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Vodka, Champagne and Passing Off

Published: 03/09/2010

By John McKeown

A recent decision of the English High Court shows the flexibility of the common law cause of action for passing off.

The Facts
The plaintiff in the case was the owner of the SMIRNOFF brand of vodka in the United Kingdom. Since the 1950’s, this brand has been the best selling brand in the United Kingdom. The plaintiff sold a range of vodkas and related products under the umbrella of the SMIRNOFF brand.

The defendant was part of a smaller group of companies founded in 1990, which also produce a range of alcoholic drinks. The product that was the subject of the present action, was a clear, virtually tasteless, alcoholic drink which had been marketed under the brand name VODKAT since April 2005. The VODKAT product was not a vodka but a mixture of fermented alcohol and vodka with a minimum alcoholic strength by volume of 22% as opposed to 37.5% for vodka. As a result of a favourable customs classification, the retail price for VODKAT was substantially less than vodka.

Passing Off
The plaintiff’s claim was based on the common law tort of passing off. Canadian and United Kingdom courts require that three elements must be established in order for a plaintiff to succeed in an action for passing off. First, the plaintiff must establish the existence of goodwill or reputation attached to the goods supplied, in the mind of the purchasing public by association with identifying "get-up" under which the goods are offered to the public, so that the "get-up" is recognized by the public as distinctive to the plaintiff’s goods. The "get-up" may include a common law trade-mark or the trade dress in which the goods are offered to the public.

Second, the plaintiff must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that the goods offered by the defendant are the goods of the plaintiff. The final consumer of the product must be taken into account in making this determination.

Third, the plaintiff must demonstrate that it has suffered or that it will likely suffer damage by reason of the erroneous belief caused by the defendant’s misrepresentation.

The Extended Form of Passing Off
In some cases, the passing off doctrine can extend to the misuse of a sufficiently significant descriptive or generic term in relation to goods for which it is inappropriate. In order to establish that the misrepresentation is material, the descriptive or generic term must have a reasonably definite meaning and some attraction to customers. The misrepresentation is actionable by anyone whose goodwill is damaged in relation to their goods to which the term is properly applicable. In short, generic terms with well defined meanings may be protected despite the fact they are not distinctive in the sense of denoting a specific source.

This reasoning had been applied in a number of cases referred to as the "champagne" cases in the United Kingdom. It was found that "champagne" meant sparkling wine produced in the Champagne district of France by the champagne houses and that the use of the term "Spanish champagne" in relation to a different type of sparkling wine from Spain was likely to be misleading. The reasoning was accepted in Canada but not the result, since Canadian champagne at the time an action was brought to attack the use of the term had been sold in Canada for more than 60 years. As a result, it was found in Canada that it was unlikely that consumers would be confused.

Following the champagne cases, the Trial Judge said that in the right fact situation, passing off can protect a descriptive term which has come to mean a particular product, rather than a product from a particular source. The reduction of the distinctiveness of the descriptive term can be relied upon as the relevant damage. It was also observed that it should be possible to protect a descriptive term if it is used in relation to a reasonably identifiable group of products which have a "perceived" distinctive quality.

Goodwill, Misrepresentation and Damage
After reviewing a substantial amount of evidence, the Trial Judge found that it had been established that the term “vodka” denoted a clearly defined class of goods. It was relevant that the applicable statutory regulations in force prescribed what could be sold as vodka.

The Trial Judge was convinced that the evidence clearly established that the alcohol-consuming public in the United Kingdom and in particular, the vodka-consuming public, had come to regard the term "vodka" as denoting a particular class of alcoholic beverage. They may not know precisely what it is, what it is made from or where it is made, but they use the term "vodka" to get what they want and to distinguish it from other similar products such as gin, rum and whiskey. The Trial Judge did not accept the submission that since vodka was essentially tasteless, it was a mere "alcohol delivery system." The Trial Judge agreed with the plaintiff’s submission that this did no more than confirm an important aspect of the reputation of vodka, namely that it can alcoholically enhance any chosen mixer without detracting from the taste of the mixer.

The Trial Judge had no hesitation in finding that the use of the brand name VODKAT plainly suggested that the product was either vodka or a version of vodka or contains or is made from vodka. In addition, the marketing of the VODKAT product was calculated to deceive a substantial number of members of the public into believing that the product was vodka.

Finally, the Trial Judge found that the plaintiff had made out some modest loss of sales of SMIRNOFF vodka as a result of the defendant’s activities. In addition, it was clear that the defendant’s marketing of the VODKAT brand was likely to erode the distinctiveness of the term "vodka," since "vodka" would cease to be a term reserved for 37.5% alcoholic strength by volume spirit and would come to be seen as a term applicable to lower strength products which include fermented alcohol. As a result, the action was allowed.

Comment
The reasoning applied in this case has been previously accepted by the Supreme Court of Canada and is available in Canada to be applied in the right case.