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Australian Lawyers and Consultants

Australian Passing Off Law

June 1999

The tort of passing off is concerned with the protection of business reputation, and with the protection of consumers from deceptive and misleading trading activities. In this latter respect the tort overlaps with consumer protection legislation such as the Australian Trade Practices Act.

The classic form of the tort is found when A attempts to pass off his product as that of B, generally by using, on or in relation to A's product, the indicia that are distinctive of B's products. The distinctive indicia reproduced by A might be a registered trade mark, aspects of B's product (such as design), aspects of the get-up of B's product or aspects of B's marketing.

More recently in Australia the tort has been expanded to encompass most forms of deceptive conduct including the following:

• the use by A of B's distinctive indicia to suggest that some connection exists between A and B, such as a licensing agreement;
• character merchandising - where A uses a well-known fictitious character to add to the popularity of his product. The necessary deception arises when it can be established that the public has been misled into believing that either A's product is genuine promotional material or A's product is authorised/endorsed by the character's creator (for a case dealing with the unauthorised manufacturing of a well-known but fictional product see Twentieth Century Fox Film Corp v South Australian Brewing Co. [citation?] - the "Duff Beer" case);
• sponsorship cases - where A uses a famous person to endorse A's product. Passing off will occur when the public is deceived into believing that the famous person has endorsed or approved of A's product or otherwise authorised the use of their image. Note that it will not be enough to establish that use of the name/image was unauthorised. The use must be shown to have caused deception. There are a number of cases where famous persons have failed to show that any deception was caused by the use of their image;
• switch selling - where A advertises that it sells B's product when in fact it does not. If customers come in to buy B's product, A attempts to sell them another brand. If A also represents that the substitute product is B's product then there is a further act of passing off;
• a suggestion that one class of B' product is in fact another;
• a suggestion by A that it is entitled to claim an award or commendation that is in fact due to, or belongs to, B;
• reverse passing off - where A suggests that B's product is in fact A's.

The essence of the deceptive conduct involved is that A is appropriating another's reputation to enhance the reputation of his goods or services, that is, A is taking a free ride on B's already established reputation.

The three most important matters that must be established by a plaintiff who alleges passing off are:

1. Reputation in the jurisdiction:

• in the character merchandising/sponsorship cases, that the plaintiff is well-known in the relevant market;
• in other cases, that the plaintiff has a reputation that resides in the particular indicia adopted by the defendant, that is, the indicia must give the product in question a distinctive character that is recognised by the relevant market.

2. That the defendant's conduct has been deceptive or might produce deception.

3. That this conduct has damaged the plaintiff's reputation in the jurisdiction, although in the character merchandising/sponsorship cases, the very suggestion of an association or endorsement between the plaintiff and the defendant's goods may amount to such damage (ie reputation and deceptive conduct are sufficient).

Of course, the result in every case will depend on its own facts.

The defendant might be able to negative the deception caused by his or her conduct and avoid liability by disclaiming any association with the plaintiff. An example of a disclaimer of association is the clear labelling of the product as that of the defendant. Whether a disclaimer would be effective will depend on the nature of the product and the circumstances of its sale and advertising. The courts have said that imitating the get-up of an inexpensive product that is not likely to be closely examined by a purchaser is likely to cause deception even where the product is clearly labelled with the defendant's name.

It might also be that the circumstances surrounding the use of the plaintiff's name or image are such that no deception is likely. For example, the plaintiff's image may be used in a parody, and it may be highly unlikely that the relevant market would believe that the plaintiff had authorised or endorsed the use of his image in such a way.

The tort of passing off also has relevance to information displayed on Web sites. Care has to be taken by the designers of Web sites that the use of a hypertext link does not cause the viewer to believe that information displayed on the linked Web site is the product of, or associated with, that of the first Web site. Imagine, for example, that a Web site displaying news articles provides a hypertext link to the Web site of a newspaper with which it has no association. However, when the link is accessed, the news articles displayed on the second Web site are displayed under the heading of the first Web site. Apart from copyright issues (considered in the Scottish case of Shetland Times Ltd v Dr Jonathan Wills & Another), such a situation might give rise to issues of deception.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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