Court of Appeal confirms that cachet is not necessary for extended passing off

United Kingdom
In Diageo North America Inc v Intercontinental Brands (ICB) Limited ([2010] EWCA Civ 920, July 30 2010), the Court of Appeal has upheld a High Court decision in which the latter had held that the sale of a non-vodka product under the name Vodkat constituted extended passing off. The Court of Appeal rejected an argument that only products with a cachet are capable of protection under the tort. The decision confirms that extended passing off can protect certain goods even where the term at issue (here, 'vodka') is generic.

The claimants, members of the Diageo group of companies, produce Smirnoff vodka. The defendant, Intercontinental Brands (ICB) Ltd, produces Vodkat, a clear, virtually tasteless alcoholic drink, which consists of vodka and naturally fermented alcohol. Vodkat has an overall alcohol by volume (ABV) of 22%. Under Council Regulation 110/2008, vodka must have an ABV of 37.5%. Vodkat was initially marketed in a get-up strongly reminiscent of vodka.

At the High Court, Diageo argued that ICB's actions amounted to extended passing off. This tort was explained by Lord Diplock in the ADVOCAAT Case (Erven Warnick BV v J Townend & Sons Ltd ([1980] RPC 31)) as comprising a misrepresentation made by a trader in the course of trade to prospective customers of its goods or services, which is calculated to harm the business or goodwill of another (in the sense that it is a reasonably foreseeable consequence), and causes actual or probable damage to the business or goodwill of the trader by whom the action is brought.

The High Court considered that vodka had a reputation giving rise to protectable goodwill and was perceived by consumers to be a clear, tasteless, distilled, high-strength spirit. In concluding that passing off had occurred, the court held that Vodkat had been marketed in a manner designed to mislead members of the public into believing that the product was vodka, or a weaker version of vodka.

ICB's contention that extended passing off is applicable only where the relevant class of goods is perceived by the public as having a 'cachet' (ie, premium goods or goods of superior quality) was rejected. A qualified injunction was granted which prevented ICB from using the name Vodkat unless, among other things, the product was actually vodka (with an ABV of 37.5%) or was clearly distinguished from vodka (for further details please see "Diageo victorious in extended passing-off case"). 

Before the Court of Appeal, ICB argued that the tort of extended passing off is confined to products with a cachet. Therefore, goods such as vodka, which do not possess this cachet, do not qualify for protection. This argument was based on previous authority and matters of policy - in particular, the need to limit cases of extended passing off and prevent a flood of cases concerning ordinary products.
 
Further, ICB contended that cachet has always been an express or implicit requirement for a claim for extended passing off. In his leading judgment, however, Lord Justice Patten conducted a thorough review of the previous case law and concluded that nothing in those decisions limited the protection of the tort to products with a cachet.

Patten LJ was strongly influenced by the views of Lord Diplock and Lord Fraser in the ADVOCAAT Case, who confirmed that it was not necessary for the goods in question to be distinctive, in the minds of the public, of goods of a particular producer or group of producers, or to be perceived as originating from a particular geographical region. Instead, the court in the ADVOCAAT Case held that it was sufficient that the product itself had qualities and characteristics which created reputation and goodwill and, consequently, made the product distinctive in the minds of the public.

Patten LJ also referred to the Chocosuisse Case (Chocosuisse Union des Fabricants Suisses de Chocolat v Cadbury Ltd ([1999] RPC 826)), where it was held that it was "not necessary to show that the plaintiff's goods are better, cheaper or in any way different to those of the defendant or others in the trade". While it will obviously be easier for a quality or fashionable product to acquire the necessary reputation and goodwill (and, therefore, distinctiveness among consumers), Patten LJ endorsed the view of the trial judge that a cachet requirement would be contrary to the principle of extended passing off.

Patten LJ concluded that the question of whether a product has the necessary public reputation and distinctiveness required to qualify for protection was one of fact for the trial judge.

In addition, Patten LJ was not sympathetic to ICB's argument that cachet is essential in order to distinguish products that create goodwill through their distinctive and special characteristics, and ordinary products which do not. He considered the tort of extended passing off to be self-limiting, because of the requirement of a distinctive reputation and resulting goodwill. Furthermore, Patten LJ reiterated that there have been only a handful of reported cases of extended passing off in the last 30 years.

Although he agreed with Patten LJ's judgment, Lord Justice Rix did express a concern that:

"the extended form of passing off should not, by dint of extensions upon extensions, trespass beyond the legitimate area of protection of goodwill into an illegitimate area of anti-competitiveness."

In its cross-appeal, Diageo contended that, in light of the findings of actual confusion, the High Court ought to have granted an unqualified injunction to restrain ICB from using the name Vodkat to describe anything other than a product which was vodka with 37.5% ABV. In Diageo's view, it was not practically possible for ICB to make it clear to new and existing customers that Vodkat is not vodka.

However, Patten LJ considered a qualified injunction to be appropriate in this case, as it was theoretically possible for ICB to use the name Vodkat without passing off. He referred to the High Court's findings that "ICB have a small mountain to climb if they are now to succeed in clearly distinguishing Vodkat from vodka", which essentially continues to render the injunction effective, be it absolute or not.

Anna Reid, Ashurst LLP, London

Unlock unlimited access to all WTR content