By Titiksha Sinha and Asmita Kaur
Introduction
In the realm of intellectual property law, reverse passing off is a lesser-known, but equally significant form of unfair competition. Unlike traditional passing off, where a party misrepresents its goods or services as those of another, reverse passing off occurs when one party presents another’s goods or services as its own. This deceitful practice can take various forms, such as removing or altering the original branding or failing to credit the true source of the product. Reverse passing off not only undermines the goodwill and reputation of the rightful owner but also misleads consumers, thereby disrupting the competitive balance in the marketplace. Understanding the nuances of reverse passing off is crucial for protecting the integrity of brands and ensuring fair competition in business.[1]
Understanding Passing off and Reverse Passing off
A. Passing off is a common law tort used to protect the rights of unregistered trade marks. It seeks to protect the identity of a business by preventing deception of consumers. It occurs when one trader falsely represents their goods or services as those of another trader, causing harm to the misrepresented trader’s goodwill. The law of passing off prevents this type of misrepresentation by ensuring that a trader cannot falsely state that their goods or services have an association or connection with another trader when this not the case.
The essential elements required to establish a claim of passing off, also known as the “classic trinity test” which were laid down in the landmark judgement of Reckitt & Colman Ltd. v. Borden Inc. [1990] 1 All ER 873[2], are:
- Goodwill or Reputation: The claimant must demonstrate that their goods or services have earned goodwill or reputation in the market.
- Misrepresentation: The defendant must make a misrepresentation to the public that leads or is likely to lead the public to believe that the defendant’s goods or services are the plaintiff.
- Damage: the claimant must demonstrate that they have suffered or are likely to suffer damage to their goodwill as a result of the defendant’s misrepresentation.
B. Reverse passing off on the other hand, occurs when a party removes or obliterates the original trade mark on a product without permission and then sells the product unbranded or under a different mark. This act misleads consumers about the origin of the goods by attributing the reputation and qualities of the original manufacturer’s products to the infringer. Reverse passing off causes the actual owner of the product to lose the advertising value of its brand as well as its associated goodwill.
Reverse passing off can categorized into two types[3]:
- Implied Reverse Passing off: This occurs when the original trade mark is removed without permission and the trader sells the product in its unbranded
- Express Reverse Passing off: This occurs when the original trade mark is removed or obliterated without permission, and the trader sells the product under their own mark.
The essential elements to determine reverse passing off require further judicial clarification, however, the following conditions seems to be important to determine reverse passing off:
- The product must have originated from the plaintiff.
- Defendant falsely designates the origin of the product without claimant’s permission.
- The false designation is likely to cause consumer confusion and the plaintiff must be harmed by the false statement.[4]
Both passing off and reverse passing off are intended to protect trade mark integrity and promote fair competition in the marketplace by prohibiting practices that mislead consumers about the origin or quality of goods and services.
Recent Judicial Decisions in India
- Western Digital Technologies Inc & Anr vs Geonix International Private Limited (DHC – February 26, 2024)[5]
Issue:
The Hon’ble Delhi High Court addressed significant instance of reverse passing off in the Western Digital Technological Inc. and its subsidiary, both Plaintiffs in this case, manufactured various storage devices and related technology under the trade marks ‘WESTERN DIGITAL’ and ‘ULTRASTAR’. The Defendant, Geonix International Private Limited was accused of refurbishing and rebranding old, discarded Western Digital hard disk drives (HDDs) and other devices before selling them as new under the ‘GEONIX’ trade mark.
Arguments:
Plaintiff:
Geonix physically changed the trade marks, serial numbers, and model numbers on the HDDs. They had also reformatted the printed circuit boards, replacing the original identifiers with their own, in an attempt to conceal the origin of the products.
Despite these alteration, technical tests and reports revealed that the HDDs were originally manufactured by Western Digital, establishing a link back to the Plaintiffs despite the Defendant’s attempts to conceal it.
In response to this, Western Digital argued that this not only infringed on their trade mark rights but also misled consumers, damaging Western Digital’s reputation and violating consumer protection laws against deceptive marketing.
Defendant’s
Geonix argued that since they had lawfully purchased the HDDs from the plaintiff and the HDDs were significantly altered and misrepresented as new, the principle of exhaustion (this principle states that the rights of intellectual property owners are limited after the initial authorized sale of a product) of trade mark rights applied, and thus, the Plaintiff had no rights.
Held:
The Hon’ble Delhi High Court granted an interim injunction in favor of Western Digital, prohibiting Geonix from further altering or selling any HDDs bearing ‘WESTERN DIGITAL’ and ‘ULTRASTAR’ trade marks. This decision underscores the court’s commitment to protecting trade mark rights and consumer interest, emphasizing the negative impact of reverse passing off on the original manufacturer’s reputation and consumer trust.
This case is significant as it highlights the judiciary’s approach to handling cases of reverse passing off and reinforces trade mark owner’s legal protections against unauthorized and deceptive use of trade marks. It serves as a deterrent to similar infringement cases and upholds the integrity of the market by insuring that consumers are not misled about the origin and quality of the products they buy.
Legal Framework & Judicial Approach
- United Kingdom (UK)
- Reverse passing off is not explicitly codified in UK law but is recognized under the broader principles of unfair competition. It involves presenting someone else’s goods or services as one’s own, either by removing or altering branding.
- Reverse passing off is treated similarly to traditional passing off, with the courts focusing on misrepresentation and its impact on the original producer’s goodwill and reputation.
Key Cases:
- John Roberts Powers School Tessensohn (1995)[6]: The main legal issue in this case was the claim of proprietary rights over the ‘LIPU’ trademark. The plaintiff sought an injunction against the defendant for using the mark, asserting that it misrepresented their goods. However, the court found that both parties sourced their products from the same manufacturer, leading to a finding of reverse passing off of the manufacturer’s goods.. The court concluded that the ‘LIPU’ mark could not be exclusively associated with the plaintiff, as it was primarily identified with the original manufacturers, thus rejecting the plaintiff’s claim for an injunction.
- Yours Naturally Naturally Yours Ltd v Kate McIver Skin Ltd [2023] EWCA Civ 1493[7]: Initially, the Defendant in this case, entered into a white labelling agreement with the Plaintiff and sold its product with a label of both, the Plaintiff and their own. However, the Defendant later, went on to sell the same product with its own logo, attracting the elements of reverse-passing off.
- United States (USA)
Reverse passing off is explicitly covered under Section 43(a) of the Lanham Act.[8] This involves one party removing or altering another’s branding and selling the product as their own.
Reverse passing off can be express (removal of the original source’s branding) or implied (selling another’s product without proper attribution). However, the U.S. Supreme Court limited reverse passing off claims in the Dastar Corp. v. Twentieth Century Fox Film Corp. (2003)[9] case, ruling that the Lanham Act does not protect claims regarding public domain works or ideas.
Key Cases :
- Liz Claiborne, Inc. v Mademoiselle Knitwear, Inc (1998): The court addressed reverse passing off, ruling that removal of Liz Claiborne’s trade marks from sweaters sold under another brand constituted a violation of the Lanham Act.
- Dastar Corp. v. Twentieth Century Fox Film Corp. (2003): The case arose from Dastar’s production of a video titled “World War II Campaigns in Europe”, derived from the public domain television series Crusade in Europe, originally created by Fox. The Supreme Court held that reverse passing off claims under the Lanham Act cannot be made for uncredited works that are in the public domain, limiting the application of reverse passing off.
- India
Reverse passing off is not explicitly mentioned in Indian statutes, but it is recognized under unfair competition principles and the broader scope of passing off actions under the Trademarks Act, 1999.
Indian courts recognize reverse passing off as an actionable wrong when a party sells another’s product as their own, thereby misrepresenting the origin of the goods or services.
Comparative Analysis:
| United Kingdom | United States of America | India |
| Recognized under the principles of unfair competition; courts focus on misrepresentation of the origin of goods. | Codified under the Lanham Act, but Dastar Corp. v. Twentieth Century Fox limited the scope, particularly concerning works in the public domain.
|
Not explicitly mentioned in statutes, but recognized under unfair competition and passing off claims, focusing on misrepresentation and harm to the rightful owner’s goodwill. |
In all three jurisdictions, the core principles of goodwill, misrepresentation, and damage guide the judicial approach to passing off and reverse passing off claims, with an emphasis on preventing unfair competition and protecting consumer trust.
Conclusion
Lack of judicial precedents and explicit provisions under the Trade Marks Act are obstacles to reverse passing off and forces rights holders to depend on broad concepts of unfair competition and misrepresentation. Rights holders must demonstrate that the deceptive party tampered with and sold their items as their own, which adds complexity and expense and necessitates expert testimony. It is easier for infringers to engage in to reverse passing off with little consequence since small and medium-sized businesses sometimes lack the financial and legal capabilities to undertake protracted litigation. Rights holders should do the following to counter the threat of to reverse passing off:
- Register copyright and trademarks;
- Conduct consumer education information drives;
- Establish customer feedback systems to spot questionable activity; etc.
Remedies for reverse passing off, similar to passing off, would essentially include suits for injunctions and damages, destruction of goods as well as account of profits.
Reverse passing off is a critical area of trade mark law that protects trade mark integrity while also ensuring fair competition. The Indian Judiciary’s approach, as seen in case like the Western Digital case, is consistent with global standards established by jurisdiction such as United States and the United Kingdom. However, each legal system has its own unique approach to dealing with such cases. The continuous evolution of Jurisprudence in this area is required to adapt to new market practices and technologies that may affect trade mark rights and consumer perception.
Arjun Sehgal , Former Intern at S.S. Rana & Co. has assisted in the research of this article.
[1] https://blog.ipleaders.in/trademark-passing-off/
[2] https://law.nus.edu.sg/sjls/wp-content/uploads/sites/14/2024/07/1326-1990-32-mal-dec-333.pdf
[3] https://law.asia/reverse-passing-off-unfair-trade-practices/
[6] https://selvams.com/blog/passing-off-trademark-india/
[7] https://stjohnsbuildings.com/wp-content/uploads/2024/01/Daniel-Metcalfe-Yours-Naturally-Yours.pdf
[8] https://www.uspto.gov/sites/default/files/trademarks/law/Trademark_Statutes.pdf