Dealing with wrongful competition; passing off
Part 1
The law does not prohibit competition, in fact, it is interested in fair competition. There are many advantages to having lawful competition in any economy.
It is good for both the businesses and the customers. However, the law is concerned with wrongful competition. This gives rise to a cause of action at the instance of an aggrieved party.
One of the common challenges that many businesses encounter is that of “passing off” which often infringes on a business’ intellectual property.
This week we want to look at “Passing Off” and the steps that businesses can take to protect their legal interests.
What is passing off?
Passing off happens when someone deliberately or unintentionally misrepresents their goods or services as those belonging to another party so that members of the public are misled.
The principle underlying the delict of passing off is that “A man is not to sell his own goods under the pretence that they are the goods of another man” (Perry v Truefitt (1842)).
The act of misrepresentation often damages the goodwill of a person or business, causing financial or reputational damage. (Woolworths Zimbabwe Ltd v The W Store 1998 (2) ZLR 402(SC); Capital Estate &General Agencies (Pty) Ltd v Holiday Inns Inc & Ors 1977 (2) SA 916 (A) at 929 C-D.” )
Passing-off is a form of wrongful competition. It is unlawful because it results, or at any rate is calculated to result, in the improper filching of another’s trade and an improper infringement of his goodwill and/or because it may cause injury to the other’s reputation. (See: Brian Boswell Circus (Pty) Ltd and Another v Boswell Wilkie Circus (Pty) Ltd 1985 (4) SA 466 (A).
In addition to straight passing off, there can also be:
extended passing off — where misrepresentation of a particular quality of a product or service causes harm to another’s goodwill.
reverse passing off — where a trader markets another business’ goods or services as being his own.
Raising an action of passing off can help you to prevent other people from using the goodwill associated with your business for their own benefit.
The essence of an action for passing off is to protect a business against a misrepresentation of a particular kind, namely that the business, goods or services of the representor is that of the plaintiff or is associated therewith.
It protects against deception as to a trade source or to a business connection. Misrepresentation of this kind can be committed only in relation to a business that has goodwill or a drawing power.
Goodwill is the totality of attributes that lure or entice clients or potential clients to support a particular business.
The components of goodwill are many and diverse. Well recognised are the locality and the personality of the driving force behind the business.
These components are not necessarily all present in the goodwill of any particular business.
The only component of goodwill of a business that can be damaged by means of a passing off is its reputation and it is for this reason that the first requirement for a successful passing off action is proof of the relevant reputation.”
It is apparent that passing off seeks to protect a product from the deceptive tendencies of a competitor who represents its product as that of the other. As a result of such deception or misrepresentation there should be injury or damage to reputation.
The common law recognises the right of a party to bring a claim based on unlawful competition or passing of.
Passing off is similar to trade mark infringement, but applies to protect unregistered rights associated with a particular business, its goods or services.
This means that even though there is no registered trademark a claim for passing off is valid because it is founded in terms of the common law.
The basis for the suit has to be specifically pleaded in order to avoid technical challenges.
Section 6 of the Trade Marks Act states that no person shall be entitled to institute any proceedings to prevent, or to recover damages for, the infringement of an unregistered trade mark.
However, the same act provides that there is nothing that precludes an affected of their right at common law, to bring an action against any other person for unlawful competition or for passing off goods or services as the goods or services of another person.
Passing off thus offers common law protection affected party who does not have a registered trademark.
Business should be pro-active and register their trademarks in order to benefit from the enhanced protections in terms of the law. In the next article we are going to look into greater detail at the requirements for passing off and the available legal remedies.
o To be continued next week…
LEGAL DISCLAIMER: The material contained in this post is set out in good faith for general guidance in the spirit of raising legal awareness on topical interests that affect most people on a daily basis. They are not meant to create an attorney-client relationship or constitute solicitation. No liability can be accepted for loss or expense incurred as a result of relying in particular circumstances on statements made in the post. Laws and regulations are complex and liable to change, and readers should check the current position with the relevant authorities before making personal arrangements.
Arthur Marara is a corporate law attorney practicing law in Harare, Zimbabwe. He is also a notary public and conveyancer. He is also passionate about employment law, commercial law, family law and promoting legal awareness and access to justice. He writes in his personal capacity. You can follow him on social media (Facebook Attorney Arthur Marara), or WhatsApp him on +263780055152 or email attorneyarthurmarara@gmail.com.-ebusinessweekly
