article
Letting the genie out of the bottle
31 July 2009
UK law has several causes of action that might reasonably be termed
laws of unfair competition.
The most obvious of these is the common-law tort of passing off.
Yet, although passing off has sometimes been called a law against
unfair competition, there have been a number of judicial
pronouncements to the contrary.
Whilst there are distinctions to be drawn between some of the
regimes that exist in Europe, there is no doubt that the
definitions of passing off have been stretched over time to
encompass new kinds of practice which have been deemed unfair by
the courts.
Indeed, it could be said that such stretches of definition
demonstrate the virtue of common-law causes of action like passing
off.
But how far has passing off been stretched, and has it been
stretched to a point where it is now possible to describe it – as
some judges have done – as a common-law tort of unfair competition?
If not, should it be stretched further to create a more
comprehensive form of redress against unfair practice?
The nature of passing off
Christopher Wadlow in “The Law of Passing Off: Unfair
Competition by Misrepresentation” begins with the following
statement:
“The term unfair competition may be used in several senses.
One is as the collective name for a variety of nominate or emergent
torts which have in common their usefulness in protecting traders
in their relationships with one another…Another usage for “unfair
competition” is as a synonym for passing-off.”
The principle underlying the tort of passing off is that "A man
is not to sell his own goods under the pretence that they are the
goods of another man".
However, the tort of passing off has a long history. Indeed, it
was recognised as early ago as the sixteenth century. In
Southern v How (1618) Dodderidge J referred to a case in
which the Defendant had put the mark of an eminent clothier on his
clothing, and upon selling it “on purpose to deceive him, it was
resolved that an action did well lie”.
Therefore, the idea of using another’s reputation to further
one’s own ends – and of the courts preventing such practice - is
not new.
Over time the tort developed to the point where it became
possible to characterise it in a more precise form. The tort was
perhaps first comprehensively described by Lord Diplock in
Warnick v Townend (1980) as a five stage test. In
Reckitt & Colman Products Ltd. v Borden Inc. (1990)
(“Jiff Lemon”) Lord Oliver reduced the definition to a “classical
trinity”:
"First, he must establish a goodwill or reputation attached
to the goods or services which he supplies in the mind of the
purchasing public by association with the identifying "get-up" …
under which his particular goods or services are offered to the
public, such that the get-up is recognised by the public as
distinctive specifically of the plaintiff's goods or services.
Secondly, he must demonstrate a misrepresentation by the defendant
to the public (whether or not intentional) leading or likely to
lead the public to believe that goods or services offered by him
are the goods or services of the plaintiff… Thirdly, he must
demonstrate that he suffers or, in a quia timet action that he is
likely to suffer, damage by reason of the erroneous belief
engendered by the defendant's misrepresentation...."
It is this classical trinity: reputation, misrepresentation and
damage that a practitioner will generally consider when assessing
if a passing off has occurred.
However, within the modern law of passing off the boundaries of
each of the tests that make up the classical trinity have been
stretched.
As regards goodwill, it is generally perceived that the required
threshold for reputation is low, but there must nonetheless by some
degree of reputation through trading in the UK. However, the
concept of goodwill has been given a liberal interpretation in
recent years. An example of this is Irvine v Talksport
[2002], which effectively extended the concept of goodwill to image
rights.
Indeed, there are other recent examples of the concept of
goodwill being stretched in different ways, not least in terms of
duration. In Jules Rimet Cup Ltd. v The Football Association
Ltd, 18 October 2007 the High Court was prepared to find that
the Football Association’s goodwill had survived a 40 year period,
during which time the FA had not been using the mark and the
majority of public had forgotten it.
Misrepresentation should be a relatively static concept,
requiring as it does confusion or a likelihood of confusion on the
part of the public. Even here though, the boundaries have been
stretched. In Bristol Conservatories Ltd. v Conservatories
Custom Built [1989] the Court of Appeal adopted the concept of
reverse (or inverse) passing off (whilst denying it was doing so)
in stating that where a trader uses images of a competitor’s
products and ‘passes them off’ as its own, the public will be
deceived into believing that it is being offered the Defendant’s
products when it is being offered the Claimant’s products. This
does not meet the classic passing off formulation since the
Defendant is not falsely representing his own goods or services as
those of someone else, yet the Court of Appeal felt that the
activity was so obviously wrong as to warrant censure. This is, in
a very real sense, an example of the courts widening the scope of
passing off to encompass an action against unfair competition.
The concept has also been stretched in relation to the time at
which confusion can occur. The general proposition in the UK has
always been that only confusion at the point of sale is irrelevant
in determining whether there has been a passing off. This was
affirmed in Bostik v Sellotape [1994].
However, pre-sale or initial interest confusion, often in
relation to such activities as switch selling (in essence a form of
reverse passing off), has long been recognised as capable of
constituting passing off, if the misrepresentation is damaging.
This concept has in fact developed over recent years in a number of
jurisdictions, and is particularly relevant to infringements on the
internet, where initial confusion at the point of making an initial
search or clicking through to a domain name will often have been
rectified at the point of sale, by which time the damage has been
done.
In fact, are also examples of decisions in which post-sale
confusion has been deemed relevant. Indeed, in ‘Jiff Lemon’ the
court, in dismissing the relevance of the label on the lemon-shaped
lemon juicer containers, commented that "virtually no, if any
attention is paid to the label which that lemon bears" and when the
shopper gets home it "performs no useful function and is easily
detachable, so that it is not thereafter any part of the purchased
product". Moreover, Arsenal Football Club plc v Reed (No
2) [2003] has established that post-sale confusion is relevant in
determining infringement of registered trade marks.
In relation to damage also, the courts have been prepared to
take a wider view, finding infringement where mere blurring or
tarnishing of reputation has occurred rather than tangible
damage.
Given all the widening in scope of the modern law of passing
off, is it not now reasonable to begin to talk of passing off as a
law of unfair competition?
There seems to be little judicial consensus on this point. In
Mogul Steamship Co v McGregor Gow & Co (1889) Fry LJ
stated “to draw a line between fair and unfair competition, between
what is reasonable and unreasonable, passes the power of the
Courts.”
This view has not always been shared. In Arsenal v Reed
Aldous LJ referred to “the cause of action traditionally called
passing-off, perhaps best referred to as unfair competition”. Yet,
the Court of Appeal recently refuted the idea that passing-off is a
law of unfair competition in L’Oreal v Bellure [2008],
Jacob LJ commenting:
“... I think the tort of passing off cannot and should not
be extended into some general law of unfair competition. True it is
that trading conditions have changed somewhat over time – but I
cannot identify any particular change which makes a general tort of
unfair competition desirable, still less necessary. If the courts
(or indeed Parliament) were to create such a tort it would be of
wholly uncertain scope – one would truly have let the genie out of
the bottle.”
Jacob LJ’s comments do indeed suggest that the courts will not
be prepared to push the law any further than it has gone. However
in attempting to assess where the law stands, it is perhaps worth
considering the regimes of other jurisdictions.
The international regime of unfair
competition
Having a law against unfair competition has actually been a
requirement in most industrial nations for a very long time.
According to Article 10bis of the 1883 Paris Convention for the
Protection of Industrial Property:
“The countries of the union are bound to assure to nationals
of such countries effective protection against unfair
competition.”
Under Article 10bis(2), any act of competition contrary to
honest practices in industrial or commercial matters (a phrase
familiar to trade mark lawyers) constitutes an act of unfair
competition.
Most countries – certainly most continental European countries –
have fulfilled this requirement through a general law against
unfair competition.
In most of mainland Europe, countries have more comprehensive
(arguably vaguer) laws against unfair competition. They are
generally wider than the UK concept of passing off because they
tend not require misrepresentation.
The German Act Against Unfair Competition 2004 (UWG) protects
competitors, consumers and other market participants against
“unfair activities for the purpose of competition”. An act of
competition is defined as any behaviour aiming to foster marketing,
distribution and the purchase of goods and services, either for
intrinsic or extrinsic purposes.
In France there is no coherent regulation against unfair
competition, but the prohibition of concurrence déloyale (or
“unfair practice”) is well engrained as a general law against
unfair competition. The law essentially requires a competitive
relationship between the parties, incorrect behaviour by the
defendant and resultant damage.
In the United States the law of passing off/unfair competition
is often referred to as "palming off". Unfair competition law in
the US can take a number of forms, such as "passing off",
"dilution", and "misappropriation". It is therefore, similar to,
but wider than, the concept of passing off in the UK and indeed
extends to areas of law that in the UK would be seen as specific
protections of intellectual property rights, such as design
right.
Clearly then, the law of passing off does, in international
terms, represent a narrow view of unfair competition.
Other unfair competition laws in the UK
Of course, passing off is not the only form legal address in
relation to activities that might constitute unfair business
practice. The common law torts of trade libel and malicious
falsehood are also relevant and there are further causes of action
upon which a wronged party can draw. Trade mark law, and
particularly s.5(3)/10(3) Trade Marks Act 1994 (and its equivalent
provisions within the Community Trade Mark Regulation), provides
that use of a mark that is identical with or similar to an earlier
registered trade mark which has a reputation in the United Kingdom
(or, in the case of a Community trade mark, in the European
Community) will not be permitted where the use of the later mark is
without due cause and would take unfair advantage of, or be
detrimental to, the distinctive character or the repute of the
earlier trade mark. This goes some way to establishing a statutory
tort of unfair competition in the UK in relation to the use of
trade marks.
Other more general statutes also provide protection against
‘unfair’ commercial activities. The Trade Descriptions Act 1968
has, for a long time, protected consumers against false
descriptions of goods. This has recently been largely replaced by
the Unfair Commercial Practices Directive, implemented in the UK by
the Consumer Protection from Unfair Trading Regulations 2008
(CPUTR) prohibiting the promotion of unfair commercial practices in
a consumer context, and the Business Protection from Misleading
Marketing Regulations 2008 (BPMMR) prohibiting the promotion of
misleading advertising. In addition there are the wide provisions
of the Fraud Act 2006, which prevents anyone dishonestly making a
false representation with a view to gaining for himself or another
or causing loss to another.
Of course, there are also the provisions of the Competition Act
1998 (and indeed Article 82 of the EC Treaty) and the Enterprise
Act 2002, and the Office of Fair Trading is the UK's consumer and
competition watchdog in enforcing the law in that area. Further
there is the CAP code, as enforced by the Advertising Standards
Authority (usually under the CPUTR and/or BPMMR).
Peripherally, one might also look to the law of defamation, the
law of confidentiality and indeed the protection of any
intellectual rights in general as laws of unfair competition in the
widest sense.
Finally, there are myriad contractual remedies such as procuring
a breach of contract or unlawful interference with contract, that
in their widest sense are laws of unfair competition.
Therefore, the overall regime of unfair competition is somewhat
wider than merely passing off and is important to look at UK law in
its totality in assessing whether there is a need to extend passing
off.
Conclusion
Therefore, there is no doubt that the modern law of passing off
goes some considerable way to establishing a law of unfair
competition. As with any common law tort, it has developed over
time. These changes have been made to allow it to encompass
activities that are, in their truest sense, acts of unfair
competition, not passing off.
Yet, it remains someway short of a true law of unfair
competition and the plethora of other laws preventing unfairly
competitive practices in the UK still leave a lacuna in relation to
activities that essentially constitute misappropriations of another
business’ activities and/or reputation, rather than
misrepresentations.
Using an Australian case as an example, in Victoria Park
Racing and Recreation Grounds Co Ltd v Taylor (1938) the
Defendant allowed a third party to erect a tower on its land to
overlook a racecourse owned by the Claimant, and subsequently
broadcasted race commentary, allegedly causing attendance at races
to fall. The case was dismissed by the Australian court, but it is
just this sort of activity that under UK law does not fall neatly
within the definition of any UK cause of action.
Passing off is not yet a law of unfair competition, particularly
following L’Oreal v Bellure. Should it be further
stretched to become such a law? Yes, if European harmonisation of
law in this area is genuinely sought, as indeed the Unfair
Commercial Practices Directive suggests it is. Moreover, given that
such harmonisation seems to be inevitable, it is likely either that
passing off will continue to be extended, or that it will
ultimately be replaced by European-derived statutory law.
This article was first published in Trademark
World
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