Introduction to Intellectual Property

Intellectual property, very broadly, means the legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields. Countries have laws to protect intellectual property for two main reasons. One is to give statutory expression to the moral and economic rights of creators in their creations and the rights of the public in access to those creations. The second is to promote, as a deliberate act of Government policy, creativity and the dissemination and application of its results and to encourage fair trading which would contribute to economic and social development. The aim of this paper is to analyse passing off and breach of confidence at common law and whether they are ‘the poor relation’ of statutory intellectual property rights.

Passing off and Breach of Confidence

Passing off both mirrors the protection afforded by registered trade mark law and is capable of reaching those parts of commercial magnetism and promotional superiority that the registered system, tied to marks and get-up, [1] cannot reach. The action for breach of confidence can be used as a supplement to the action of patent protection by maintaining secrecy prior to obtaining the patent and by protecting the know-how surrounding the patent, once awarded. It can also be used instead of patent protection, where short-term secrecy is adequate protection.

However, both actions appear ripe for expansion, to provide wider protection for creative endeavour and promotional effort as they are often considered to be “the poor relation” of statutory intellectual property rights.

What is passing off?

Passing off is selling one’s own goods under the pretence that they are the goods of another man. Passing off occurs when one trader attempts to pass off goods by misrepresenting them so as to make the consumers believe that his goods are the same as those of another trader.

Object of the law of passing off

The object of the law of passing off is to protect some form of property- Usually the goodwill of the plaintiff in his business or his goods or his services or in the work which he produces or something of that kind. The goodwill of the business is ordinarily represented by a mark, name, get up or other badge.

Goodwill, misrepresentation and damage are the three elements of the tort of passing off, which is often referred to as the ‘classical trinity’ of passing off.

In U.S.A passing off is treated as a form of unfair competition and the subject is referred to under that heading [2] . In Canada the courts speak not of passing off but of wrongful appropriation of the plaintiff’s personality, he having a ‘proprietary right in the exclusive marketing for gain in his personality’ [3] .

General Principles and the Scope of the Law of passing off

The substantive law of passing off is entirely based on common law. It has been held in various decisions the no man is entitled to represent the goods or business as being the goods or business of another whether such representation is made by the use of any mark, name sign, or symbol, device or other means. It is therefore actionable wrong for any person to pass off his goods or business as the goods or business of another by whatever means that result may be achieved [4] .

A trader is not permitted to use any mark, device or other means whereby, although he does not make a false representation to a direct purchaser of his goods, he enables such a purchaser to make a false representation to ultimate purchasers of those goods. Where goods are sold to trade customers who are not themselves deceived but the goods are so marked or got up as to be calculated to deceive ultimate purchasers, the plaintiff’s cause of action for passing off is regarded as complete, both at law and in equity as soon as the goods are disposed of to the trade customers.

According to Halsbury’s Law of England- “It is not enough that the goods are merely capable of being used by dealers to perpetrate frauds on their customers; the goods or leaflets or other material supplied with them, must be intended or must be of such a nature as to suggest, or readily or easily lend themselves to such passing off, as otherwise the consequence is too remote to be attributed to the supplier of the goods”.

The basic underlying principle of such an action was stated by Lonngdale M.R. in Perry v. Truefitt [5] to be –“A man is not to sell his own goods under the pretence that they are the goods of another man” Accordingly a misrepresentation achieving such a result is actionable because it constitutes an invasion of proprietary rights vested in the plaintiff.

However it is prerequisite of any successful passing off action that the plaintiff’s goods have acquired a reputation in the market and are known by some distinguishing feature. It is also prerequisite that the misrepresentation has deceived or is; likely to deceive and that the plaintiff is likely to suffer damage by such deception. Mere confusion which does not lead to a sale is not sufficient [6] .

Passing off – future goodwill

The court has to decide the case on the basis of the goodwill which is established at the date the defendant commences the complained of. The action of passing off can, as the law stands, adequately protect the development of a growing business. Thus if a claimant has at the relevant date only a modest business in one or two line of goods, he can still succeed in a passing off action against a company selling other goods. If the claimant’s reputation at the relevant date is inadequate to induce people to believe that the goods and services are the claimant’s, or connected with him, then it is the end of the matter.

There is no requirement in the law of passing off for the claimant and the defendant to be operating in the same field. However that is not to say that the existence or otherwise of an overlap is not highly relevant to assessing the evidence of misrepresentation. The question of whether two companies trade in the same field can be affected by the level of particularity with which one defines the field. In a vast and extremely diverse industry such as computer telecommunications industry, care must be taken not to assume that everyone working within it is working in the same field.

Essential Characteristics of Passing Off- modern formulation

The essential characteristics which must be present in order to create a valid cause of action for passing off as stated by Lord Diplock [7] are: “ (1) Misrepresentation, (2) made by a person in course of trade, (3) to prospective customers of or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader and (5) which causes actual damage to a business or goodwill of another trader by whom action is brought (in a quia timet action) will probably do so……It does not follow that because all passing off actions can be shown to present these characteristics give rise to a cause of action for passing off”. No claim could however succeed, in absence of all five. What is relevant is whether the plaintiff’s goodwill has suffered or likely to suffer damage and not whether the defendant has reaped any positive benefit from a misrepresentation of goodwill.

In Reckitt & Colman v. Borden [8] , Lord Oliver of Aylmerton summarized the law of passing off as follows: “The law of passing off can be summarized in one short general proposition- no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number. First, he must establish a goodwill, or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying “get up” under which his particular goods or services are offered to the public, such that the getup is recognized by the public as distinctive specifically of the plaintiff’s goods or services. Secondly, he must demonstrate a misrepresentation by the defendant to the public leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. Whether the public is aware of the plaintiff’s identity as the manufacturer or supplier of the goods or services is immaterial, so long as they are identified with a particular source which is in fact the plaintiff’s. Thirdly, he must demonstrate that he suffers or, in quia timet action that he is likely to suffer, damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as of the source of those offered by the plaintiff”.

Breach of Confidence

The law of breach of confidence protects secret or commercially valuable information. The action for breach of confidence protects confidential information by preventing persons, to whom the information has been divulged in confidence, from using that information to obtain an unfair benefit for themselves. In an action for breach of confidence the pursuer seeks to restrict the dissemination of commercially valuable information. The law of confidence is particularly relevant in the fields of patents and registered designs. Most inventions can be dismantled and reproduced from their constituent parts and so the only effective protection for most inventions is patent registration. If the importance of the invention or product is in the underlying processes rather than the end product the method of production may be kept effectively secret by the law of confidence. The law of confidence imposes a duty of confidentiality on any person who is connected with the production process. The protection provided by the law of confidence lasts until the process is discovered by another inventor separately. This may well extend beyond the 20 year period of patent protection.

When information is imparted to another in confidential circumstances and is either used or disclosed without authority, breach of confidence provides a remedy. The action applies to any type of information, whether commercial, private or governmental. In the intellectual property field, the action stands as an alternative to statutory design, copyright or patent protection. Confidence has the advantage of not needing any formalities of application or registration, or the payment of fees. It also has the advantage that it can be implied from the circumstances in which information is divulged between the parties of an action. However the obligation to preserve confidence is dependent on there being a reasonable expectation of confidence between those parties and, once the information has been disclosed to the public, there can be no effective further secrecy.

Development of Confidence

The action has developed on a case by case basis. This ability to evolve has the advantage that the action can respond to changing social conditions and to the perceived needs of legal policy. This function was articulated by Keene LJ in Douglas v Hello:

…breach of confidence is a developing area of the law, the boundaries of which are not immutable but may change to reflect changes in society, technology and business practice.

The driving factor behind the most recent developments was the coming into force of the Human Rights Act 1998 in England. The rights of privacy and freedom of expression established action for breach of confidence in A v B&C. Adopting these two rights – which pull in opposite directions, privacy providing as additional source of protection to private information, while freedom of expression restricts the area in which remedies lie for breaches of confidence – has created a tension requiring the courts to hold the balance between them. Doing so required adjustments to the balance between the interest in confidentiality and that of the public interest previously established by the courts. Additionally, these changes have the potential to rebound on other aspects of the action, notably the nature of confidential information as property and the existence of confidentiality where no relationship exists between confider and confidant, as well as to the scope of appropriate remedies.

Conditions for a remedy

Despite the confusions concerning the origins and development of the action for breach of confidence, Megarry J laid down three necessary conditions for the action in Coco v AN Clark (Engineers) Ltd. He said:

‘Where there is information that is confidential, an obligation to maintain that confidence has come into being and the information has been used or disclosed without authority, an action for breach of confidence will lie.’

Consequently, the subject matter of the action lies in the existence of information which is confidential. No liability can arise until an obligation or duty to maintain confidence has arisen and there is no breach of the duty without an unauthorised disclosure or use of the information. Although Lord Advocate v Scotsman Publications Ltd gives authority for an obligation in Scots law, the House of Lords did not define when such an obligation should arise. The lords recognition of English authority, however, justifies relying on Megarry J’s dictum.

However Megarry J himself was careful to point out that the authorities from which he derived these conditions did not lay down clear tests for establishing the confidentiality of information, nor the creation of the necessary obligation, or whether the breach need be detrimental to the claimant in order for him to secure a remedy. Given that common law has the capacity to develop by analogy as new circumstances arise, the boundaries of breach of confidence remain blurred and open to interpretation by subsequent courts.

Conclusion

This search for protection has been strengthened by the sympathy of some commentators. Johnson is critical of the fact that the common law’s absence of an unfair competition or slavish imitation action ‘‘presents serious problems in relation to the subtleties of the imitation market’’, [9] while Mills notes the view that ‘‘the economic investment and labour involved in creating and providing branded products deserves protection in the same way as real property’’. [10]

Both passing off and breach of confidence involve a claimant who ‘‘deserves’’ protection. This is part of the reason that they attract the protection of the common law. In passing off this is reflected in the requirement that the claimant show ‘‘goodwill’’, an existing customer base. The tort focuses on the success of the claimant, rather than the free-ride achieved by the defendant. With breach of confidence, the claimant will be ‘‘deserving’’ only if information has been kept secret [11] and represents ‘‘in some considerable degree independent efforts’’. [12] Moreover, Lord Walker was at pains to point out in Hello! the claimant’s information—or rather his image, in the context of the case itself—must ‘‘merit’’ protection as a commercial secret. So he noted that even ‘‘the fact that stringent security arrangements were in place’’ would not of itself invest the image with the quality of confidentiality. [13] However, simply being ‘‘deserving’’ is not enough, and that is because the common law focuses not on rights, but on wrongs. So the action for passing off in theory always requires a misrepresentation, without this the property in the ‘‘goodwill’’ is not protected.

As for breach of confidence, although an anomaly in that it focuses on ‘‘the principle of good faith’’ and ‘‘unfair advantage’’, [14] it is categorised by Goff and Jones [15] amongst those restitutionary claims brought against wrongdoers. In this action, liability flows from the fact that the defendant has acquired a benefit ‘‘through his own wrongful act’’, the breach of duty. It is not the information per se that is protected, but rather the court reacts to the breach of conscience, based on the defendant’s knowledge that that information is confidential. [16]

The traditional caution of the common law which encourages competitive activity and intervenes only where ‘‘wrongs’’ are involved and the public interest is served should be upheld. Dixon J. rightly asserted in Victoria Park that the common law should not necessarily protect ‘‘all intangible elements of value’’; so that simply putting yourself into a position to obtain value from the fruits of your effort does not per se bestow a right to get it protected by law. On the other hand, if an industry can justify a need for incentives, then the better way forward is for the creation of a statutory intellectual property regime, with a balanced approach to the issue.