Carscallen Blog

Passing-off: Protecting the brand, goodwill and reputation of a business

Posted by Carscallen LLP on Feb 4, 2020 1:25:42 PM

Written by Catherine A. Crang and Suzanne M. Porteous

The law of passing-off in Canada originated with deceit and trademark laws in the nineteenth century. It subsequently evolved to become a common law tort used to protect businesses from competitors who misuse their trademark or trade name in connection with the goods and services offered by the competitor. It is often summarized by the now antiquated statement that “no man should pass off his goods as those of another”.

The tort of passing-off offers protection through the courts for a business for any misrepresentation by a competitor in the marketplace of distinctive features that are associated with that business’s brand, including registered and unregistered trademarks (such as marks, slogans, colours, sounds, scents, and holograms), trade names and the goodwill of the business.

Typically, passing-off actions occur in cases of confusing names or symbols between business competitors.

Although there is parallel statutory trademark protection for passing-off codified in the Canada Trademarks Act [1] (the “TM Act”), the common law tort of passing-off is no longer limited to the unauthorized use of a trademark or trade name. The guiding principles of this law have also changed from protecting the interests of traders or businesses to protecting consumers from unfair trading and unfair competition.[2]

In Canada, three elements are required to establish the tort of passing-off:[3]

  1. the existence of goodwill;
  2. the deception of the public due to a misrepresentation; and
  3. actual or potential damage to the plaintiff.

"How does a business protect its brand, goodwill and reputation from passing-off?"

Goodwill” is usually described as an intangible asset resulting from a business’s intellectual property, reputation and brand. Goodwill has been referred to by the courts as the positive association that attracts consumers to a business’s goods or services rather than those of its competitors.[4]

It should be noted that the law of passing-off does not protect a business’s actual product from misrepresentation in the marketplace - it protects the association that is made by consumers between the product (goods or services) and the business (producer/manufacturer), based on distinguishing features.

1. Establishing the goodwill and reputation of a business

Business owners, traders and licensees who want to protect their brand, goodwill and reputation (in addition to their intellectual property such as trademarks and trade names) from misrepresentation in the marketplace by competitors should consider factors such as:

  • whether the business’s goodwill or reputation is attached to the goods or services that the business supplies, from the point of view of the purchasing public (consumers);
  • whether the business’s reputation exists in the geographical area where a business or licensee would enforce its rights through use of its particular mark;
  • whether the business’s goodwill or reputation is associated with the distinctive features of the identifying get-up” of the goods or services offered by the business, from the point of view of consumers:
    • the identifying get-up is the distinguishing guise that the public associates with the business’s product or services - for example, the McDonald’s golden arches, or the Nike swoosh symbol;
    • the identifying get-up can be a brand name or the design of the product, such as an identifying shape, size or colour of packaging;[5]
    • the identifying get-up can also be a trade description, or part of the labelling or packaging under which the business’s goods or services are offered to the public; and
  • whether a business’s product has acquired a secondary meaning.[6]
2. Misrepresentation in a passing-off action

The second part of the three-part test in a passing-off action, deception to the public due to a misrepresentation, focuses on whether there is confusion in the public mind between the identifying get-up of the two competitors.

Confusion or deception is not required to be made intentionally, or with malice or negligence.[7] It can also be unintentional, negligent or careless misrepresentation that leads or is likely to lead the public to believe that goods or services offered by a competitor are the goods or services of another business.

However, deliberate conduct to deceive or bad faith engaged in by the competitor will be relevant in court.[8]

Some factors for businesses to consider respecting misrepresentation include:

  • the test for confusion is whether any consumer or user of the products is likely to be confused by the misrepresentation;[9]
  • the confused person does not have to be the business’s direct customer; confusion must be avoided in the minds of all consumers, direct and indirect;[10] and
  • the purpose of a passing-off action is to protect all persons affected by the product.
3. Damage to the business

In the third part of the three-part test for a passing-off action, the court will consider whether there is actual or potential damage to the plaintiff by reason of a consumer’s mistaken belief or confusion due to the competitor’s misrepresentation.

Without damage there is no passing off.[11] Therefore, actual or potential damage must be proved by a plaintiff in order to be successful in a passing-off action.

 

Carscallen LLP’s Commercial Litigation Expertise

Protecting the brand, reputation and goodwill of a business from passing-off by competitors requires a multi-faceted and proactive approach to assessing your business needs and determining what preventative measures can be implemented by a business, and when dispute resolution or legal action is required. 

If you have questions about how to best protect your brand, reputation and goodwill from potential passing-off, or if you have think you are the subject of a passing-off action, please contact any member of our Commercial Litigation team.

Our team of experienced litigators has successfully represented clients at all levels of court and before tribunals in Alberta and Canada. We have achieved regular and consistent success at trial and appellate levels of courts and before various tribunals, and we also have a strong track record of effectively resolving disputes outside the formal legal process through mediations and arbitrations.

 

*This update is intended for general information only on the subject matter and is not to be taken as legal advice.

 

[1] Trademarks Act, RSC 1985, c T-13, s 7(b).

[2] Consumers Distributing Co v Seiko, [1984] 1 SCR 583 at p 598-599.

[3] Ciba-Geigy Canada Ltd v Apotex Inc, [1992] 3 SCR 120 at para 33 [Apotex].

[4] Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, [2006] 1 SCR 824 at para 50.

[5] Oxford Pendaflex Canada Ltd v Korr Marketing et al, [1982] 1 SCR 494 at p 500 [Oxford].

[6] Oxford.

[7] Apotex.

[8] Enterprise Rent-A-Car Co v Singer, [1996] 2 FC 694.

[9] Apotex.

[10] Apotex.

[11] Orkin Exterminating Co Inc v Pestco Co, 1985 CanLII 157 (ON CA).

 

 

 

 

Topics: Commercial Litigation

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