Spring 2006Newsletter

Reverse Passing Off May Be More Limited Than Previously Thought

Intellectual Propery Update

Reverse passing off is different from ordinary trade identity infringement. In ordinary trademark or trade dress infringement cases the defendant sells his own product, but gives it a trademark or trade dress that makes purchasers think the product came from the plaintiff. The plaintiff is upset about this because people who really want to purchase the plaintiff’s product may buy the wrong one, and thus wind up giving their money to the defendant instead.

But in reverse passing off cases the defendant sells (or, more accurately, re-sells) the plaintiff’s product, after removing the plaintiff’s trademark, or re-labeling the plaintiff’s product as the defendant’s own, so that ultimate purchasers think the defendant is the source of the plaintiff’s product, or at least they do not know that the plaintiff was the original source of the product.

What is the harm in such a method of doing business? Shouldn’t the defendant be free to buy the plaintiff’s product on the open market and then do whatever he wants with it? Why should the plaintiff be entitled to complain if he has already sold his product for the asking price?

One answer is that the plaintiff may be interested in more than present sales. He probably is interested in building a lasting, perhaps even a growing, business. To do that he has to generate goodwill leading to repeated sales to satisfied customers. He can’t do that unless those satisfied customers know who the product came from.

Alternatively, the customers may actually recognize the plaintiff’s product (despite the unlabeling or re-labeling) and consequently come to the erroneous conclusion that the defendant is affiliated with the plaintiff. That’s not good for the plaintiff, because it puts his reputation in the marketplace at least partially under the control of the defendant, who may not care about the plaintiff’s goodwill.

Of course, many companies are in the business of selling components for incorporation into some other company’s larger product. But those are consensual business deals, so nobody is aggrieved. It is only when the plaintiff is in the business of selling direct to the same consumers that the defendant is trying to reach, and the re-labeling or unlabeling is done without the plaintiff’s consent, that reverse passing off is objectionable.

The earliest reverse passing off cases involved sales of tangible products. In one such case, for example, the defendant published an advertisement for ladies’ dresses of the defendant’s manufacture, but the ad contained a picture of the plaintiff’s dress.

Later, the courts began to extend the reverse passing off doctrine to intellectual property. One of the first examples of such cases involved the broadcasting by a U.S. television station of a program of a Monty Python show which had been licensed to it by the British Broadcasting Co. The show had been so badly edited to fit the commercial-free BBC program into the American format of one hour less commercial announcements, that Monty Python claimed that the American broadcast no longer deserved to have their name on it.

But recently the United States Supreme Court in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 66 USPQ2d 1641 (2003), forbade the application of the reverse passing off doctrine to intellectual property. In that case, some films on which the copyright had expired were re-used without the authors’ permission, and those authors sued for reverse passing off. The Supreme Court held that it interfered with the copyright laws to apply the law of trademark infringement in that way. The unauthorized use of copyrightable subject matter was either copyright infringement or it was not, and if it was not then the copyright laws mandated that the defendant was free to make unauthorized use of the no-longer copyrighted material. Trademark law should not prevent them from doing so.

Now a more recent case has further circumscribed the doctrine of reverse passing off, although the case relates to tangible products rather than intellectual property. In Bretford Manufacturing Inc. v. Smith System Manufacturing Corp., 75 U.S.P.Q.2D 1858 (7th Cir. 2005), the plaintiff Bretford made computer tables featuring one leg on each end. The leg supports a sleeve attached to a V-shaped brace, making it easy to change the table's height while keeping the work surface stable. The sleeve and brace together look like a Y. Here’s a picture of the Bretford table:

Bretford contended that the Y-shaped leg is its trade dress, and that the defendant Smith System engaged in reverse passing off when it incorporated some Bretford legs into a sample table that Smith showed to its prospective customers.

It seems that Smith decided to copy Bretford's table, which it was entitled to do because Bretford had no patent or other form of intellectual property protection on the table as a whole. Smith had subcontracted the Y-shaped leg assemblies to a specialized metal fabricator, whose initial efforts were unsatisfactory. This left Smith in a bind when the prospective customer asked to see a sample table. Smith then cobbled a sample together by attaching the Y-shaped leg assembly from a Bretford table to a table top that Smith had manufactured itself. The customer was satisfied, and placed an order for a quantity of tables with Smith. All of the tables which Smith ultimately delivered to the customer included legs manufactured by Smith's subcontractor, not taken from Bretford tables.

The court ruled in Smith’s favor. It reasoned that liability for reverse passing off, like any other form of trademark or trade dress infringement, must be based on a misrepresentation of the goods' origin. Just as Dastar (in the Supreme Court case) had the right to incorporate into its videos uncopyrighted footage taken and edited by others, provided that it manufactured the finished product as a whole, and did not mislead anyone about who should be held responsible for its shortcomings, so Smith had the right to incorporate into its tables unpatented legs made by someone else, provided that it manufactured the finished product as a whole and did not mislead anyone about who put the table together. As far as the customer was concerned, said the court, the table originated with Smith, no matter who made any component or subassembly.

Thus the Bretford case interpreted Dastar not as a case which precludes liability for reverse passing off when the product which the defendant re-branded, is intellectual property rather than tangible property, but as a case which precludes liability for reverse passing off when the product which the defendant re-branded does not become the defendant’s entire product, but is merely a component of the defendant’s entire product, and the rest of the defendant’s product was actually manufactured by or for the defendant.

The Bretford case therefore seems to say that, so long as the sample table as a whole originated with Smith, it did not mislead anyone that a part of it did not originate with Smith. Accordingly, reverse passing off may be inapplicable to mere components of the defendant’s product, regardless of whether the defendant’s product is a tangible one or is intellectual property.

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