What is the Tort of “Passing Off”?

Author: Ian Aldridge, Progressive Legal

If you’re a business owner in Australia, then you need to be aware of the tort of passing off – especially with regard to trade mark protection. This legal concept is crucial for protecting your brand’s reputation and market position from potential infringement or deceptive practices by competitors.

In this article we’ll discuss what the tort of passing off is, passing off and Australian trade mark law, how to claim passing off, remedies to passing off, and how to defend a claim of passing off.

What is the tort of “passing off”?

Passing off is a common law tort which can be used to enforce both registered and unregistered trade mark rights. The tort of passing off protects the goodwill of a trader from misrepresentation, as it prevents one trader from misrepresenting goods or services as being the goods and services of another.

It also prevents a trader from holding out his or her goods or services as having some association or connection with another when that’s not the case. 

The tort of “passing off” protects consumers and other businesses from being misled into purchasing or using a product or service that isn’t produced or offered by the business they thought they were dealing with. It is important to understand how this tort works so you can protect your business against any false representations made by others.

Passing off and Australian trade mark law

The use of a trade mark in relation to particular goods or services allows consumers to identify its trade source and distinguish it from other trade sources. A registered trade mark provides exclusive rights to use that trade mark in relation to the goods or services for which it is registered.

This allows you to take legal action against anyone who uses your trade mark on those goods or services without your consent. However, even when your trade mark isn’t registered, you may still have some protection under the law of passing off.  

Passing off is a common law cause of action, whereas statutory law such as the Trade Marks Act 1995 provides for enforcement of registered trademarks through infringement proceedings. Both passing off and the Trade Marks Act 1995 deal with overlapping factual situations, but in different ways.

Misleading and deceptive conduct under the Australian Consumer Law (ACL) also provides protection in this area. Passing off does not grant monopoly rights to any names, marks, get-up or other signs. Instead, the law of passing off is designed to prevent misrepresentation in the course of trade to the public.

How to claim passing off

In order to succeed in a claim for passing off, you need to establish the following 3 elements: 

Reputation/Goodwill

You need to be able to show that you have a reputation in the geographical area that the other party is trying to sell their goods or services. Look at TV advertisements, marketing materials, print and non-print advertisements (e.g., social media, radio, etc) to prove reputation. Reputation is especially a big factor when selling goods. Note that, neither you nor the other party are required to be local traders to establish this first element – a party can be international and based overseas! 

Case Example – In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd 

In-N-Out Burgers Inc is a well-known American fast food chain. The company has been in business since 1948 and is best known for its burgers and fries. It only operates in the United States. In 2014, In-N-Out filed a passing off case against an Australian company that had opened a restaurant in Sydney with a similar name and logo. 

Since In-N-Out’s reputation for its burgers and fries extended to Australia, Hashtag’s use of the In-N-Out name and logo was likely to cause confusion among consumers in the Australian market. Thus, Hashtag was ordered to change its logo and name.  

This case highlights the importance of having an element of reputation to succeed in a passing off case. 

Misrepresentation

You must also clearly demonstrate that how the other party presents their goods or services will likely deceive consumers. Note that an intention to injure your business or reputation does not necessarily have to be present, however, it will likely strengthen your claim. Additionally, the damage could be caused to your brand or reputation too.   

The result is that customers are deceived into believing that they are buying from the original source, when in fact they are not. To successfully establish a passing off claim, you must show that there has been a significant copy of your brand.  

For example, using the following without permission can amount to misrepresentation:    

• Another trader’s trade mark; 
• The ‘get-up’ of another trader’s product or service; 
• Another trader’s advertising theme; and/or 
• The design, shape or colour of another trader’s product or its packaging. 

Damage

The element of damage is key in determining whether passing off has occurred. This damage will need to be to your reputation. If there has been no loss, then there is potentially no case for passing off. However, if passing off has resulted in a loss of sales, reputation, or goodwill, then it may be possible to take legal action.

Remedies to passing off

If you have been a victim of passing off, there are a few remedies that may be available to you. The first is to send a Cease-and-Desist letter to the party that is passing off your work as their own. This letter should outline the ways in which they are passing off your work, and demand that they stop.  

If the passing off continues, you may be able to file for an injunction, which would require the party to stop passing off your work lest it faces legal penalties. Finally, you may be able to file a lawsuit for damages or account of profits, which could result in compensation for the harm that has been caused. 

Note that you can’t be awarded both damages and an account of profits, as an account of profits responds to the gain of the wrongdoer whilst an award of damages targets your loss. 

You will have to satisfy the 3 elements mentioned above before accessing these remedies where you do not have a registered trade mark. The critical benefit of trade mark registration is the exclusive rights to the use of your trade mark, including the ability to enforce your trade mark rights.

How to defend a claim of passing off

If you’ve received a claim of passing off, there are various ways you can defend yourself. For example, you can: 

• argue that there is no likelihood of confusion between the two brands. This can be done by showing that the two brands are sufficiently different in terms of appearance, marketing, and target market;
• argue that the defendant’s use of the mark is a fair use. This can be done by showing that the defendant’s use of the mark is in good faith and not likely to cause confusion or deception;
• argue that the mark in question is not distinctive or that the mark is generic;
• consider using the defence that the claimant has not used their own brand carefully and honestly; 
• try to prove that the claimant has not suffered any actual damage or loss because of your use of the mark.  

The party alleging passing off may choose to consent to or encourage the other party’s use of the mark in order to avoid litigation, which is often costly. 

Key takeaways

The tort of passing off is a valuable tool for businesses to protect their reputation and goodwill, especially when there are no registered trade mark rights to rely upon.  

To successfully prove a case of passing off, the elements reputation, misrepresentation, and damages need to be established. If a party is found guilty of passing off, it may be served with a Cease-and Desist Letter asking for an undertaking. Alternatively, the court may order an injunction to stop the activity amounting to passing off, or the guilty party may be ordered by the court to pay damages or an account of profits to the other side.  

However, if the defendant disagrees that it has passed off the goods or services of the aggrieved party, there are defences available.  

If you feel that you have been misled or damaged by another business, or have received such a claim from another trader, contact us below and get in touch with our experienced trade mark team today.