Passing off may be more useful than you think

Overview

The Comptroller-General of Patents, Designs and Trade marks (and another) v Intellectual Property Agency Limited (and another) [2015] EWHC 3256. IP Enterprise Court (IPEC), 12 November 2015

The defendant, Intellectual Property Agency Limited (IPAL), gave the impression that it was the IPO and wrote to holders of patents and trade marks to "remind" them that the rights in their IP required renewal and also requested a fee for the renewal.

Although in each case IPAL did apply to renew the relevant rights and the majority were successful applications, IPAL’s fees were far higher than the fees required by the IPO. For example: to renew a trade mark the IPO charges £200; IPAL charged a minimum of £1,280.

The claimant, on behalf of the IPO, brought action against IPAL for passing-off and trade mark infringement on the basis that that IPAL was misrepresenting itself to right holders, who were paying IPAL either in the belief that it was the IPO, or that it was otherwise officially connected to or authorised by the IPO.

The IPO succeeded on both arguments at trial and IPAL and its sole director/shareholder were found liable for the maximum account of profits in the IPEC court: £500,000.

What is interesting to note here is that passing-off has been successfully argued even though the claimant has not suffered any financial loss.

Passing off

The main authority on the tort of passing off is Reckitt & Colman v Borden (the JIF Lemon case). In short, “no man may pass off his goods as those of another”.

The three essential elements for passing off are:

• goodwill of the claimant
• misrepresentation by the defendant which causes or is likely to cause deception, and
• damage arising from the erroneous belief engendered by the defendant’s misrepresentation.

Goodwill was found to be generated through the activities of the IPO even though it is a government department as opposed to a "trading" business.

Goodwill usually operates on the basis that there is a "pulling power" attracting a user’s custom. In this case, the IPO is the only service available to a consumer who wants to, for example, renew a UK trade mark registration, yet there was still found to be sufficient "goodwill" to use passing-off.

The IPAL logo and overall presentation of the “reminder letter” suggested that the request came from an official source which could be, to “others with lives not largely taken up with IP matters”, the IPO. Based on the evidence of confusion presented at trial, the judge was satisfied that such confusion had taken place based upon a misrepresentation by IPAL.

There was no financial loss to IPO as in each case the renewal fees were paid. However, sufficient loss was established in the form of damage to the IPO’s reputation - “the misrepresentation accordingly harms the IPO’s standing in the eyes of that section of the public which uses its services”.

Importance in practice and commercial relevance

Whilst having a registered Trade Mark will usually provide you with the most straightforward action and remedies, this case demonstrates that, for some claims, passing off can be equally useful.

Passing off usually involves a degree of financial harm (eg through loss flowing from consumers mistakenly buying goods or services from the defendant rather than the claimant). Here, however, the vast majority of fees were paid as required and the IPO suffered no real financial loss.

This case is a reminder that damage does not have to be primarily financial (or even financial at all). Loss can come (in part or purely) in the form of damage to goodwill.

It is crucial to note, however that merely having a reputation is not sufficient. It is the damage to goodwill (which may arise through damage to reputation) which is the important factor and the basis on which a passing off claim may be successful.

The commercial consideration arising from this case is that goodwill is a broad concept and can even apply where, as here, the claimant occupies a monopoly position in the market.

This is an especially relevant and pertinent point, for companies or institutions which have little or no competition but which have suffered damage to their reputation. Passing off should be remembered for its wide utility in relation to the maintenance of goodwill, even in situations where there has been only loss of an intangible nature.