In a global online market, competition is rife. Sometimes, traders resort to tactics that give them the upper hand in business. One of these tactics is to pass off another trader’s products as their own. Due to overseas and online trade, this practice is increasingly more likely to occur. Accordingly, this article explores whether a foreign entity can claim passing off in Australia. In short, it is technically possible – but it depends a lot on the specific situation at hand.
Trademarks
In order to understand passing off, it is firstly important to understand trademarks. When you register a trademark, you are protecting your branding. This is usually curated to shield specific traits of the brand from external appropriation, but it does not protect everything. Things like reputation and goodwill come to the fore. These form the basis of the types of things that can evade the protection of trademark. Trademarks are also only applicable in the country in which they are registered. As you can see, trademarks have their limitations.
For example, there are two businesses. Fred’s Fries ad Ted’s Fries. Let us assume that Fred’s Fries are tastier, and he develops a reputation for this. Ted recognises Fred’s success, but unfortunately lacks the same culinary prowess. However, if Ted then attempted to purposefully misrepresent his product as though it was Fred’s Fries, is Fred’s goodwill protected? Whilst you can own a recipe, you cannot really trademark the reputation of how tasty something is. It is too subjective a task. This is where the tortious claim of passing off becomes both relevant and useful.
What is passing off?
In common law countries such as the UK, Australia, and New Zealand, passing off is a common law tort which can be used to enforce unregistered trademark rights. The tort of passing off protects the goodwill of a trader from misrepresentation. Ultimately, the law of passing off prevents one trader from misrepresenting goods or services as being the goods and services of another. It also prevents a trader from falsely claiming that their goods or services have some association or connection with another.
With a global market and variety of online products, this can easily happen. A problem arises where one trader has intentionally relied on the reputation of another to sell products. Since it is possible for an international trader to prove their reputation in a particular geographic areas, a passing off claim is achievable.
Making a passing off claim
A passing off claim comprises of the following elements:
Misrepresentation
There has been representation to mistake others into thinking one party were the other party or in partnership with them.
Goodwill
The other party has an established reputation and their name and logo distinguishes them within the market.
Damage
The other party has suffered damage as a result of the misrepresentation. Often, the damage is the sales the other party has lost out on.
One of the main difficulties facing overseas entities would be the costs of litigating. However, if they are able to overcome these costs, and are able to sufficiently established the foregoing elements, it is possible for an overseas entity to claim passing off in Australia.
The ‘moron in a hurry’
Put simply, the ‘moron in a hurry’ is a defence or test applied in passing off proceedings. What this means is that if only a ‘moron in a hurry’ could be misled into believing one product was actually that of another, the two products and their respective goodwill are distinct enough from one another so as to not encroach upon intellectual property rights of the other. Applying this defence to an online context can be difficult. Nevertheless, using it to reject passing off claims makes sense since reasonable consumers ought to know the difference between local and overseas products. Where this can be more applicable is where a supplier passes itself off as a licenced wholesaler or distributor of an overseas product online. Even a reasonable person could be misled into believing this was true. Ergo, a passing off claim can be established.
The Australian Government Intellectual Property website outlines some further precautions to take. Being aware of the global product landscape is always a good idea. Keep vigilant, and know your product market well. If you are at all unsure about your situation, it may be wise to consult with a trademark or property lawyer.
