A. INTRODUCTION
A business or organization may not pass off its goods or
services as those of another business or organization. More specifically, any
business or organization that misrepresents its goods or services to the public,
such that the average person would be confused in the marketplace and lead the
individual to believe they were purchasing the goods or services of another
more reputable company, could be liable under the tort of passing-off. This Charity
Law Bulletin explores Canadian case law concerning the tort of passing off,
as well as the newer and more specific tort of domain name passing off and their
implications to charities and not-for-profits.
B. TORT OF DOMAIN NAME PASSING OFF
With regard to the tort of passing-off, recent Ontario
court decisions have determined jurisdiction to hear disputes over domain names
and have used basic common law trade-mark principles applied in domain name
disputes. The Ontario courts in Dentec Safety Specialists Inc. v. Degil
Safety Products Inc. essentially carved out a new tort of domain name passing off. If a domain name
squatter’s use of a particular domain name, which is identical to a charity or not-for-profit’s
trade-mark, is used to attract internet users to a website from which the
registrant earns profit, this would constitute a “passing off” of the
trade-mark, entitling the charity or not-for-profit to damages, or recovery of
profits and possibly an injunction and transfer of the domain name. As further
discussed below, this type of court action is based on the domain name’s squatter’s
violation of prior trade-mark rights.
The tort action of passing off involves deceitfully
misrepresenting one’s business or goods so as to mislead the public into
believing that one’s goods or business are those of another. A court action for
passing off requires the following three elements to be proven:
1. the
existence of goodwill;
2. deception
of the public due to a misrepresentation; and
3. actual
or potential damage to the plaintiff.
C. DENTEC SAFETY SPECIALISTS INC. V. DEGIL SAFETY PRODUCTS INC.
In Dentec, the court considered the tort of domain
name passing off. In this case, the plaintiff had a website at www.dentecsafety.com and used the
domain name as a major source of marketing, including displaying the URL on its
advertising for five years. The defendant sold its products at www.degilsafety.com. The defendant also
registered the domain name www.dentecsafety.ca,
which was the same as the plaintiff’s domain but with a .ca, instead of a .com,
and redirected any traffic to his degilsaftey.com website without any warning
to the customers. The plaintiff and the defendant were direct competitors with
similar customers, offering similar services. The plaintiff
brought an action towards the defendant for passing off. The plaintiff
proceeded with the action and was successful in obtaining judgment for $10,000,
as sought.
The court in Dentec applied the elements listed
above that are necessary in proving the tort of passing off. Proving the first
element, the existence of goodwill, would require proof that the organization
owns the rights to the particular trade-mark. The court held that registration
of a trade-mark in Canada may be sufficient on its own in this context.
The Dentec case provides commentary that is helpful
in the application of a passing off action in the context of internet domain
names. In particular, in order to prove the second element, that there has been
a deception of the public due to a misrepresentation, the plaintiff must prove
that the registrant “conveyed a misrepresentation to the public, whether intentionally
or not, that would likely have caused confusion among ordinary average
customers as to whether the goods being sold by the defendant are those of the
plaintiff.” Addressing the issue of confusion between a domain name and a competitor’s
name, the court stated that “use of an exact business name weights heavily in
the ‘customer confusion’ analysis… [T]he defendant’s use of such a domain name
may itself amount to passing-off.”
Regarding the third element, actual or potential damage to
the plaintiff, the court in Dentec found that the cyber squatter had
caused actual damage to the plaintiff by intentionally redirecting internet
traffic and customers to the cyber squatter’s website. Even though the court
did not have evidence showing any actual monetary damages suffered, a damages
award was made in favour of the plaintiff.
Another important factor that the court considered in the
confusion analysis was the similarity of products sold. In this regard, the
court in Dentec confirmed the well established principle that use of a
similar or identical mark or name with virtually identical products is likely
to cause greater customer confusion.
Finally, the court will also look to the registrant’s
intentions. Registrants need not intentionally seek to confuse or mislead the
public in order to be held liable for passing off. However, proof of intention
to mislead will weigh strongly in favour of customer confusion. In this regard,
if the registrant of the website is squatting on numerous domain names, and
therefore appears to be a textbook example of a typical domain squatter, this
weighs heavily in favour of a finding that he is intending to cause confusion
with others’ well-known names and trade-marks.
D. CONCLUSION
This case provides a useful analytical framework and
confirms that when considering a confusingly similar domain name, a passing off
action is a suitable option. Charities and not-for-profits should be cognisant
of the potential of another organization passing-off their goods or services
through the tort of domain name passing off and seek to register their domain
names and monitor the status of similar domain names.
