Defense against Unfair Competition | Legal

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Unfair Competition is a deceitful, fraudulent or dishonest business method or trade practice to gain unfair advantage over competitors.

Unfair Competition has two broad categories:

1. Unfair Competition - refers to business tactics that are intended to confuse consumers as to the source of the product. (e.g. imitative name, trademark or package)

2. Unfair Trade Practices- which is comprise of all forms of unfair competition deceptive or false advertising (e.g. criticizing one’s product, publication of false, defamatory or misleading representations)

These actions are prohibited by statute or common law. An individual may bring a legal action against an unfair competitor especially if such actions are intended to harm one’s business.

Fundamentals of Unfair Competition

Unfair Competition Law is governed by state common law, and is mainly comprised of torts that cause damage and harm to a certain business through deceptive and unfair business practice.

The most common practice of unfair competition is trademark infringement, which is a violation to the exclusive rights of a trademark without the authorization of the owner.

Trademark infringement may occur when the infringer uses a mark, which is the same or identical to another party, that may lead to confusion with the trademark owner’s product or services.

Other practices of unfair competition include:

• Unauthorized replacement or substitution of one product brand for another

• False advertising

• Use of confidential information by former employee to seek for customers

• Trade libel

• Breaking or violating a restrictive covenant or agreement

• Stealing of trade secrets

• False representation of goods and services

Forms of Unfair Competition Law

The unfair competition law emerged from common law doctrine. It may take a number of forms such as passing off, dilution or misappropriation.

• Passing off

This is a misrepresentation created by a trader to injure the business that lead to the actual damage not only of the business itself, but the goodwill of the trader or the owner of the business.

Passing off has three elements namely:

1. misrepresentation
2. goodwill owned by trade
3. damage to goodwill

There is a law however, the “law of passing off,” which protects traders or business owners from such misrepresentation or damage to goodwill. This law also prevents one person from misrepresenting his goods or services as that of another.

• Dilution

This is the unauthorized commercial use of a mark or identical mark to a different or same good and services.

Dilution is divided into two concepts:

1) Blurring- a “blur” in the mark, that is associated with one product to signify that it is different from the other one, so that consumers will not identify or recognize the commercial source.

2) Tarnishment- weakening the quality of the mark through unpleasant and unfavorable associations

• Misappropriation

This refers to an illegal and intentional use of other person’s assets that are not protected by the copyright and trademark laws.

Misappropriation can also be a form of fraudulent misuse of funds and property that is entrusted to another person and then claiming it as his own, but is actually owned by someone else.

Purposes of Unfair Competition Law

Unfair competition law has five purposes:

1) It seeks to protect the intellectual, economic and creative outlays created by businesses to distinguish their products and themselves as well.

2) It seeks to preserve and protect the good will that businesses have made with their consumers.

3) It seeks to prevent businesses from taking or misusing the good will of their competitors.

4) It seeks to promote precision and stability through encouraging consumers to depend on the business’ reputation and good will in evaluating the quality of other products.

5) It seeks to increase competition by granting incentives to businesses through offering better products and services than others offer.

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