Could an authorised dealer be liable for passing-off after termination of dealership?
Introduction
In Omega SA v New Bowling Watch Co Ltd
[2022] HKCFI 3145; [2022] HKEC 4276, the defendant was found to have used the plaintiffs'
promotional and marketing materials specifically and exclusively provided to
and used by their authorised dealers in selling its products and liable for the
tort of passing-off.
Background
Omega
S.A., Compagnie Des Montres Longines, Francillon S.A. and Tissot S.A. (“Plaintiffs”) are wholly-owned
subsidiaries of The Swatch Group Limited. The Plaintiffs’ products had been
distributed to only designated boutiques and authorised dealers for their
resale to retail customers.
New
Bowling Watch Company Limited (“Defendant”)
was once an authorised dealer of the
Plaintiff’s products about 20 years ago whose dealership had been
terminated around 10 years ago. In 2017, the Defendant was found to have used
the Plaintiffs’ promotional and marketing materials in selling its products. The
Plaintiffs claimed that, in doing so, the Defendant passed off itself as the
Plaintiffs’ authorised dealer.
The law on
passing-off
Passing-off is a common law tort whereby someone deliberately or
unintentionally passes off their goods or services as those belonging to
another party. To establish the right of action, a plaintiff must show three
elements sometimes referred to as the ‘classic trinity’ first enunciated in the
English case of Reckitt & Colman Products Ltd. v Borden Inc. [1990] 1
WLR 491, (also known as the “Jif Lemon Case”):-
1.
The goods or services have acquired goodwill or reputation in the
marketplace that distinguishes such goods or services from competitors;
2.
The defendant misrepresents his goods or services, either intentionally
or unintentionally, so that the public may have the impression that the offered
goods or services are those of the claimant; and
3.
The plaintiff may suffer damages because of the misrepresentation.
Decisions
Goodwill
Firstly, on the point of “goodwill”, the court accepted that the
Plaintiffs enjoy substantial goodwill in Hong Kong in respect of their
registered marks.
Misrepresentation
Secondly, the court took the view that the use of such specific
promotional and marketing materials by the Defendant on the display windows and
counters, and the Defendant’s purported ability to issue warranty card to the
purchaser, plainly conveyed a false message to the general public that the
Defendant was an authorised licensee of the Plaintiffs.
The
court went further to explain that although it might be the case that the
products sold or offered to be sold by the Defendant were genuine products of
the Plaintiffs, the Defendant’s conduct may still amount to passing-off. In
essence, it is passing-off to represent oneself as an agent of the plaintiff,
in either the legal or popular sense, or as an authorised dealer in the plaintiff’s
goods. The court also noted that misrepresentation may be implicit merely in
selling the plaintiff’s goods without a disclaimer.
The
court reiterated that the law of passing-off overs the scenario where one
misrepresents to be the authorized dealer of another.
In Music Fidelity Ltd v Vickers
[2002] EWHC 1000, the defendant who was once the authorised distributors of the
claimant, made a continuing representation statement on its website despite
termination of its dealership. Similarly, in Sony v Saray Electronics Ltd [1983] FSR 302, the defendant
who were not authorised dealers of the claimant, sold the claimant’s goods and
purported to give the claimant’s guarantees to customers.
Damages
Lastly, the court agreed that the Plaintiffs would clearly suffer damage
arising out of the Defendant’s misrepresentation. As
such, the court took the view that the relevant public not being aware of this
would be misled, and if they found out the invalidity of the warranty, they
might blame the brands for the lack of warranty or control over the sales.
Having considered
the evidence, the court found in favour of the Plaintiffs and held that the
Defendant has passed off, or at least attempted to pass off, itself as an authorised dealer
of the Plaintiffs.
Key takeaways
It
should be noted that passing-off can be established even though most people are
not deceived - the courts look at the evidence of misrepresentation,
such as the size and nature of the applicable market to assess whether it is
likely that enough individuals have made or will make the false assumption such
as to cause damage to the goodwill of the claimant. It should also be reminded
that the act of misrepresentation does not need to be intentional because
passing off is a tort that attracts strict liability, meaning that intention is irrelevant,
the conduct alone is enough.
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Important: The law and
procedure on this subject are very specialised and complicated. This article
is just a very general outline for reference and cannot be relied upon as
legal advice in any individual case. If any advice or assistance is needed,
please contact our solicitors. |
Published by ONC Lawyers
© 2022 |