The law of passing off prevents traders from appropriating the goodwill of their competitors by passing off their business as either being that of or associated with the business of another.
To a certain extent the law of passing off has been replaced by the Fair Trading Act, and almost all passing off claims will rely on the Fair Trading Act in the alternative. Nevertheless, there can be practical advantages to bringing a claim under passing off, as discussed below.
Test for passing off
There are two tests for passing off which are generally cited in the New Zealand courts.
The first is from the House of Lords case of Warnink v J Townsend & Sons (Hull) Limited [1979] AC 731, which related to a Dutch egg-based liquor called advocaat. Lord Diplock stated (at 742):
“[There are] five characteristics which must be present in order to create a valid cause of action for passing off:
(1) a misrepresentation
(2) made 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 (in the sense that this is a reasonably foreseeable consequence) and
(5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so.”
The test was revisited in the subsequent House of Lords case of Reckitt & Coleman v Borden [1990] 1 WLR 491, which related the sale of a concentrated lemon juice product for use in cooking in yellow plastic squeeze packs which resembled lemons. In the so-called “Jif Lemon” case, the House of Lords reduced passing off to three key elements:
(a) goodwill in a name or get-up;
(b) a misrepresentation; and
(c) damage.
The “Jif Lemon” test has been cited in the New Zealand courts, but there has not been any definitive statement that it has supplanted the Advocaat test (which continues to be cited by counsel and the courts). This is despite the “Jif Lemon” test being preferred to “Advocaat” test in the United Kingdom, on the basis that:
1. the focus is on goodwill or reputation attached to the goods or services which the plaintiff supplies, rather than reputation in the brand name or get-up; and
2. it sensibly combines the first and fourth elements of Lord Diplock’s formulation.
The Advocaat test is more confusing, and in my view the simpler Jif Lemon test is easier to apply and preferable.
Why claim under passing off?
If conduct amounts to a breach of the Fair Trading Act as well as passing off, it is normal to plead both causes of action (as well as trade mark infringement if applicable).
A successful plaintiff can claim damages or an account of profits and a permanent injunction. It is also possible to apply for an interim injunction to prevent passing off, and threatened damage to goodwill may be difficult to compensate by way of damages so this may be relevant to assessment of the balance of convenience.
The major advantage for framing a claim in passing off rather than the Fair Trading Act is the ability to seek punitive or exemplary damages.
Again, it is important to obtain specialist IP advice on potential claims so that the strongest claims across the different rights can be emphasised.