Passing Off: Preventing Theft Of Your Business's Identity

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Miller Thomson LLP

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Protecting your business's unique identity is key to building your business's reputation and ensuring brand recognition. The common law developed the tort of "passing-off" in order to provide businesses...
Canada Corporate/Commercial Law
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Protecting your business's unique identity is key to building your business's reputation and ensuring brand recognition. The common law developed the tort of "passing-off" in order to provide businesses with a remedy when one business attempts to steal the identity of another business, and thereby trick the public into thinking the two businesses are one and the same.

The Supreme Court of Canada in Kirkbi AG v Ritvik Holdings Inc.1("Kirkbi") established three necessary components a claimant must prove in order to make out a claim for passing-off:

  1. The existence of goodwill or reputation;
  2. Deception of the public due to a misrepresentation; and
  3. Actual or potential damage to the claimant.

Goodwill in this context is in regards to the distinctiveness of the product provided. The intent of passing-off is to protect "guises, get-ups, names and symbols which identify the distinctness of a source."2

ATTIC RAIN SPECIALISTS LTD V NO PAYNE ROOFING INC., 2024 ABKB 166

The question addressed by the Alberta Court of King's Bench in the recent decision of Attic Rain Specialists Ltd v No Payne Roofing Inc.3 ("Attic Rain") was how distinctive a name must be in order to ground a finding of passing-off.

In Attic Rain, both the Applicant, Attic Rain Specialists Ltd. and the Respondent, No Payne Roofing Inc., were engaged in the business of addressing and remediating attic rain issues. Attic rain occurs when frost or ice inside an attic melts faster than the attic can vent moisture, resulting in moisture damage to a home.

The Applicant claimed that the Respondent had been using the phrase "attic rain specialists" in promotional materials on its website. The Applicant sought a permanent injunction to prevent the Respondent from using the Applicant's name in its marketing or promotional materials.

The Court's analysis focused on the first element of the three-part test from Kirkbi; namely, whether the Applicant had sufficient goodwill or reputation connected to the name "Attic Rain Specialists". The Court cited Corus Radio Inc v Harvard Broadcasting Inc4 for a number of factors that could be indicative of sufficient goodwill:

  • 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 the claimant's mark;
  • the geographic reach of the claimant's mark;
  • its degree of inherent or acquired distinctiveness;
  • whether products associated with the claimant's mark are confined to a narrow or specialized channel of trade, or move in multiple channels; and
  • the extent to which the mark is identified with a particular quality5

The Court focused on whether or not the name "Attic Rain Specialists" was distinctive enough to establish such goodwill.

The Court pointed out that the words appeared to be descriptive and that while the Applicant was claiming to be a specialist in attic rain, many HVAC or roofing contractors could validly make the same claim. When words are merely descriptive, the Court stated that an important consideration is whether the words have "developed a secondary meaning that signifies exclusive association with the claimant's services."6 The closer a name is to a mere description of the product, the more difficult it is to prove goodwill associated with those words.

The Court drew the Applicant's attention to the lack of distinctiveness by comparing the Applicant's situation to that of a hypothetical plumbing company calling itself "Leaky Pipe Specialists". The Court asked the Applicant what the proper remedy would be in that scenario if another plumbing company advertised themselves as "leaky pipe specialists". The Applicant's response was that this would depend on whether or not the hypothetical plumbing company was registered in the Alberta Corporate registries under a name such as "Leaky Pipe Specialist Inc." and impressed upon the Court that "Attic Rain Specialists" is the name registered for the Applicant at the Alberta Corporate registries. The Applicant's position was that the Respondent could not use their registered name, because it amounted to a misrepresentation that the Respondent was associated with the Applicant.

The Court rejected this argument:

18 It is not enough, in support a passing off action, to adopt a generic name by registering same in Alberta corporate registry. "Attic Rain Specialists" might be used as a description of the qualities of a service provider or as a name. The Applicant must prove the requisite degree of goodwill. Otherwise, whatever representation one might conceive is not actionable.7

The Court ultimately concluded that the Applicant did not sufficiently address the issue of lack of distinctiveness to establish the necessary goodwill to meet the first element from Kirkbi. The Court found that there could be many competitors of the Applicant who might validly make a claim to be an "attic rain specialist" and that the Applicant had failed to prove that there was a sufficient secondary meaning to this phrase in the marketplace to show that this phrase was associated exclusively with the Applicant. As such, the Court held that the requisite goodwill was not established and the injunction was not granted.

PRACTICAL TAKEAWAYS

  • Adopt distinctive and unique names for your company as well as any products your company develops.
  • Ensure uniformity in the branding of all products, vehicles, correspondence etc. Although this was not something addressed in this case, having one brand on all public facing aspects of your business increases the likelihood that the public will associate your business name and logo with your business.
  • Avoid using merely descriptive terms for the name of your company. Although it may be helpful to inform potential clients of the services your company can provide, if your name is a phrase that multiple competitors could accurately use to describe their own services, it may be an uphill battle to prove that your company has a sufficiently distinct identity in the event another company tries to misrepresent itself as being associated with your company.
  • If your company is already using a largely descriptive name, and you believe that another company is passing-off as your company, it will be very important to provide evidence that your company's name is known to the relevant consumers and that it is associated exclusively with your business.

Footnotes

1. 2005 SCC 65 ("Kirkbi").

2. Ibid at para 67.

3. 2024 ABKB 166.

4. 2019 ABQB 880.

5. Ibid at para 86.

6. Kirkbi, supra note 1 at para 15.

7. Ibid a para 18.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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