Passing Off in Canada: Goodwill, Misrepresentation, and Damage (A Practical Refresher)

In prior posts, we reviewed the core elements a plaintiff must establish to succeed in a passing-off claim. This month, we examine those elements in greater detail.

Goodwill In any passing-off action, the plaintiff must satisfy the Court that it has goodwill in the relevant indicia of trade—whether a brand name, trade name, or other distinguishing feature—such that the relevant public associates goods or services offered in connection with those indicia with the plaintiff. In other words, the indicia must be recognized by the public as distinctive of the plaintiff’s goods or services.

In this context, goodwill has been described as the benefit and advantage of a business’s good name, reputation, and connection that generates custom. While goodwill may be established through a range of evidence, it must ultimately be grounded in marketplace perception.

The plaintiff need not prove that it is the sole source of the goods in issue, or that consumers know the plaintiff’s name. For example, purchasers may not know the manufacturer, and the goods need not be manufactured by the plaintiff; they may be purchased, imported, or otherwise acquired by the plaintiff for sale under the relevant indicia.

 A plaintiff may, in limited circumstances, establish protectable goodwill or reputation in Canada without actively carrying on business in Canada, although such claims are relatively uncommon.

Misrepresentation

As previously explained, the plaintiff must establish that the defendant made a misrepresentation. Passing off is not confined to any particular means of misrepresentation; in appropriate circumstances, misrepresentation may be inferred even in the absence of an express statement. The following have been held sufficient to constitute passing off:

(a) direct substitution of goods or services in response to orders;

(b) imitation of trade names, trademarks, or product get-up;

(c) representing goods, services, or a business as those of a rival trader; or

(d) conduct likely to lead customers to believe there is a connection between the plaintiff’s goods, services, or business and those of the defendant where no such connection exists.

Use of a word, device, or other feature by which the plaintiff’s products or business is known is not, by itself, sufficient. The plaintiff must demonstrate a misrepresentation to the public (whether intentional or not) that leads, or is likely to lead, the public to believe that the defendant’s goods or services are those of the plaintiff. The burden of proof rests with the plaintiff.

This element typically requires the plaintiff to establish a likelihood of confusion in the minds of the relevant public as a consequence of the defendant’s sale (or offer for sale) of its product under circumstances suggesting it is the plaintiff’s product, or an equivalent.

Proof of an intention to deceive is not required; however, evidence of intention may be treated as strong support for an inference that the defendant’s conduct is likely to affect the plaintiff’s trade. Where the Court is satisfied that the defendant intended to deceive, it may be more prepared to conclude that the deception was effective.

Consideration should also be given to whether the defendant has copied additional surrounding elements in which the plaintiff has no goodwill. Courts have referred to such circumstances as “badges of fraud”.

The facts are assessed from the perspective of an ordinary member of the public (or average customer) exercising ordinary care in purchasing the goods or services in question. Evidence that persons of average intelligence have in fact been confused may assist the Court in determining whether there has been an actionable misrepresentation.

Damage

The plaintiff must show that it has suffered, or is likely to suffer, damage as a result of the defendant’s conduct.  Actual or potential damages cannot be presumed, and there must be evidence proving them. 

A loss of control over the plaintiff’s reputation, image, or goodwill may be sufficient to establish damage. Likely damage—such as loss of sales or business—may be inferred where the parties are direct competitors.

Comment

In practice, the existence of these elements turns on the evidence that is available particularly marketplace perception and the likelihood of confusion. 

To ensure your rights are fully protected reach out to us for a detailed review of your situation and potential remedies. 

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If you have questions, please contact me at  jmckeown@LN.Law

John McKeown

Loopstra Nixon LLP.  

130 Adelaide St W Suite 2800Toronto, Ontario, M5H 3P5Canada

 jmckeown@LN.Law

437 290-5960

This article is of general nature and is not intended to provide specific legal advice as individual situations will differ. Specialist advice should be sought about your specific circumstances. Copyright © John Mckeown, All rights reserved. To unsubscribe to the IP Update please send me an email at jmckeown@Ln.Law

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