Modest goodwill is sufficient basis for passing-off claim
The decision of the Patents County Court in Lumos Skincare Ltd v Sweet Squared Ltd ( EWPCC 22, May 10 2012) has shown that claims for passing off can succeed where the claimant has only a very modest goodwill attached to its goods, so long as it can demonstrate that a substantial part of the relevant public would be misled into purchasing the defendant’s goods as those of the claimant. Confusion as to the origin of goods in passing-off cases is not sufficient.
This was a claim for passing off before Mr Recorder Douglas Campbell sitting in the Patents County Court. The claimant, Lumos Skincare Limited, distributes a number of skincare products under the mark LUMOS in the United Kingdom. The first defendant, Sweet Squared Limited, and latterly the third defendant, Sweet Squared (UK) LLP, distributed nail care products in the United Kingdom under the mark FN LUMOS that were manufactured by the second defendant, Famous Names LLC.
The defendants denied passing off. They claimed that the claimant’s goodwill was very small and that, in any event, there was no likelihood of a misrepresentation as the nail care products trade is sufficiently different to the skincare trade. The defendants also argued that there was no likelihood of a misrepresentation, as the defendants’ products were sold to professionals while the claimant’s products targeted end consumers.
There was no dispute between the parties as to the relevant law. Applying the classic test in Reckitt & Coleman Products Ltd v Borden Inc ( RPC 341), the issues for Mr Campbell to decide were:
- whether the claimant had established goodwill or reputation attached to its products;
- whether the defendants' actions resulted in a misrepresentation that their products were in fact those of the claimant; and
- whether this misrepresentation resulted in damage to the claimant.
Mr Campbell began by considering whether the claimant had goodwill in the mark LUMOS as at the date the defendants began the goods complained of (October 2010). At the relevant date, the claimant was selling approximately £10,000 of product each quarter, which equated to roughly 100 bottles of product. These sums led to a finding of only a very modest goodwill in the LUMOS mark, which related to a particular niche in the market for skincare products. Mr Campbell noted that, according to Stannard v Reay ( RPC 589) and Stacey v 2020 Communications ( FSR 49), even a very modest goodwill can support an action for passing off.
Having established the claimant’s goodwill, Mr Campbell turned to the question of whether the defendants had made misrepresentations to the relevant public. The claimant was found to operate at the premium end of the market for anti-ageing serums, a subsection of the skincare market. The defendants, in contrast, operated in the mass market for nail products, with their products retailing for around £10 a bottle, around 10 times less than the retail price of the claimant’s goods. Equally, Mr Campbell found that the claimant’s products were aimed at end consumers, while the defendants’ products were aimed at the professional market. This meant there was little overlap in trade outlets and no direct overlap in the way the products were marketed. With these clear distinctions, it made it more difficult to accept that a misrepresentation had occurred.
Although it was possible to succeed in a claim for passing off with a modest goodwill, it would have required establishing that a substantial number of the relevant public would have been misled into purchasing the defendants’ products. This was not made out on the evidence, which at best suggested there had been some confusion as to the origin of the defendants’ goods. Having the relevant public wonder whether there was a connection between the parties was not sufficient; deception is required to constitute a misrepresentation. Accordingly, Mr Campbell found there had been no misrepresentation and the action failed.
There are two points of interest that come from this case. First, it demonstrates that a modest goodwill is a sufficient basis for a claim for passing off. Mr Campbell quoted an article supplied in evidence which suggested that the overall skincare market was worth in the region of £1 billion a year. With sales of only £10,000 a quarter, the claimant had sufficient goodwill to proceed.
That said, with such a modest goodwill, a claimant needs to introduce substantial evidence to persuade the court that a misrepresentation has occurred. This evidence must demonstrate that the relevant public would be deceived by the defendant’s products, not merely caused to question whether there was a link between the two parties. In this respect, this case was distinguished from Neutrogena Corporation v Golden Limited ( RPC 473), where the claimant’s substantial quantity of evidence established a misrepresentation in circumstances where the claimant’s market share was also very modest.
Leigh Smith, McDermott Will & Emery UK LLP, London
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