Tort Of Passing Off In Social Media/Digital Platform And Relief

The Growing Influence of Social Media Platforms

As the usage of Social Media platforms such as Facebook and Instagram is growing immensely, businesses are starting to use social media platforms to market and sell their products. This naturally will also lead to wrongdoers deliberately riding on the goodwill that has been established by the mark holder to advertise and sell their products.

It is therefore important for mark holders to know their rights, especially the law of passing off if they do not have their mark registered as a trademark.

What is the legal meaning of Passing Off

Passing off is derived from common law. The principle behind passing off is that nobody has any right to represent his goods as the goods of somebody else. It is important to note that passing off does not require trademark registration as it is a common law principle.

In the Supreme Court case of Seet Chuan Seng & Anor v Tee Yih Jia Foods Manufacturing Pte Ltd [1994] 2 MLJ770 where Gunn Chit Tuan CJ(Malaya) stated the following:

“The principle of law regarding passing off has been plainly stated by Lord Parker in Spalding v Gamage ‘and that is, that nobody has any right to represent his goods as the goods of somebody else’. It is, therefore, wrong for a trader to conduct his business as to lead to the belief that his goods or business are the business of another”.

Passing off is therefore applicable to anyone regardless of whether he/she has registered a trademark and this is what makes passing off have importance even till date. Passing off essentially seeks to protect the goodwill/reputation of a trader regardless of whether he/she has registered a trademark.

What are the elements of passing off?

In the case of Syarikat Zamani Hj Tamin Sdn Bhd & Anor v Yong Sze Fun & Anor [2006]5 MLJ262, the court reaffirmed and established that three elements has to be established for passing off which are goodwill, misrepresentation and damages.

Goodwill

Goodwill means that the person who relies on passing off has to show that he has established sufficient reputation that is known to the public.

To establish goodwill, it will depend on the facts of the case where the Plaintiff would have to establish substantiate evidence to show that he has goodwill. An example of where goodwill has been established would be the brand UNIQLO where consumers are able to associate the brand to UNIQLO’s clothes.

Misrepresentation

Misrepresentation is the element where the Plaintiff would have to show that the wrongdoer has caused confusion to the consumers where the consumers are now unable to differentiate the Plaintiffs mark from the Defendant’s mark. There is no necessity for the plaintiffs to prove actual confusion. The plaintiffs need only show the possibility of association.

An example of misrepresentation is where the wrongdoer uses the mark “UNIQLO’S” to sell computerproducts. It is likelythat consumers will experience confusionwhere they will associate the computerproducts to having an association with UNIQLO.

Damages

Damages in a passing off action mean that Plaintiff would have to show that Plaintiff has suffered damages as a result of the actions of the wrongdoer who has misrepresented his goods to the consumers.

In the case of Yong Sze Fun & Anor (tla Perindustrian Makanan & Minuman Layang- Layang) v Syarikat Zamani Hj Tamin Sdn Bhd & Anor [2012] 1MLJ585, the court established that damages for passing off need not be proven to be actual damages and that a probability of damages occurring is more than sufficient for this element.

For damages, it is likely that the court will infer that Plaintiff has suffered damages as a result of the wrongdoer’s actions if the Plaintiff successfully establishes the first two elements of passing off.

Remedies for Passing Off Actions in Social Media

The court applies a very flexible approach in terms of its reliefs for a passing off action. Over the years, the court has granted a wide variety of remedies to the goodwill holder for the damages that they have suffered as a result of the wrongdoer’s action.

Remedies that the court has granted to the mark holder in a social media passing off cases are as follows:

  1. Damages for dilution of goodwill (damages given to the Plaintiff due to his goodwill being tarnished by the wrongdoer’s actions);
  2. Additional damages (that the court considers appropriate in the circumstances);
  3. Account of profits(defendant gives the profits that they have earned);
  4. Exemplary damages (damages given to punish the defendant); and
  5. Aggravated damages (damages granted due to the Defendant’s bad faith and conduct)
  6. An injunction (Either a mandatory injunction (compel the Defendant to remove their infringed acts or a prohibitory injunction to prevent the Defendant from copying the Plaintiff’s product

Case Law Example for Passing Off in Social Media

In the case of Masitu Marketing(M) Sdn Bhd & Ors v Masfoam Engineering Sdn Bhd & Ors [2021] MLJU 36, the Plaintiff was in the business of manufacturing, distributing and selling foam products under the”MASFOAM” mark.

The Defendants had then sold products similar to “MASFOAM” products by using a Facebook page and website under the name “Masfoam Engineering Sdn Bhd” where the Defendants would use the term “MASFOAM” as a reference to their products without the Plaintiff’s consent.

The Plaintiff then commenced an action against the defendants under passing off as well as trademark infringement where the court had referred to the case of Irvine and another v Talksport Ltd [2002] 2 All ER 414 (“Irvine case”) which stated the following:

“… If someone acquires a valuable reputation or goodwill, the law of passing off will protect it from unlicensed use by other parties.

Such use will frequently be damaging in the direct sense that it will involve selling inferior goods or services under the guise that they are from the claimant. But the action is not restricted to protecting against that sort of damage.

The law will vindicate the claimant’s exclusive right to the reputation or goodwill. It will not allow others to so use goodwill as to reduce, blur or diminish its exclusivity.”

The Court, viewing that the Defendants had without any valid reason ride on the goodwill that has been established by the Plaintiff to sell their products under a similar name of the Plaintiff’s mark held that the Plaintiff has successfully established action of passing off.

The Court had granted the Plaintiff the remedies of a mandatory injunction against the Defendant to change the name of the product and remove “Masfoam” from it, a prohibitory injunction to restrain the Defendants from continuing to pass off or attempting to pass off the Defendants’ products as the Plaintiff, an amount of RM 100,000.00   for dilution of goodwill of the Plaintiffs, a sum of 200,000.00 as exemplary damages, an inquiry as to damages or accounts of profits and cost in the amount of RM 40,000.00.

Know your rights

As the usage of Social Media platforms such as Facebook and Instagram is growing immensely, it is, therefore, advisable for mark holders to know their rights fully.

Even if the mark holder does not have their mark registered as a trademark, the mark holder can still establish a cause of action under passing off. The remedies that are available for passing off are wide in variety therefore it is likely that the mark holder would be able to get what he wants through passing off action.

However, this would be subjected to the mark holder being able to establish the elements of passing off, specifically goodwill and misrepresentation which is a higher threshold test as compared to trademark infringement. Therefore, it is highly recommended that mark holders still register their mark as a registered trademark.

If a mark holder registers his mark as a trademark, then the mark holder can employ two different causes of action which are trademark infringement and passing off which grants the mark holder a higher chance of succeeding against the wrongdoer.

Written by Esther Ong:

  1. Legal Council and Board of Council Member in Federation of Malaysian Business Associations (FMBA) 2022-2023
  2. Board of council Member in ASEAN Retailers and Franchise Federation 2022 – 2023
  3. Finalist Woman Lawyer of the Year 2022 (ALB Award)
  4. Finalist Woman Lawyer of the Year 2022 (ALB Award)
  5. LexFalcon Awardee 2022
  6. Founder of International Entrepreneur Network (IEN)
  7. President of Yayasan WholisticFamily Association (YWFA)
  8. Senior Partner of Messrs. Esther Ong TengkuSaiful & Sree (ETS) [www.lawyermalaysia.com]

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