"Passing off and unfair competition": an event review

This post was written by guest Kat Nadia, and posted by Jeremy

"Passing Off and Unfair Competition", hosted by Baker & McKenzie LLP, was the subject of the third event held by the Journal of Intellectual Property Law & Practice (JIPLP) in conjunction with its German partners at GRUR Int.

Passing off

The first talk came from Ben Allgrove, a partner at Baker & McKenzie and a contributor to JIPLP.  Ben's main message revolved around two propositions; (i) that the tort of passing off is flexible and that it has evolved over time; an evolution that is still progressing to this day, and (ii) in the core area of practice there is no real difference between passing off and unfair competition.

The basics

Ben began by discussing the basics of the tort of passing off. The origins of passing off began in the nineteenth century.  Perry v Truefitt, 49 ER 749 stated that ‘A man is not to sell his own goods under pretence that they are the goods of another man.’  The classic action of passing off is based on the trinity of (i) goodwill, (ii) misrepresentation to the public, and (iii) damage to the claimant, as was reaffirmed in the 'Jif Lemon' case (Reckitt & Colman Ltd v Borden Inc [1990] UKHL 12). 

Early development

The point of an evolving concept was illustrated further by reference to the leading case of Cadbury Schweppes Pty Ltd v Pub Squash Co. Pty Ltd [1980] UKPC 30, which showed early on that it was acknowledged that the concept of passing off could even extend to advertising campaigns. Cadbury Schweppes launched a lemon drink in Australia which was novel in that it was specifically aimed at the adult male market. Pub Squash Co copied the drink itself and the general theme and tone of the marketing campaign.  Even though Cadbury Schweppes failed to establish passing off, there was at least some acknowledgment that passing off could happen in advertising.

Extended passing off

 Ben next reviewed the three different ways in which passing off has been extended.

1. Initial Interest confusion is a concept which was derived from US law.  The doctrine was defined by the International Trademark Association (INTA) as

'... a doctrine which has been developing in U.S. trademark cases since the 1970s, which allows for a finding of liability where a plaintiff can demonstrate that a consumer was confused by a defendant’s conduct at the time of interest in a product or service, even if that initial confusion is corrected by the time of purchase'

Och-Ziff Management Europe Ltd & Another v Och Capital LLP & Another [2010] EWHC 2599 (Ch) showed a flexibility in the doctrine (on which see the IPKat here). In this case there was a variety of trade mark in issue which involved the word 'OCH'.   At the point of trade there was no confusion, as members of the public knew they were dealing with Och-Ziff.  However, pre-sale, various individuals had independently contacted Och-Ziff asking whether they had moved offices after seeing a sign for OCH Capital in the window of OCH Capital's offices. In the end, while the claim under Article 9(1)(a) of the CTM Regulation 2009 failed, the claim under Article 9(1)(b) succeeded as it didn’t matter that there was no confusion at the point of trade: what was decisive was that there was confusion pre-sale.  Arnold J found that several uses of 'OCH Capital' infringed the registered trade marks under Article 9(1) (b), concluding that there was a 'manifest likelihood of confusion'.  This case showed that passing off is a tort that can evolve.

The next step in this evolution is post-sale confusion. In L'Oréal SA v Bellure NV [2010] EWCA Civ 535 (on which see IPKat overview here) Bellure's business model was to sell cheap 'knock off' perfumes whose smell alluded to the smell of L'Oréal 's own perfumes. Even though there was no confusion pre-sale and at the point of trade as consumers knew what they were buying and who they were buying from, it was found there was post sale confusion and therefore there was unfair advantage.
  
2 The tort of passing off has now been extended to the reputation and goodwill held in products via quality association.  The key components come from the ‘Advocaat’ case (Erven Warnink B.V. v J. Townend & Sons (Hull) Ltd [1979] AC 731) Lord Diplock established five criteria for a claim of extended passing off. There must be:

1.  Misrepresentation
2.  by a trader in the course of trade
3.  to prospective customers of his or ultimate consumers of goods or services supplied by him
4.  which is calculated to injure the business or goodwill of another trader and
5.  which causes actual damage to the business or goodwill of the trader bringing the action.

In the recent ‘ Vodkat’ case, Diageo North America Inc v Intercontinental Brands (ICB) Ltd [2010] EWHC 17 (Ch), Arnold J held that "vodka" is a term that is capable of distinguishing a particular class and quality of product. In branding a vodka blend as "VODKAT" and marketing it in a manner that did not make clear to the public that this was not vodka, the judge held Intercontinental Brands liable for passing off. 

More recently in the long-awaited appeal in Fage UK Ltd & Another v Chobani UK Ltd & Another [2014] EWCA Civ 5 (see IPKat overview here) the argument focused on whether Chobani could use the term ‘Greek yoghurt' to describe their yoghurt. The Court of Appeal, upholding the trial judgment, sided with Fage in finding that 'Greek yoghurt' had to be made in Greece.  

3. False Endorsement is the third aspect of extended passing off. The leading case on false endorsement is Irvine v Talksport [2002] FSR 60, in which Eddie Irvine successfully argued passing off when Talksport used his image for an advertising campaign. More recently, in Fenty v Arcadia Group Brands Ltd (t/a Topshop)  [2013] EWHC 2310 (noted by the IPKat here), pop star Rihanna succeeded in her claim for passing off against retail giant Topshop, who used her image on a t-shirt without her permission. The public are well aware that celebrities have authorised merchandise, and Rhianna successfully argued that members of the public would believe her brand was associated with Topshop.  The damage was loss of control of her reputation which was a key thing.

Colour

The Irish case of BP Amoco PLC v John Kelly Ltd and Glenshane Tourist Services Ltd (Court of Justice in Northern Ireland, Chancery Division, 16 June 2000, here) involved a dispute over the colour green.  Here BP claimed that the second defendant, which ran a filling station under the ‘TOP’ brand used the same colour green as them, and argued that members of the public would be confused into thinking their garage was a BP garage. In this case passing off failed as the court stated petrol is a commodity product and a consumer would not drive away.  There would thus have to be a pretty strong association with a colour, and it is very difficult to show pre-sale confusion.  It was noted that in a supermarket for example, cheaper brands often use the same colouring as bigger competing brands.

German unfair competition law

The second talk was presented by Gert Würtenberger (a partner at Würtenberger Kunze, Munich) on the topic of German Unfair Competition Law.

After the industrialisation and liberalisation of the market, Gert explained, Germany passed its first law in unfair competition in 1896.  However problems were still evolving, so Germany reacted and passed a revised Unfair Competition Act 1909 ("the Act”). 

Gert then discussed the Warsteiner case (Case C-312/98 Schutzverband gegen Unwesen in der Wirtschaft e.V. Warsteiner Brauerei Haus Cramer GmbH & Co. KG). This case involved a company which operated a brewery in Paderborn, 40km from Warstein. The dispute centred on the wording used by the company on their labels; the front label said 'Warsteiner Premium Light‘ and 'Warsteiner Mark [Brand] Premium Fresh‘, and on the back the label said ‘bottled in their new Paderborn Brewery’.   The applicant, an association the objective of which was to combat unfair competition, believed that the design of the labels was misleading, and that the geographical indication of source 'Warsteiner‘ may consequently not be used for beer brewed in Paderborn.

At first instance, the trade association argued that the brewing company was deceiving consumers by not indicating that this specific beer was not brewed in Warsteiner, which was found to be misleading.  The brewing company then put a small indication on the front of the bottle, which was deemed to be too small.  Finally the Supreme Court referred questions to the CJEU to see whether the directive could take influence from case law on geographical indications. In its final decision the Supreme Court made a complete turnaround on its opinion regarding the labelling and stated, that if the consumer is interested where the beer is brewed, the consumer will look on the front and the back of the bottle.

Section 4 of the Act gives examples of unfair commercial practices; however, the list is not final. Section 4(9) is the closest to passing off in UK law in which it states, ‘Unfairness shall have occurred in particular where a person offers goods or services that are replicas of goods or services of a competitor if he

(a) causes avoidable deception of the purchaser regarding their commercial origin;
(b) unreasonably exploits or impairs the assessment of the replicated goods or services; or
(c) dishonestly obtained the knowledge or documents needed for the replicas.’

In German unfair competition, it is not the actual copying that makes an act unfair; it is the behaviour behind the copying. In the German Federal Court of Justice (BGH) decision in Regalsystem on 21 January 2013, IZR 136/11 the court ruled that a nearly identical copy of aesthetic design features might be justified under the German Law of Unfair Competition by customers' interest in visually compatible products. In Regalsystem, German manufacturer Tegometall asked for an injunction to prevent Czech manufacturer Eden Europe s.r.o. from selling technically and visually comparable shelving units.  In this case the court found that the act was not 'unfair' and denied the injunction. The Court emphasied that it was in the interest of the consumer to have options to buy different products which may be cheaper, and that it was unfair to force a competitor to vary the shelves which may lead someone not to buy them.

Comparison

There seem to be a variety of similarities between the two doctrines of passing off and unfair competition. However, some have suggested that the UK tort of passing off is unfair competition in all but name. 

 During the panel discussion featuring His Honour Judge Richard Hacon QC, Dr Birgit Clark and Professors Phillip Johnson and Christopher Wadlow, it was suggested that there are still differences between the two concepts, mainly the fact that unfair competition has more of a consumer protection element, whereas passing off is more business-to-business and competitor-to-competitor.   

So should we opt for unfair competition, passing off, any combination of them both -- or what?  It will be good to know what you think!