Passing-Off Article

In June of 2024, a Mississauga homeowner believed they had hired a reputable paving company to re-pave their driveway. The business card, logo, and name of the company the homeowner hired were almost identical to those of the reputable company which the homeowner intended to hire. However, the company that was hired was a different legal entity, with a different owner and employees that did not complete the work to the satisfaction of the homeowner. The owner of the reputable company was unaware that there was a different business that had seemingly cloned his own.¹

This is a textbook situation for the legal wrong known as “passing off”, which helps protect businesses from other businesses deceptively or fraudulently “passing off” their good, services and/or products as those of another.²

Overview

The success of a business is often attributable to the business’ reputation, commonly referred to as “good will”. Consumers identify these businesses through their brand names or symbols. Another business that uses the same, or similar, name or symbols may be liable for “passing off” their product, service, or brand as that of the different business. In Canada, business names, symbols, and guises “[that] identify the distinctiveness of a source” are protected under Section 7 of the Trademarks Act and/or through the common law tort of passing off.³ Both mechanisms of protection share the same common elements, however, the Trademarks Act is enforceable through the Federal Court, whereas the common law tort of passing off is enforced in a provincial court. The common law tort of passing off is slightly broader, since it can protect intangible assets that may not qualify as a trademark.

The elements of passing off are:⁴

1. The existence of goodwill;
2. The deception of the public due to misrepresentation; and
3. Actual or potential damage to the plaintiff.

If the first two factors are established, it is presumed that there will be actual or potential damage to the claimant.⁵ This presumption would then have to be rebutted by the defendant.

The Existence of Goodwill

• ¹ See https://toronto.ctvnews.ca/ontario-homeowner-fighting-back-against-alleged-paving-scam-arrested-1.6922543
• ² Ciba-Geigy Canada Ltd v Apotex Inc, [1992] 3 SCR 120 at paras 47 & 52 [Ciba-Geigy]
• ³ Kirkbi AG v Ritvik Holdings Inc, 2005 SCC 65 at para 67 [Kirkbi].
• ⁴ Ciba-Geigy, supra note 2 at para 33.
• ⁵ Greystone Capital Management v Greystone Properties Ltd, [1999] BCJ No 514 at para 27 [Greystone Capital].

When determining if there is existence of goodwill, a court would consider the following factors, regardless of whether the claim for passing off is made under the Trademarks Act or under the common law tort:⁶

• The degree of recognition of the mark within the relevant universe of consumers; • The volume of sales and the depth of market penetration of products associated with the claimant’s mark;
• The extent and duration of advertising and publicity accorded to the claimant’s mark. • The geographic reach of the claimant’s mark;
• The inherent or acquired distinctiveness of the claimant’s mark;
• Whether products associated with the claimant’s mark are confined to a narrow or specialized channel of trade;
• The extent to which the mark is identified with a particular quality.

It is important to note that this analysis is confined to the relevant market, which, depending on the business, goods, or services, may be large or small geographically, and may be narrow or broad in terms of the products or services.⁷

The Deception of the Public Due to Misrepresentation

Regarding the second element of a claim for passing off, the misrepresentation can be wilful, negligent, or careless.⁸ A claimant does not need to show that actual confusion occurred, nor that there was deliberate intent in the misrepresentation; all that is required is the likelihood of confusion that would lead to the possibility of lost business opportunity.⁹

When determining if there has been confusion, a court will consider all the following factors from Section 6(5) of the Trademarks Act, regardless of whether the claim for passing off is made under the Trademarks Act or under the common law tort:¹⁰

• The inherent distinctiveness of the marks or names and the extent to which they have become known;
• The length of time the marks or names have been in use;
• The nature of the goods, services or business;
• The nature of the trade;
• The degree of resemblance between the marks or names.

The last factor, the degree of resemblance, is oftentimes the most important factor that a court will consider.¹¹

• ⁶ Veuve Clicquot Ponsardin c Boutiques Cliquot Ltée, 2006 SCC 23 at para 54.
• ⁷ See Vancouver Community College v Vancouver Career College (Burnaby) Inc, 2017 BCCA 41 at paras 40 & 44.
• ⁸ Kirkbi, supra note 3 at para 68.
• ⁹ Greystone Capital, supra note 5 at para 27.
• ¹⁰ Sandhu Singh Hamdard Trust v Navsun Holdings Ltd, 2019 FCA 295 at paras 53 & 63.
• ¹¹ Masterpiece Inc v Alavida Lifestyles Inc, 2011 SCC 27 at para 49.

If you believe that another business is attempting to pass off their goods or services as those of your business, then you may be able to protect your business by commencing an action for passing off.

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