Deliberately Confusing the Market to Gain Advantage

Are you deliberately confusing the market to gain an advantage for your business? You don’t have to reinvent the wheel, but by ‘borrowing’ from your competitors you may be infringing on Competition Law.
By Monisha Prem

Passing off is creating the impression that your products or services are somehow connected to those of another business, whether by using the same name, brand, slogan or trade mark. If you use the same colour and style of packaging as a competitor or have a similar logo, you could be guilty of passing off, even if your brand name is substantially different, as was the case in Swartkops Sea Salt (Pty) Ltd vs Cerebos Ltd (CA 2012).

What are the legal requirements for being accused of passing off?
 
Reputation or goodwill:
The infringed business has a reputation or goodwill connected to its products or brand.
 
Misrepresentation:
The infringer makes false or unauthorised representations, whether expressly or implied.
 
Impacting the market:
This misrepresentation causes, or is likely to cause, confusion amongst the public as to the source of the products or services.

The degree of impact
 
The challenge lies in determining whether actual deception has occurred or whether the mere possibility of confusion is sufficient.

In the case of Kellogg Co vs Bokomo Co-operative Ltd (SA, 1997), the judge found that there was no passing off if there was no proof of deception, regardless of how confusingly similar the marks may be. In Capital Estate and General Agencies (Pty) Limited vs Holiday Inns Inc (SA, 1977), however, the judge found that the ‘likelihood of confusion’ was enough to be guilty of passing off. In Mega Power Centre CC trading as Talisman Plant & Tool Hire vs Talisman Franchise Operations (Pty) Ltd and Others (Namibia, 2016), the court mentioned that the use of the feature or name must be calculated to deceive, and that the aggrieved party must have the necessary reputation.

Passing off in the digital space and cybercrimes
 
Website domains with similar sounding names are registered with the aim of deceiving users into believing they are the same business, or they are used in cybersquatting to benefit from higher priced sales. Keyword searching and meta tags are also used to generate online sales.

In more serious cases, cybercrimes involving the sale of counterfeit goods or identity theft are clear infringements and therefore unlawful.

What is ‘leaning on’?
 
Leaning on is a form of unlawful competition whereby one person benefits from a positive association with another’s brand or business without deceiving or confusing anyone.
In Cochrane Steel Products Pty Ltd vs M-Systems Group (Pty) Ltd (SA, 2014), the court considered use of similar branding in digital advertising (‘ClearVU’), but the judge held that leaning on is not recognised in South African law and could not be relied upon.

How similar is too similar?
 
To determine how far you can push the envelope before you have crossed the line into passing off, consider the following questions relating to the brand you are mimicking:

• What is the strength of the other brand’s mark and reputation?
• How common is their branding in terms of words, colours, logos and packaging?
• What is the degree of similarity in the product or service offered?
• Will this result in actual confusion, or is confusion likely?
• Who is the typical customer to whom the product or service is marketed?

It is possible to operate with similar branding, provided there is sufficient differentiation for your product or service to have its own brand identity in the market. If, however, you have intentionally branded or marketed your products/services in such a way that consumers are likely to confuse it with the products/services of a competitor with an established reputation, you will likely be guilty of passing off.

Sources:

• www.ensafrica.com
• www.brands-man.com
• www.polity.org.za
• Competition Act of 1998