Passing off - Trademark

 Passing off - Trademark

Submitted by -Ojas Bangia

Introduction

Passing off action basically refers to the unauthorized use of goods, services, and the goodwill attached to another person’s business, which would amount to misrepresentation. In a way, such an authorized use causes confusion or deception in the marketplace, which leads to unfair competition.

If someone misrepresents another person's goods or services as their own, it's known legally as "passing off." The business of the original or rightful owner of the trademark suffers, and clients and consumers get confused as a result. 

Trade mark

A trademark indicates to consumers that a particular company's customized products are distinct from those of other companies. Simply said, because they are linked to quality and customer expectations for a good or service, trademarks are an important type of intellectual property. One of the most common types of intellectual property, it helps establish a company's reputation within the industry and informs consumers about the origin and characteristics of the items.

The trademark defines the source of the product and makes it unique from its substandard replicas or substitutes present in the market.

A mark is a symbol, and it is used in the course of trade to indicate that there is a business connection between the person or entity, even if it’s a corporate entity that uses the mark concerning such goods or services that are tagged with such a mark. Once this trademark is registered, it preserves exclusive markets and maintains profit margins by providing a market axis and freedom to operate. The registration prevents the other businessman from taking any unfair advantage of the reputation of another mark-bearing goods or services, as it provides remedies in the record of such conflicts.

According to Article 15 of the Trade-related Intellectual Property Rights Agreement, a trademark is any sign, or even a combination of signs and science, that can be used to identify one undertaking's goods and services apart from those of other undertakings that may also qualify as trademarks. The clause continues by stating that some signs, particularly words that contain security features, numerals, personal names, or a mixture of characters in different colors, are eligible for trademark registration.

Passing off

The owner of the trademark may take legal action if "someone sells his goods as the goods of another," since this would be considered passing off. The practice of passing off serves to preserve the goodwill associated with an unregistered trademark. If the owner has registered the trademark and there is infringement, the matter becomes a lawsuit for infringement; if the owner has not registered the trademark and there is infringement, it becomes a case of passing off

Perry v. Truefitt (1842) established the principle of passing off, which states that "Nobody has the right to represent his goods as the goods of somebody else." Over time, the passing-off legislation has evolved. It was limited to representing one person's products as another in the past. It was then expanded to include trade and services. 

Later, this was extended to include both business and non-business endeavors. It now encompasses a wide range of unfair economic and competitive practices in which an individual's actions damage the goodwill linked to the actions of another individual or group of persons.

It is challenging to establish passing off as plaintiffs must show that a significant portion of the public may mistakenly believe that the two companies are one and the same. When it comes to passing off, the most crucial question is whether the defendants' actions are leading the public to believe that they are the plaintiffs or if there is a reason for confusion about which company is doing what. This kind of deception frequently harms a person's or company's goodwill by resulting in financial or reputational harm.

Features of passing off

The act of passing off is entirely reliant on the reputation and goodwill of the trademark owner or the company. Taking the aforementioned statement into consideration, the passing-off action's attributes are as follows:

It is necessary for the owner's trademark to be misrepresented.

The ultimate consumers of the owner's goods or services are those to whom this deception is directed: potential customers.

This false statement had to be made with malice in mind and ought to have hurt the original trademark owner's company or goodwill.

Kinds of passing off

Extended passing off - when a person or business's harmony or goodwill is harmed by false representation as a specific feature of an item or service.

Reverse passing off - when a trader manufactures, advertises, or sells another person's or company's goods or services. When the defendant passes off the plaintive's output as his own, it is known as reverse passing off. Reverse passing off entails replacement with regard to the trademark in question. 

In reality, what takes place in this situation is that an individual buys things from another source, passes them off as his own, and then sells them under his own brand.

Elements of passing off

Misrepresentation - It is evident that misrepresentation has occurred anytime and anywhere the defendant purports to represent the plaintiff as the source of the products and services he is offering to the public. 

Any representation that results in a passing off lawsuit suggests that the defendant misrepresented that the goods or services, which belonged to the plaintiff in the first place, were in reality owned by them.

It must be disregarded that, in the event that the plaintiff and defendant are not competitors in the industry, even the most tiny implication by one of them that their companies are related might harm both the other's reputation and company. It becomes important to demonstrate in every instance that a misrepresentation was committed, as the foundation of the passing off action is a requirement of false representation. 

Goodwill- It must be demonstrated that the individual or the products have some sort of market reputation that links the general public to those particular products or services. In the Trego v. Hunt (1896) case, it was interpreted more widely by Lord Macnaughten. 

According to him, goodwill frequently serves as a company's lifeblood and soul, without which it would be extremely unlikely to turn a profit. It is the entire benefit, in whatever form it may take, of the company's connections and reputation, which may have been earned via generous financial outlays or years of honest labor.

It was decided in the 1981 case of CIT v. B.C. Srinivas Seti that benevolence is affected by all aspects of the business, including the owners' personalities, the nature and character of the enterprise, its name and reputation, its location, its impact on the modern market, and the socioeconomic psychology of the time.

Goodwill is defined as the advantage or benefit of a positive reputation or good name associated with the business of the relevant goods and services. It acts as a draw for the company, setting it apart from competitors in terms of growth, quality, stability, and aspirations. It is that quality or force that drives corporate growth, thus harm to it would be advantageous to the company and would draw attention to any violations. 

Damage - Finally, the aggrieved party must demonstrate that it has experienced an actual or reasonable loss of business as a result of the claimed deception in order to successfully pursue legal action to halt the infringing party. Practically speaking, this requires looking through both parties' records of accounts, which is typically difficult to show. This is adequate evidence of the potential for loss. It must be demonstrated that the deception damaged the reputation or undermined goodwill.

In order to invoke the passing off defense, the plaintiff must prove that he has been wronged or is involved in a quia timet action. The Latin expression "quia timet" action means "because he fears," and in the context of trademarks, it indicates that the plaintiff is compelled to ask the court for an injunction because he worries that the defendant may inflict harm to his rights in the future. 

The passing off action covers circumstances in which a plaintiff believes he may be put in danger by a false representation about the source of the products or services, and in which case the plaintiff is likely to incur damages, even in the event that there is a possibility of deceit. 

General principle of passing off

It is not enough that the goods are merely capable of being used by dealers to perpetrate fraud on the customers,” according to Halsbury's Law of England. The goods or other materials supplied with them must be intended or must be of such a nature as to suggest readily or easily lend themselves to such passing off otherwise, the consequence is too remote to be attributed to the supplier of the goods,” the law specifies. A misrepresentation that results in the sale of goods under the false impression that they belong to another person is therefore actionable because it violates the original owner's proprietary rights. This is because the law mentioned above establishes the principle that underpins the action of passing off. To be legally liable, however, such deception must fool clients and consumers; simple confusion that prevents the sale of the relevant good or service is insufficient. 

Case laws 

In the case of Colgate Palmolive Company v. Anchor Health and Beauty Care , Both the plaintiffs and the defendants manufacture well known toothpaste brands. The plaintiffs sued the defendants for passing off. The contention of the plaintiffs was that the defendants’ use of color and pattern of colors in their dental products was dangerously similar to the plaintiffs’. According to the plaintiffs the proportion of colors (red and white) used by the defendants was almost identical to that of the plaintiffs (1/3:2/3). 

The reason for bringing in such an action was that the plaintiffs were established in the Indian market since 1951, and had a tremendous goodwill in the country, while the defendants had entered the market only in 1996.

It was held by the court that though there cannot be any monopoly over color, in a country with a huge number of illiterate and semi-literate people, by marketing a new product with a design closely resembling that of the older product, it is easy to create confusion in the minds of the public, especially when a similar product has been prevailing in the market for close to half a century. It was adjudged that the defendants were using the trade dress of the plaintiffs. The court ordered an injunction, restraining the defendants from using the red/white combination in the disputed order

In case of Honda Motors Co. Ltd. v. Charanjit Singh and Ors., The defendants manufactured pressure cookers under the name “Honda”, in India. Their application for registration had already been rejected once before and they had applied for registration again, while continuing to sell their products. It was held that with an established business and sale of quality products, the name “Honda” had become associated with the plaintiffs’ reputation and its goods. It is very easy for the public to associate the plaintiffs with any product that carries the name of “Honda”. Further, the honourable judges also held that by using the name “Honda” the defendants were creating confusion in the consumers’ minds, which was indirectly affecting the business of the plaintiffs in an adverse way. An injunction was ordered to stop the defendants from using the name “Honda

Conclusion

The protection of the trademark is necessary for the business point of view as well as for the protection of customers from fraud and cheating. The passing-off action is applicable to unregistered goods and services. The scope of passing off is wide as compared to infringement of the trademark.

Even though the process and remedies for passing off suits are the same for both registered and unregistered marks, the burden of proof becomes greater when it is for unregistered marks as it becomes difficult to establish goodwill and reputation. To allow unregistered trademarks, the Act provides relief to a certain extent to several users who would otherwise not be able to take any kind of legal remedy for infringement of their marks.