What Problems Can Passing Off Cause?
What Problems Can Passing Off Cause?
There are a number of problems that passing off can cause your business; depending on the type of business and the extent of passing off taking place.
If your customers are led to believe that another business is yours (or associated with you); then you may find that your customers simply vanish, using the other business by mistake. If you obtain a lot of your custom by word of mouth, then new customers searching for you may never realise that the business passing off is not you.
If your customers realise that another business has gained their custom inappropriately, they may lose trust in you and feel hesitant about using your services again. If the other business treated them badly they may go elsewhere altogether, and (If they do not realise they have used a different business) could even tell other people of their disappointment with your business.
If your business is respected in your marketplace, the appearance of a business passing off as you could cause customers to think less of your business; especially if the passing off business provides poor quality products or services. If the passing off business causes bad word of mouth publicity, this can cause serious damage to your image and reputation.
If a business is passing off as you, then your financial damage is not limited to the money from customers you lose to them and through bad publicity. Any money you spend on advertising or other promotions (e.g. Leaflets, web banners, ‘pay per click’ listings) becomes less effective as some of the customers you can gain may end up using the passing off company.
There are three main points that need to be met to qualify as passing off for legal action; these were stated by the House of Lords in the well known legal case of ‘Reckitt & Colman Ltd v Borden Inc’ (1990). These are enforced under common law.
- Your business, services, or product needs to have acquired a reputation or goodwill in the marketplace, and are known by distinguishing features. This could include a name, logo, website or colour scheme; your name or product does not need to be trademarked as long it is known in your marketplace.
- There has been a misrepresentation by the business that is accused of passing off which could lead customers to believe that they are really buying from you. This could mean that customers could confuse their logo or business name with yours, or may believe the business is associated with you because of the similarities. The misrepresentation does not have to be intentional to qualify as passing off.
- Your business needs to have suffered some form of damage because of the misrepresentation. This could include the problems listed earlier; lost customers (who used the other business by mistake), future lost custom (they may be worried about using your business again), a damaged reputation and reduced effectiveness of promotions.
If all three of these points are met, then it is likely you could gain compensation for passing off by taking the company to court. You will of course need to prove that your business has a reputation and/or history; you can use several things to help prove this:
- Registered Company Information (e.g. From Companies House)
- An online presence (e.g. A URL in your business’s name.)
- Letters from customers/suppliers which proves your business standing or reputation.
- A dated (preferably unopened) letter to a solicitor which discusses aspects of your business (such as the name, market or products/services)
- Is Someone Passing Off as Your Business?
- What Problems can Passing Off Cause?
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