It is generally accepted that the United Kingdom does not have a law of unfair competition.Footnote 1 But this is a puzzling statement. In fact, there are number of torts, including breach of confidence, malicious falsehood, and passing off, which cover a great deal of the territory which in other jurisdictions is considered to fall within the general area of unfair competition law.Footnote 2 Furthermore, there are an increasing number of statutes and regulations (largely of EU derivation) which occupy this same territory.Footnote 3 The torts of course are generally enforced between businesses, while, by contrast, the statutes and regulations are enforced by state agencies. Nonetheless, taken together, the common law torts and the statute law in this area would overlap with almost all the legislation and case law which in other jurisdictions would constitute a law of unfair competition. It follows that to explain how the United Kingdom can claim not to have a law of unfair competition, it is necessary to map not this broad area of overlap, but rather to locate the small outpost where United Kingdom law is thought to differ from that of many of its continental neighbours. Arguably, what is held to differentiate United Kingdom law from a more general law of unfair competition has generally been identified by both judges and commentators as residing in large measure in its refusal to encompass a remedy for what is sometimes called “unjust enrichment” and at other times, misappropriation, often referred to as “pure” misappropriation. This difference is most clear if one considers the tort of passing off, which is usually thought to come closest in the United Kingdom to providing a general remedy against unfair competition.Footnote 4
According to the textbooks, to prove passing off it is necessary to show that three separate elements are present: goodwill, misrepresentation and damage.Footnote 5 This may be contrasted with the situation in other jurisdictions. For example, under French unfair competition law, there is a remedy against concurrence parasitaire, which has been described as the exploitation of one party's commercial achievements or reputation by another, even if there is no likelihood of confusion between them and even if the parties are not directly in competition.Footnote 6 An example might involve the sale of brand name lookalikes.Footnote 7 Germany too, following the passage of its Unfair Competition Act 2004, has introduced sanctions against the “parasitic exploitation of another's achievements” which does not necessitate a misrepresentation.Footnote 8
The centrality of misappropriation to what is generally understood in the United Kingdom to constitute a general law of unfair competition by contrast to the narrower tort of passing off may be seen in the differing approaches of the British and the French courts to the dispute between the perfume companies, L'Oreal and Bellure in these two jurisdictions. In this case, L'Oreal, which manufactured expensive perfumes sought to prevent the defendant from marketing cheap perfumes in packaging and with fragrances which made allusion to the claimant's products and advertising its products with reference to the claimant's own. In France, apart from findings of trade mark and copyright infringement, and of unfair competition based on a likelihood of confusion between L'Oreal's products and those of Bellure, the courts also found Bellure to have been guilty of “parasitic competition”, which did not involve confusion. According to the Court d'appel de Paris (Fourth Chamber):Footnote 9
It is shown by the evidence bought before the Court that Bellure's illicit acts are directed against the perfumes of the claimant companies which have acquired a certain reputation with consumers; in appropriating at reduced costs the financial investments made by the claimant companies in developing the perfumes, their packaging and in promoting the finished products, by marketing perfumes which were presented as equivalent and in reproducing identical ranges of products…Bellure committed distinct acts of parasitic behaviour.
In the UK, on the same facts, L'Oreal asserted that Bellure was guilty of both trade mark infringement and passing off. Moreover, counsel for L'Oreal also argued that the Court should be willing to “embrace a tort of “unfair competition” which requires no misrepresentation.”Footnote 10 Jacob L.J. had certainly taken the view that there was no misrepresentation in this case. He had found that the claimant and the defendant were neither in competition with each other, nor would consumers confuse their products.Footnote 11 But he was not prepared to extend the law of passing off to embrace a situation such as had arisen in this case. According to Jacob L.J., those “who support some wider tort” of unfair competition, “use the word “misappropriation” of goodwill to designate it.”Footnote 12 He went on:
I wish to state that I think it very unhelpful. We are all against misappropriation, just as we are all in favour of mother and apple pie. To use the word in the context of a debate about the limits of the tort of passing off and its interface with legitimate trade is at best muddling and at worst tendentious.
So I think the tort of passing off cannot and should not be extended into some general law of unfair competition.Footnote 13
As was made clear in L'Oreal v. Bellure, the key barrier which is usually identified as preventing passing off from developing into a tort of unfair competition has been the need for a misrepresentation or, as it is sometimes called, a deception.Footnote 14 Thus, Jacob L.J. quoted from his own earlier decision in Hodgkinson & Corby v. Wards Mobility Services to the effect that “never has the tort [of passing off] shown even a slight tendency to stray beyond cases of deception. Were it to do so it would enter the field of honest competition, declared unlawful for some reason other than deceptiveness.”Footnote 15 It will be argued here that the focus on the need for deception in passing off as the requirement which differentiates that tort from a more general tort of unfair competition is itself deceptive. In fact, what is generally held necessary in passing off is not any misrepresentation, but a misrepresentation which damages the claimant's goodwill.Footnote 16 And what has actually shaped the limits of passing off, and indeed what in fact has determined whether or not it has embraced “pure misappropriation” has been the changing nature of the damage which the courts have been prepared to recognise, together with the fact that, in practice, a claimant is rarely, if ever, put to the task of proving it has occurred. As a result, it will be suggested, the British courts have, in effect, allowed passing off to venture into the territory usually deemed occupied by unfair competition law more generally.
The next section (I) will examine two recent registered trade mark decisions of the ECJ, Intel v. CPM and L'Oreal v. Bellure.Footnote 17 It will do so in order to demonstrate that whether or not the law of registered trade marks provides a remedy for misappropriation hinges on the question of damage rather than the need for a deception. The following section (II) will then turn to passing off. It will suggest that here too very often it is the nature of the damage rather than the nature of the misrepresentation which is determinative of whether there has been passing off and this is particularly the case when the court seeks to expand the tort's traditional boundaries. The section III will then turn specifically to look at the role of damage in delineating the boundaries between passing off and unfair competition. It will argue that the ease with which courts can identify new forms of passing off depends in some measure upon the rarity with which claimants will, in practice, be called upon to prove that damage has occurred. This article will then conclude (IV) by suggesting that given the protean nature of passing off, as it has developed through case-law, and the lack of any clear boundary to its expansion which might be practically provided if it were necessary for claimants to prove actual damage, the UK would do well to consider enacting a general unfair competition statute. Such a statute might, at the very least, clearly and systematically set out what market behaviour is or is not acceptable in the area of unfair competition, including on which side of this line “pure” misappropriation might fall.
I
The questions asked of the ECJ in Intel v. CPM and L'Oreal v. Bellure concerned the interpretation of arts 4(3) and 5(2) of the European Trade Mark Directive respectively.Footnote 18 Specifically, they addressed the issue of when use of a sign identical or similar to a registered mark, which has a reputation in the Member States, on similar or dissimilar goods, is detrimental to the distinctiveness of the earlier mark (in the case of Intel) or takes unfair advantage of the repute of the earlier mark (in the case of L'Oreal). Both of these referrals to the ECJ originated from the British Court of Appeal, and in both cases the British court took the view that for either to apply there should be a misrepresentation about the claimant's mark made by the defendant. In Intel, the claimant had registered marks for “Intel” and “Intelinside” for computers and related products. CPM obtained the registration of “Intelmark” for telemarketing and marketing services. Intel sought to have the CPM mark revoked on the basis, inter alia, that CPM's use of the mark would be detrimental to the distinctive character of its own marks. The key issue raised in Intel, and addressed to the ECJ, was what was the nature of the linkFootnote 19 that the relevant public needed to make between the two marks which would lead to a dilution of the distinctiveness of the claimant's mark. Intel argued it could constitute any kind of mental association, even a mere bringing to mind. According to Jacob L.J., however, this would be insufficient. In fact, what was needed was that “the average consumer would consider that there was an economic connection between the owners of the two marks.”Footnote 20 Furthermore, as a result of this link there must be harm or the prospect of harm to the distinctiveness of the claimant's mark, which is “real and tangible”.Footnote 21
We have already seen that in the case of L'Oreal v. Bellure, Jacob L.J. did not consider that there was any likelihood that the relevant consumers would be confused as to the origin of the products marketed by the claimant and the defendant. A key question for the ECJ then became whether when there was no such confusion, so that there was no damage to the origin function of the claimant's mark and no impairment of the claimant's sales, in other words no misrepresentation and no damage to the claimant's mark as such, but the defendant did get a commercial advantage from his use of a sign similar to the earlier mark, would that amount to taking unfair advantage under art. 5(2). Jacob L.J. felt that the better answer would be in the negative, in that “where there is no harm, present or prospective, caused to the mark, its distinctive character or to the mark owner or his business, present or reasonably prospective, I see no reason to say that a use is “unfair”.”Footnote 22
Superficially, at least, the ECJ seemed to come to opposite conclusions in its consideration of these two cases. In its judgment in Intel, the ECJ looked at the nature of the necessary link for a finding of detriment to the distinctive character of the earlier mark. It seemed that were the average consumers to be confused as to origin of the defendant's goods then the “link”, which was identified in Adidas v. Fitnessworld, would be “necessarily established”.Footnote 23 But whether there was the necessary link for finding dilution had to be appreciated globally taking into account a variety of factors. Whether the average consumer called to mind the earlier mark when he saw the later mark or sign might be one factor in this global assessment, but it was not sufficient to establish the relevant link.Footnote 24 In fact, according to the ECJ, the only truly necessary factor for finding dilution was damage to the claimant's mark. Or as the court put it, “evidence of a change in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered consequent on the use of the later mark, or a serious likelihood that such a change will occur in the future.”Footnote 25 And that change must be shown by the proprietor of the earlier mark “to cause actual and present injury to his mark … or a serious likelihood that such an injury will occur in the future.”Footnote 26
Damage was also relevant to finding that art. 5(2) applied in L'Oreal v. Bellure, although in this case it was the absence of damage to the earlier mark that was key. As we have seen, the Court of Appeal had asked, inter alia, whether unfair advantage might be found even if there was no likelihood of confusion between the earlier mark and the later mark or sign, and indeed even if the origin function of the earlier mark was not jeopardised nor was the mark impaired in any other way. The ECJ held that it would. According to the ECJ, taking unfair advantage of the character or repute of the mark with a reputation did not require a likelihood of confusion or any detriment to the distinctive character or repute of the earlier mark, or indeed any detriment to its proprietor. Rather, unfair advantage meant that the third party sought “to ride on the coat-tails” of the earlier mark in order to take advantage of its attractiveness and its reputation and thus to exploit, without recompense the proprietor's effort in creating and maintaining the mark's image.Footnote 27 Furthermore, in order to determine whether a mark does in fact take unfair advantage of the distinctive character or the repute of the earlier mark, it is necessary to undertake much the same exercise to determine if there is a relevant “link” made in the minds of consumers between the two marks as was described in Intel.Footnote 28
In L'Oreal v. Bellure, the ECJ made clear that a remedy against “parasitism” or “free-riding”,Footnote 29 which we have already identified as the defining characteristic of a general law of unfair competition, is provided by art. 5(2) TMD for marks with a reputation. In other words, taking unfair advantage is tantamount to “pure” misappropriation. By contrast, the judgment in Intel v. CPM held that for art. 5(2) to apply to the dilution of a mark with a reputation there needed to be actual damage to the earlier mark or a serious likelihood that it would occur. However, what these apparently contrasting cases share in common is the irrelevance of whether there is a deception for either detriment to distinctive character or unfair advantage to be found. Rather, both judgements concentrated on damage: in Intel the apparent need for damage; in L'Oreal the reverse. But here again the contrast might be more apparent than real. By asking, in Intel, not for actual damage, but allowing at a minimum for only a likelihood (albeit a serious one), without identifying any of the specific factors which might be adduced to determine whether such a likelihood of damage actually exists, the ECJ was, in effect, endowing national courts with the same freedom to find misappropriation that it provided by its judgment in L'Oreal v. Bellure. We shall now turn to passing off and misappropriation. We shall see that here too the emphasis on the need for a misrepresentation as setting a limit to the tort is misplaced. Instead, it will be argued that it is damage or its absence which has determined whether passing off has in fact evolved into a general law of unfair competition.
II
As we have seen, in the Court of Appeal in L'Oreal v. Bellure, counsel for the claimant argued that passing off had metamorphised into a tort of unfair competition, in particular because it was no longer necessary to prove there had been a misrepresentation in every case. We have also seen that Jacob L.J. disagreed. He reviewed the cases which the claimant's counsel had cited in support of his contention,Footnote 30 concluding that each of these confirmed the need for a misrepresentation, and instead, opined thatFootnote 31: “Most of it is about the damage which a misrepresentation will cause, Laddie J. [in Irvine] pointing out that it can be more subtle than loss of sales”. In some ways both these approaches are puzzling. In fact, if passing off is truly to be understood as different from a law of unfair competition then it is not the need for a misrepresentation alone which distinguishes it, but that the fact that the misrepresentation damages the claimant's goodwill rather than simply benefits the defendant. Certainly, in cases of pure misappropriation it is presumably still possible to have a misrepresentation, but one that goes to the nature of the defendant's goods rather than those of the claimant. Indeed, where passing off cases have been perceived to stray from the classic trinity, it has most often been because the damage caused by the misrepresentation would not directly affect the claimant's goodwill rather than that there was a lack of a misrepresentation as such. But it is also true that in such cases the nature of that misrepresentation is often shadowy at best: and may, in some cases, differs little from the “link” which was described in Intel and L'Oreal. Cases of what is known as the “extended” form of passing off are a good example of situations in which both the misrepresentation and the damage it causes are hard to define – although understood as cases of misappropriation the claimant could be argued to have an unanswerable case.
In the “extended” form of passing off, the misrepresentation is not in relation to the claimant's goodwill but to a product which is produced by a number of claimants. In the leading case of the “extended” form of passing off, Warnink v. Townend, the claimants were the Dutch producers of the drink, advocaat, based on spirits and the defendant produced “Keeling's Old English Advocaat” based on wine. According to Lord Diplock,Footnote 32 “True it is that it could not be shown that any purchaser of ‘Keeling's Old English Advocaat’ supposed or would be likely to suppose it to be goods supplied by Warnink or to be Dutch advocaat of any make.” But nonetheless, and perhaps surprisingly, given the apparent lack of customer confusion, Lord Diplock accepted there would be loss of sales of the claimants' products. And he was also willing to accept the possibility that the reputation of the name “advocaat” would be debased.Footnote 33 Nor, as we shall see, were the claimants put to any particular proof that either sort of damage had or might occur. It is submitted that the only certainty in this case is that what the court, both at first instance and in the House of Lords, was really describing, was pure misappropriation. By describing its product as advocaat, the defendant was benefitting from the Dutch products' reputation, without it would appear deceiving customers into believing it was that product itself. Such a view is more than hinted at by Lord Fraser's statement that, “the misrepresentation was that the respondents' “Old English Advocaat” was a liqueur of the kind that enjoyed the reputation attached to genuine advocaat in England. I note in passing that the justification for the passing off action to prevent such misrepresentation continuing is not to protect the public (who might suffer no prejudice from it, if they had never tasted genuine advocaat) but to protect the appellants' property in the goodwill.”Footnote 34
One might make a similar point about two other extended passing off cases which followed Warnink v. Townend: the “elderflower champagne” and “Swiss chocolate” cases. In Taittinger v. Allbev Footnote 35, the claimants were French champagne producers and the defendant produced a drink they called “Elderflower Champagne”, which they sold in bottles reproducing the colour and shape of the classic champagne bottle. The defendant's “champagne” was non-alcoholic and sold for £2.45, about four times less than a bottle of real champagne. At trial, it was held that although there was goodwill and a misrepresentation, the amount of damage resulting from any customer confusion would be so small that it would be insufficient to find passing off. In the Court of Appeal, Peter Gibson L.J. accepted that there had been a misrepresentation that the defendant's product was “in some way associated” with champagne, and he accepted the view of Sir Mervyn Davies, in the High Court, that a “simple, unworldly man” might be confused between the two products. But he also accepted that the damage caused by this confusion might be on such a small scale that it could be ignored.Footnote 36 However, he thought that a larger number of the public would “associate” the two products,Footnote 37 and as a result the effect would be to “demolish” the distinctiveness of the word champagne.Footnote 38 This was where the real likelihood of damage lay. Similarly, Mann L.J. took the view that a possible lack of customer confusion was not decisive, since the real damage was to the impairment of the claimant's mark, although such “debasement, dilution or erosion are not demonstrable in figures of lost sales…”.Footnote 39 According to Sir Thomas Bingham M.R.,Footnote 40
Plainly, those with any knowledge of wine will not buy the defendants' product instead of Champagne …. Like the judge, I do not think the defendants' product would reduce the first plaintiffs' sales in any significant and direct way. But that is not, as it seems to me, the end of the matter. The first plaintiffs' reputation and goodwill in the description Champagne derive not only from the quality of their wine and its glamorous associations, but also from the very singularity and exclusiveness of the description, the absence of qualifying epithets and imitative descriptions. Any product which is not Champagne but is allowed to describe itself as such must inevitably, in my view, erode the singularity and exclusiveness of the description Champagne and so cause the first plaintiffs damage of an insidious but serious kind.
As with the “advocaat” case, it was accepted by the Court of Appeal that there was no, or very little, customer confusion between the two products, rather an “association”, which although never actually defined bore a remarkable similarity to the “link” in the registered trade mark cases, Intel and L'Oreal. In any case, the Court of Appeal clearly held that such an association would be likely to dilute the value of the claimant's mark, although it did not set out any parameters for how to assess the extent of dilution if and when it occurred.Footnote 41 As a result and given the lack of customer confusion, it is submitted that the only sure outcome from the defendant's actions in the “elderflower champagne” case is again the misappropriation of the positive connotations of the name “champagne” by the defendant.Footnote 42
Finally, it is worth considering the “Swiss chocolate” case, Chocosuisse v. Cadbury.Footnote 43 In this case, both the perceived misrepresentation and the actual damage might be said to fit uneasily into any conventional definition of passing off. Cadbury sold chocolate under the name “Swiss Chalet” with a picture of the same on its packaging. The chocolate was not made in Switzerland. Nor did the defendant claim that it was. The claimants were producers of chocolate which was made in Switzerland. Both Laddie J., in the High Court, and the Court of Appeal concluded that there was passing off. Thus, Laddie J. held that there was a misrepresentation which would damage the claimants' goodwill through “insidious” damage to the “exclusivity” of the designation “Swiss Chocolate”.Footnote 44 This was despite the fact that, as he acknowledged, it was not clear what particular common characteristics the public attributed to Swiss chocolate, apart from its country of origin.Footnote 45 However, he accepted that Swiss chocolate had “a distinct reputation” and the “fact that members of that public have different views of what features of the distinctive quality are or are incapable of defining it is of little relevance”Footnote 46 The Court of Appeal went further and accepted that Swiss chocolate did indeed have defining characteristics in that it was made to Swiss food regulations, including the “absence of any added vegetable fat”, but there was no suggestion the public generally would be aware of this.Footnote 47
If the particular characteristics of Swiss chocolate, and hence the basis for its goodwill, were hard to pin down, presumably this was not the case for “Cadbury”. For example, in 2008, a Readers Digest's survey of the “Most Trusted Brands” found that 54 per cent of respondents identified Cadbury “as the most trusted brand of chocolate and confectionery.” “Cadbury” was rated highly for its “quality, excellent value, strong image and understanding customer need”.Footnote 48 It must surely be arguable that in purchasing “Swiss Chalet”, consumers were at least as likely to be attracted by the fact that the origin of the chocolate lay with Cadbury rather than with Switzerland. This possibility was acknowledged by Laddie J. who took the view that the prominence of the Cadbury brand name meant that a majority of the public, like himself, would not be confused into thinking the chocolate was “Swiss” chocolate. He then went on to find, absent evidence, that a smaller but nonetheless still a significant number of consumers would.Footnote 49 It is not argued that Cadbury got no advantage from styling its chocolate “Swiss Chalet”. Presumably, Cadbury intended to attach whatever positive associations consumers had about Swiss chocolate to its own. But, it seems equally likely that the public would assume the chocolate was English, even if it had some of the attribute of Swiss chocolate, however defined. It is submitted that from this perspective, this case too fits squarely within the ambit of misappropriation. Furthermore, were this to be accepted, then the claimants would be released from the need to show “insidious” damage to their putative goodwill: something which they were not called upon to do in any event.Footnote 50
It is not intended to suggest that it is only the extended form of passing off which displays the characteristics of a general tort of unfair competition. There are other forms of passing off which, it is submitted, do the same. “Inverse” (or reverse) passing off is a case in point, sharing as it does, with the extended form, the fact that the relevant misrepresentation is primarily in relation to the defendant's goods rather than the claimant's. Thus, in Bristol Conservatories v. Custom Built,Footnote 51 the defendant showed pictures of the claimant's conservatories to its prospective customers, claiming them as its own. The Court of Appeal held that whether or not the public would be confused was irrelevant. According to Gibson L.J., “The prospective customer here is not left to perceive the difference between the two allegedly similar products, he is told simply and untruthfully that Custom Built designed and constructed the conservatories which provide the evidence for the experience, skill and reputation of the plaintiffs” and found passing off.Footnote 52 In this situation, while there is obviously a misrepresentation, there must be some difficulty in pinning down exactly what damage it might do to the claimant's goodwill, if the relevant public are unaware of it.Footnote 53 However, there can be little doubt that the defendant has misappropriated some of the value of the claimant's reputation, including its experience and skill, for its own benefit.Footnote 54
Another more recent example of a case where, it can be argued, passing off strayed into misappropriation and which was also cited by defence counsel in L'Oreal is Irvine v. Talksport.Footnote 55 In Irvine, the claimant, a racing car driver who endorsed products, sued the defendant radio station which produced a doctored photograph showing the claimant listening to its programme on a portable radio, thus implying, according to Laddie J., that he had endorsed the defendant. Here, Laddie J. identified the damage as the following:Footnote 56
In my view these cases [of false endorsement] illustrate that the law of passing off now is of greater width than as applied by Wynn-Parry J in McCulloch v. Lewis A. May (Produce Distributors) Ltd. [1947] 2 All E.R. 845.Footnote 57 If someone acquires a valuable reputation or goodwill, the law of passing off will protect it from unlicensed use by other parties. Such use will frequently be damaging in the direct sense that it will involve selling inferior goods or services under the guise that they are from the claimant. But the action is not restricted to protecting against that sort of damage. The law will vindicate the claimant's exclusive right to the reputation or goodwill. It will not allow others to so use goodwill as to reduce, blur or diminish its exclusivity. It follows that it is not necessary to show that the claimant and the defendant share a common field of activity or that sales of products or services will be diminished either substantially or directly, at least in the short term. Of course there is still a need to demonstrate a misrepresentation because it is that misrepresentation which enables the defendant to make use or take advantage of the claimant's reputation.
In Irvine, the claimant did not supply goods or services which incorporated any goodwill which could be damaged by the defendant's misrepresentation. In order to keep Irvine within the bounds of passing off, it has nonetheless been argued that he did have goodwill in the business of endorsing products and the misrepresentation that he had endorsed the radio station damaged that goodwill.Footnote 58 But to maintain this line of explanation, it has also been necessary to differentiate the Irvine case as a one of “false endorsement” from cases purely concerned with false merchandising, where a celebrity image (either real or fictional) has been appropriated and placed on a product without his or her consent, since these latter cases have not generally found a remedy in passing off.Footnote 59 To justify this interpretation of Irvine it is necessary first to relocate the relevant goodwill from Irvine as a personality (where it was placed by Laddie J. in the above quote) to his business of endorsing products and also to maintain that the public will actually draw a distinction between false merchandising and false endorsement.Footnote 60 This is not to argue that the courts must necessarily accept that passing off should provide a remedy for “pure” misappropriation of “fame” in false merchandising cases, but rather to suggest that the difference between doing so and the outcome of the Irvine case might be more apparent than real.Footnote 61 Indeed, it is interesting that Laddie J., who was of course responsible for the expansion of the scope of passing off to encompass false endorsement, originally suggested that the relevant damage would be a reduction in the “exclusivity” of the claimant's image as such, and then subsequently held the relevant damage to be the cost for the defendant of engaging a celebrity to associate with its product, although not necessarily Irvine in particular.Footnote 62 This amount was increased in the Court of Appeal to the price Irvine, himself, would have charged for an endorsement, surely a more logical outcome if this was indeed a case of “false endorsement” rather than one which concerned the simple misappropriation of fame.Footnote 63
III
We have argued thus far that if the presence of a misrepresentation is key to distancing passing off from cases of pure misappropriation, there is considerable evidence that the definition of what constitutes a misrepresentation in passing off has been an exceedingly flexible one.Footnote 64 Indeed, it has often born a distinct similarity to the elusive link which the ECJ identified in Intel and L'Oreal as necessary for findings of dilution and misappropriation, respectively, in relation to registered trade marks and which falls far short of any confusion as to the origin of the goods or services in question. We have suggested, instead, that what actually differentiates misappropriation from “classic” passing off is the absence of damage to the claimants' goodwill. Thus, as we have seen, in L'Oreal, Jacob L.J. himself took the view that those cases which appear to stretch the boundaries of passing off have done so through identifying new types of damage rather than by eliminating the need for a misrepresentation as such: although, of course, it has been argued here, that some have done that as well.Footnote 65
Others have identified the presence of damage to goodwill as the key element which separates passing off from unfair competition. According to Hazel Carty:Footnote 66
Proving financial loss (to the claimant) or gain (to the defendant) is not sufficient. The link between damage and goodwill is an important limitation on the tort, especially after Advocaat added product misdescription to the list of relevant misrepresentations. If simply any damage-in the sense of damage to the claimant's competitive edge – was sufficient, then the tort would expand into something closer to an action for unfair competition.
Similarly, Christopher Wadlow sees the need to show damage to goodwill as compensating for what may be seen as less traditional types of misrepresentations in passing off cases. According to Wadlow: “Faced with a set of facts which would hardly have fitted within the traditional notion of the tort, likelihood of damage provides one acid test to distinguish those misrepresentations which amount to passing-off from those of which the claimant cannot complain.”Footnote 67 In addition, Wadlow sees as crucial that such damage or its likelihood should be to the claimant's goodwill. Where passing off has recognised types of damage which do not appear directly to threaten goodwill, such as dilution, he argues that these have “overlapped” with or been the “intermediate cause” of several other, “better established” heads of damage, such as, for example, loss of sales.Footnote 68 As an example, he cites the “Elderflower champagne” case, which he says recognised confusion as the crucial fact for a finding of passing off and hence went beyond offering a simple remedy for dilution.Footnote 69
Thus it appears, to these commentators, that if damage is an “acid test” that there has been a relevant misrepresentation; then confusion provides the necessary proof that there will be the relevant damage. This view had been put by Millet L.J. in the “Harrods” case, when commenting on the decision in “Elderflower champagne”, he said: “I have an intellectual difficulty in accepting the concept that the law insists upon the presence of both confusion and damage and yet recognises as sufficient a head of damage which does not depend on confusion.”Footnote 70 Carty too sees the three elements of passing off as “interlinked”, helping “to define and limit each other.”Footnote 71 By contrast, what has been argued here is not necessarily that the “Elderflower” champagne case, and the other cases discussed, should be understood as passing off without confusion. Instead, we have gone further to suggest that on their facts, and indeed, as was recognised by the courts, not only the likelihood of confusion but also damage to the claimants' goodwill were equally remote.
That passing off may in effect encompass “pure” misappropriation, in this way, derives, in large measure, from the fact that although the supposed core of the tort is damage to the claimant's goodwill, such damage is often assumed by the courts and very rarely needs to be proven by the claimant. There are two reasons for this. One has to do with principle; the other with practice. In the former case, if a defendant is indeed passing off, then it would be a poor justice system which allowed him to continue to do so until he damaged the claimant's goodwill. Thus, the courts have recognised that a passing off action may be brought quia timet.Footnote 72 In other words, if in the court's view damage to goodwill is the likely outcome of the defendant's actions then once a claimant can show goodwill and a misrepresentation the courts may well assume a likelihood of such damage.Footnote 73 In the second case, where instances of passing off are not brought to a swift conclusion by a letter before action, in practice legal proceedings will frequently be resolved by the claimant's obtaining an interim injunction. Even if a case goes to trial, which happens rarely, legal proceedings almost certainly end once a successful claimant obtains a permanent injunction. It is even less usual for the claimant then to seek a second hearing to decide upon the measure of damages owed by the defendant. Thus, in a majority of cases, neither in principle nor practice, will the claimant be put to proof of damage.Footnote 74
As we have seen, it is a recognised aspect of passing off that a court may assume there is the relevant damage if goodwill and a misrepresentation can be shown. And, as we have also seen, the courts may assume there has been the relevant misrepresentation, if damage to goodwill can be shown or, more to the point, inferred. In Chocosuisse, for example, no evidence was apparently adduced by the claimants as to damage through loss of sales or of any other kind. Instead, the claimants argued that if they succeeded in showing goodwill and a relevant misrepresentation, then “damage is more or less inevitable”. Laddie J. agreed, and this point was not contested in the defendant's appeal.Footnote 75 In Taittinger, as well, the claimants gave “no evidence of loss of sales”, nonetheless Peter Gibson L.J. was willing to infer that there would be such damage, based on the likelihood that some members of the public would be confused. Although, as we have seen, he thought the greater damage would be to the exclusiveness of the name champagne, something which did not depend upon customer confusion.Footnote 76 In Bristol Conservatories, too, the Court of Appeal was willing to infer damage to the claimant's goodwill because of the defendant's misrepresentation, even though Peter Gibson L.J. had this to say of the misrepresentation itself: “The concept of confusion, in my view, is irrelevant when the misrepresentation leaves no room for confusion”.Footnote 77 On the other hand, Irvine was a particularly unusual passing off case in that the courts were called upon, in separate hearings, to calculate the damage caused by the defendant's passing off.
Despite rare exceptions such as Irvine, in the other cases discussed above and indeed in the vast majority of passing off cases, claimants are able to assert that they have suffered damage to their goodwill, or are likely to do so, or the courts are able to infer the same in the sure knowledge that it will be highly unlikely that the claimant will need to adduce proof of such damage. It can be argued that to provide otherwise would be to lengthen such actions so that the damage to the claimant's goodwill through the defendant's passing off would be irreversible whether or not the former was eventually compensated by the latter; or that it would be foolish to prolong passing off actions, and hence to increase the costs involved, if the parties were willing to settle at an early stage. Nonetheless, it is remarkable that a lack of the need to prove damage to goodwill is characteristic of even those landmark decisions which have shaped the nature of the tort at its margins. In Warnink v. Townend, Lord Diplock was willing to accept the “finding of fact” by the trial judge, Goulding J., that the claimants' goodwill would suffer “serious injury” through the actions of the defendant.Footnote 78 Yet, although Goulding J. accepted that there was evidence the defendant had diverted sales from the claimants (in effect, a statement from the defendant that it “must” have taken some of the claimants' customers), with regard to the “more gradual damage to the plaintiffs' business through depreciation of the reputation that their goods enjoy”, he noted that “damage of the second type can rarely be susceptible of positive proof in this class of case” and indeed, in the event, none was given.Footnote 79
IV
There continues to be considerable debate as to whether the United Kingdom should introduce a law of unfair competition. There are certainly powerful arguments as to why it might be wrong either to introduce a remedy for misappropriation or to stretch passing off to encompass such a wrong. For the most part, these arguments reflect the view, traditionally favoured by the judiciary in the United Kingdom, that it is in the public interest to have robust competition in the market, both for the benefit of traders and the public more generally.Footnote 80 Thus, in the “Pub Squash” passing off case, Lord Scarman commented:Footnote 81
But competition must remain free; and competition is safeguarded by the necessity for the plaintiff to prove that he has built up an “intangible property right” in the advertised descriptions of his product, or, in other words, that he has succeeded by such methods in giving his product a distinctive character accepted by the market. A defendant, however, does no wrong by entering a market created by another and there competing with its creator. The line may be difficult to draw; but, unless it is drawn, competition will be stifled.
What might be called the “English” view was recently summarised in a government report relating to the implementation of the Unfair Commercial Practices Directive:Footnote 82
English law tends to prioritise different values to those favoured by other European legal systems. First, as a matter of doctrinal form, English contract law prefers specific provisions to general clauses; and, secondly, as a matter of doctrinal substance, the default values of English contract law are those of self-reliance and individualism rather than mutuality and co-operation.
Or, as Jacob J. pithily noted in Hodgkinson v. Wards Mobility, “the common law … leans against monopolies”.Footnote 83
Carty has taken a similarly cautious approach to the creation of monopolies, if for slightly different reasons. Rather than her primary concern being for traders seeking to enter a market, she sees a public interest in protecting consumers against misinformation about products. Such protection, according to Carty, is dependent upon the “need for customer connection and misrepresentation” in passing off, “which ensures that the public interest in rational consumer decisions is maintained”.Footnote 84 Interestingly, Carty differentiates this “public interest” from the narrower interests of traders, although it could be argued that greater competition allows for lower prices and more choice, which also benefits the wider public.Footnote 85 Jacob L.J. made this point in his judgment in L'Oreal v. Bellure. Referring back to the facts in Hodgkinson & Corby v. Wards Mobility, he noted:Footnote 86
The rejected complaints show just how anti-competitive a law of unfair competition would or might be. What one man calls “unfair”, another calls “fair”. The market involves the interests of traders, their competitors and consumers. They all have different perspectives. An established trader would like the law to hold off all his competitors – as far as possible. He would want to prevent all copying of his products – and for as long as possible, preferably indefinitely …. And the consumer will want the best deal he can get. He would oppose anything deceptive, but probably nothing else.
There are of course also strong arguments on the other side. The recent Gowers Review of Intellectual PropertyFootnote 87 questioned whether “brands” should attract greater protection from misappropriation, in particular in relation to copycat packaging, noting the difficulties for prospective claimants in demonstrating consumer confusion in passing off actions or even sufficient goodwill.Footnote 88 Gowers concluded that the government should “monitor the success of current measures to combat unfair competition” and if these are found to be ineffective, should then consult upon how the law might be changed.Footnote 89 In its judgment in the L'Oreal v. Bellure, the ECJ also put succinctly why it believed the Trade Mark Directive should protect marks with a reputation against “parasitism” or “free riding”.Footnote 90 The Court held:Footnote 91
… where a third party attempts, through the use of a sign similar to a mark with a reputation, to ride on the coat-tails of that mark in order to benefit from its power of attraction, its reputation and its prestige, and to exploit, without paying any financial compensation and without being required to make efforts of his own in that regard, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark, the advantage resulting from such use must be considered to be an advantage that has been unfairly taken of the distinctive character and repute of that mark.”
Protection against misappropriation may thus be seen as necessary to protect the investment that proprietors will put into nurturing the attractiveness of their brands, and to encourage them to invest further in the future. Elsewhere, it has been argued that not only does the brand owner profit from such protection, but so does the public more generally. In particular, some consumers are willing to pay a premium price for “exclusive” merchandise, and would see their own investment in such goods undermined if other traders were able to appropriate that exclusive image for cheaper products.Footnote 92
If the question of whether the United Kingdom should adopt remedies against misappropriation has been a matter of intense debate for some time, it is all the more ironic that in practice, as has been argued here, the law of passing off has already done so.Footnote 93 We have suggested that the extended form of passing off, inverse passing off and cases of false endorsement should all be understood as providing a remedy against misappropriation. We have made this suggestion because, as has been argued, in these cases in particular, damage or the likelihood of damage to the claimant's goodwill, as a requirement for passing off, has appeared to be particularly remote. Indeed, we have gone on to argue that the bias against having to show damage or the likelihood of damage in passing off actions both for legal and pragmatic reasons has been a major factor in enabling the tort to trespass on the territory occupied in other jurisdictions by unfair competition law.
But, as we have also seen, any systematic application of passing off to situations where the key wrong suffered by the claimant is misappropriation of his goodwill is unlikely. Because of this uncertainty and because, in practice, misappropriation is already recognised in English law, there must be a strong argument for enacting an unfair competition law, which provides a remedy against misappropriation. Such a law need not be permissive. Indeed, on the contrary, it might be designed in such a way as to ensure that successful actions for misappropriation must surmount significant obstacles. For example, if one were to take the German Act against Unfair Competition (2004) as a model, then, according to one observer, misappropriation may be “theoretically” dealt with only on the basis of the Act's general clause, which requires that illegal acts of unfair competition must be “capable of impairing competition to a not insubstantial extent.”Footnote 94 Nonetheless, however tightly drawn, such a law might go some way to ensuring that claimants (and perhaps even more importantly defendants) know what market behaviour would be tolerated and what deemed unfair.Footnote 95 It would bring the law of passing off into line with that of registered trade marks, which following the ECJ decision in L'Oreal v. Bellure, now provides a remedy against misappropriation. And it would presumably provide a remedy for those, perhaps rare, occasions when morality should triumph over the market, and a defendant not be allowed to enrich himself at the expense of a claimant. Despite judicial resistance to a law against misappropriation, the fact that it has already found its way into passing off suggests that there are times when justice demands that competition should not simply be given its head.
