Passing off in the digital age

Passing off can help protect businesses when someone registers a misleading domain name that could confuse customers or take advantage of their reputation. Our litigation experts explain the key legal principles, examine the landmark Marks & Spencer v One in a Million Ltd case, and outline practical steps businesses can take to protect their brands online.

Imagine discovering that someone has registered a domain name almost identical to your business name and is offering to sell it back to you at a premium. Even if the website isn’t live, the registration alone could damage your brand and confuse customers.

This is where the law of passing off can help. Although traditionally used to protect business goodwill in relation to goods and services, passing off has evolved to protect businesses in the digital age, including against cybersquatting and misleading domain name registrations.

At its core, the tort prevents one trader from misrepresenting their goods, services or business as being connected with another, thereby unfairly benefiting from that trader’s established reputation. There are three key elements which must be established to succeed in passing off:

Goodwill

Goodwill is the attractive force that brings in customers and is generated by a business’s reputation. It is not sufficient to merely prove that the defendant is using the company’s reputation; the claimant must show that the defendant has sought to benefit from that goodwill by attracting the claimant’s customer base.

Misrepresentation

A false representation must be made that led people to believe the defendant’s goods or services were those of the claimant. The key consideration is whether a number of customers are likely to be deceived. Being unaware of this misrepresentation, known as innocent misrepresentation, is not a relevant defence and may still constitute misrepresentation.

Damage

The claimant must show that they suffered or are likely to suffer damage as a result of the misrepresentation.

Marks & Spencer v One in a Million Ltd [1998]

In the late 1990s, before online brand protection was commonplace, a company called One in a Million registered domain names corresponding to famous businesses including Marks & Spencer, Sainsbury’s and Virgin. Rather than using the websites, it intended to sell the domain names back to the businesses at a profit.

The Court had to decide whether simply registering those names could amount to passing off, even though no trading had yet taken place.

The defendants argued that they were not using these domain names “in the course of trade” and as such, didn’t meet the requirements to be categorised as passing off. Contrastingly, the claimants’ position was that registering these domain names exploited their goodwill and caused deception to the public.

What was the Court’s decision?

The Court found in favour of the claimants and granted injunctive relief, restraining the defendants from dealing in the domain names and requiring their transfer to the relevant companies.

The Court held that domain names can function as business identifiers, meaning that registering a domain incorporating a well-known business name may itself amount to a misrepresentation. Although the defendants had not actively used the domain names, the registrations created a real risk of deception and could exploit the claimants’ goodwill by suggesting an association with their businesses.

The Court considered the domain names to be “instruments of fraud”, particularly given the defendants’ intention to sell them at a profit, and found that the registrations threatened reputational damage and public confusion. As a result, it granted injunctive relief to prevent both the immediate and future misuse of the domain names, demonstrating that passing off can provide preventative protection before actual damage has occurred.

What does this mean for my business?

The decision in One in a Million is significant because it confirms that passing off can provide preventative protection in the digital context, even before a misleading domain name is actively used. A domain name may create a misleading association with an established business even before it is used for a live website or trading activity.

For brand owners, the case underlines the importance of monitoring domain name registrations and acting quickly where a registration appears to exploit existing goodwill or create a risk of public confusion.

What should businesses do?

• Take a proactive approach to protecting your brand online. Registering a company name at Companies House or even owning a registered trademark does not automatically secure the corresponding domain names, making it important to consider domain name protection.
• Regularly monitor domain name registrations incorporating a trading name or brand.
• Register the key domain names associated with your brand as early as possible, including common variations and relevant top-level domains, to reduce the risk of third parties acquiring them.
• Act quickly if a misleading registration is discovered. Many organisations use domain monitoring services to alert them to suspicious registrations as they arise.
• Ensure that your business’ wider intellectual property portfolio is kept under review. Registered trademarks can provide additional protection alongside passing off, particularly where it may be difficult to establish goodwill or where swift enforcement action is required.

A combination of trade mark protection, proactive domain name management and regular monitoring provides the strongest defence against cybersquatting and other forms of online brand misuse.

Ultimately, early legal advice can often prevent more significant disputes and protect valuable goodwill before damage occurs. If your business has discovered a potentially infringing domain name, or you would like guidance on protecting your brand online, please get in touch with our experienced litigation team who would be happy to help.

Our Legal 500-rated litigation & dispute resolution team help private and commercial clients to resolve a wide range of disputes, including matters that can be resolved through mediation.