Passing Off and Misleading and Deceptive Conduct
Passing off, is a common law action used in intellectual property law. Passing off protects goodwill and reputation built up by the use of a trade mark or business name of a product or service.
The elements of the passing off action must satisfy:
- a misrepresentation;
- made by a trader in the course of trade;
- to prospective customers of their ultimate consumers of products and/or services;
- which is calculated to injure the business or goodwill of another trade;
- which causes actual damage to a business or goodwill of the trader by whom the action is brought.
Some types of passing off include:
- a misrepresentation that one person's goods are those of another;
- a misrepresentation that one person's goods are of a particular class or quality;
- a misrepresentation that a connection exists between a person's goods and those of another where there is no actual connection;
- using images or representations of a character or person to suggest an endorsement or a connection between that person or character with the goods where there is no actual connection and/or endorsement.
Essentially, passing off actions involve situations in which a representation is made in the course of trade, which deceives or causes confusion amongst customers either online or in the real world.
Misleading and Deceptive Conduct
"Misleading or deceptive conduct" is a commercial legal action, which applies in relation to all businesses' dealings with other parties. Its prohibition can be found in the Australian Consumer Law (which is contained in the Competition and Consumer Act 2010 (Cth) previously known as the Trade Practices Act 1974 (Cth)) and the various State and Territory Fair Trading Acts, which prohibit businesses from engaging in misleading or deceptive conduct in trade or commerce.
Conduct will be misleading or deceptive if it induces error, or is capable of inducing error, in an ordinary reasonable person.
The elements of misleading and/or deceptive conduct are:
- it is the overall impression that counts;
- the dominant message is the most important, not the "fine print".
Misleading or deceptive conduct can consist of spoken or written words or any other conduct such as gestures, body language or even silence or lack of response. A company can engage in misleading or deceptive conduct by reason of the actions of its officers, employees or agents.
Conduct can give rise to liability even if:
- it has not actually misled anyone. All that is necessary is that the conduct is likely to mislead or deceive people;
- the person making the representation acted honestly and reasonably. All that is necessary for liability to arise is that the conduct did, in fact, mislead or deceive; and
- the affected person did not make proper inquiries, or could have discovered that the conduct was misleading or deceptive had they investigated the matter.
Section 18 of the Australian Consumer Law (which is contained in the Competition and Consumer Act 2010 (Cth)) prohibits a person, in trade or commerce, from engaging in conduct, which is misleading or deceptive or is likely to mislead or deceive. Other sections of the Australian Consumer Law prohibit the making of false representations or claiming false affiliations or associations. State legislation prohibits similar conduct.
Parties who have been misled by representations to enter into an agreement most often use section 18. For example, where a vendor gives incorrect past trading figures for the business they are selling.
It is important that an organisations advertising and marketing do not fall into deceptive and misleading conduct.
Where a person makes a representation in relation to a future matter, e.g. projected sales figures of a business, the representation will be deemed to be misleading unless the company has reasonable grounds for making it and can back up those grounds with evidence.
Remedies may be available if it can be shown that:
- the misleading or deceptive conduct took place; and
- the aggrieved party relied upon the conduct, or was induced by the conduct to do something, and as a result suffered loss.
Potential remedies include injunctions and damages.
Liability by a scheme approved under Professional Standards Legislation