Trademark Unfair Competition: "Passing Off"

Outside the trademark arena, the idea of unfair competition exists in both the common law and statute to protect businesses that have suffered an injury through deceptive or wrongful business practices. In Minnesota, the statutory branch is the Minnesota Uniform Deceptive Trade Practices Act, Minn. Stat. §§ 325D.43-.48, which provides injunctive relief and attorney fees rather than money damages, and which is expressly cumulative with common-law remedies: “[t]he relief provided in this section is in addition to remedies otherwise available against the same conduct under the common law or other statutes of this state.” Minn. Stat. § 325D.45, subd. 3 (available at https://www.revisor.mn.gov/statutes/cite/325D.45). A 2023 amendment added an express statutory unfair-methods-of-competition provision at Minn. Stat. § 325D.44, subd. 1(13). Because the statute is keyed to injunctive relief and fees, money damages for unfair competition come through the common-law branch and related claims, not the statute itself.

In a trademark situation an injured party can bring an unfair competition claim under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Section 43(a) provides that:

• Any person who, on or in connection with any goods or services…uses in commerce any word, term, name, symbol, or device…or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which
• is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
• in commercial advertising or promotion, misrepresents the nature…of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1) (available at https://www.law.cornell.edu/uscode/text/15/1125).

“Passing off” encompasses a lot of activity and is the oldest theory of unfair competition. As the Supreme Court has described it, passing off “occurs when a producer misrepresents his own goods or services as someone else’s.” Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 27 n.1 (2003). The common-law unfair competition action developed originally to provide relief against a competitor’s misrepresentation of the source of goods or services. See Restatement (Third) of Unfair Competition (1995). Passing off happens when the defendant makes a statement or representation creating a likelihood of confusion as to the affiliation, connection, or association of the goods or services with the plaintiff, or as to their origin, sponsorship, or approval. The clearest case is a direct representation: the seller claims that its products actually come from the plaintiff.

To be liable for “passing off,” a defendant must misrepresent the source of its goods or services, whether by simulating the plaintiff’s mark, trade dress, or trade name, by a false designation of origin, or by a direct representation that the goods come from the plaintiff, and the plaintiff must show that this is likely to cause confusion as to the source, sponsorship, or approval of the goods or services. No showing of intent is required. In the Eighth Circuit, which governs Minnesota, the alleged infringer’s intent “raises an inference of likelihood of confusion, but intent is not an element of a claim for trademark infringement.” SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir. 1980) (available at https://law.justia.com/cases/federal/appellate-courts/F2/628/1086/).

Some plaintiffs have also tried to bring “reverse passing off” claims. A reverse passing off claim arises when a defendant/seller re-sells (or repackages) the plaintiff’s product after the plaintiff’s label or trademark has been removed or replaced with the defendant’s own, causing purchasers to believe that the product comes from the defendant rather than from the plaintiff, its true source. As the Supreme Court put it, reverse passing off occurs when “[t]he producer misrepresents someone else’s goods or services as his own.” Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 27 n.1 (2003).

The Supreme Court did not abolish this cause of action; it narrowed it. In Dastar, the defendant copied a television series whose copyright had expired (and was therefore in the public domain) and sold it as its own product, and the rights holders (Fox, SFM Entertainment, and New Line Home Video) sued for reverse passing off under the Lanham Act. The Court held that the “origin of goods” under Section 43(a) “refers to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.” 539 U.S. at 37. Because Dastar produced the tangible videotapes it sold, it was the “origin” of those goods, so the claim failed. The Court reasoned that once a copyright expires, the public gains a federal right to copy and use the work without attribution, and that the Lanham Act cannot be stretched into a “species of mutant copyright law” to restore that lapsed protection. The Court did, however, preserve a separate pathway under Section 43(a)(1)(B): where a producer gives buyers a false impression of the nature, characteristics, or qualities of goods, an injured competitor or the true source “might have a cause of action…for misrepresentation.” 539 U.S. at 38. The practical effect: a reverse passing off claim cannot rest on a failure to credit the originator of an underlying (uncopyrighted) work, but it remains viable where a defendant misrepresents the source of the physical goods themselves.