Protecting Your Business’s Reputation: The Tort of Passing Off

You’ve poured your heart, soul, and countless hours into building your business. Your unique branding, quality service, and distinctive offerings have cultivated a loyal customer base and a sterling reputation. But what happens when another business starts using a name or a look so similar to yours that it confuses the public and siphons away your customers? This is a situation where your brand’s reputation might be at risk and even without registering your trademark with the Canadian Intellectual Property Office, you still have legal rights and protections against others using your name, logo, or other distinctive aspects.

This protection is the common law tort of passing off, and it is available to unregistered trademarks under the common law and it is codified pursuant to s. 7 of the Trademarks Act. Claims of passing off can arise when a business uses a name, mark, or "get-up" that deceives the public into believing their products or services are actually yours.

It's important to note that passing off doesn't protect a monopoly over a product itself, but rather the unique identifiers, such as names, logos, packaging, and overall presentation, or the "get-up", that distinguish your business from others in the marketplace. The key question is whether the "ordinary public" or the "average customer" would recognize and associate these identifiers with your specific business as being the source of the goods or services.

To succeed in an action for passing off, your business needs to satisfy the well-established three-part test:

1. The existence of goodwill attached to your business.
2. Deception of the public due to a misrepresentation by the competitor.
3. Actual or potential damage to your business as a result.

What exactly is "goodwill" in the legal sense? Goodwill, in the context of passing off, refers to the benefit and advantage derived from your business's good name, reputation, and customer connections. It’s often described as the "attractive force which brings in custom." Typically, goodwill is accumulated over a longer period of time, with the business growing in recognition as it grows its customer base.

The second element is proving that the competitor's actions have caused, or are likely to cause, deception or confusion among the public. This misrepresentation can take many forms and, importantly, it doesn't have to be intentional. Passing off does not require proof that the competitor intended to deceive or misrepresent. Even a careless or negligent misrepresentation can lead to liability. The focus is on the effect, or likely effect, on the consumer.

Finally, your business must demonstrate that it has suffered, or is likely to suffer, damage as a result of the competitor's passing off. While the damage element must be proven, courts have recognized that a finding of potential damages can also be sufficient.

So what happens if you are able to establish the test for passing off? The remedies that a court will order are severe for infringers. Courts have ordered damages, accounting of profits, disgorgement of profits, the destruction of the infringing material, and injunctions against the infringing party.

The tort of passing off is a vital tool for businesses looking to protect some of their most valuable assets: their intellectual property and brand recognition. Of course, having a registered trademark is the best way to protect your business’s trademark, but even in the absence of a registered mark, the law provides significant protection. If your business is suffering because another is taking your established reputation, you have legal recourse.