Common law unfair competition is comprised of torts causing economic damages to a business through deceptive or wrongful business practices. Unfair competition, both the common law tort and the federal statute, attempt to enforce honest pratices in business. The courts give a fairly broad definition of what constitutes unfair competition, with prior case law lending guidance in defining the concepts of fairness. Most states recognize two common law forms of unfair competition relating to trademarks.
Trademark Passing Off or Reverse Trademark Passing Off
Two examples of unfair competition, recognized by state unfair competition laws as well as federal law under section 43(a) of the Lanham Act, are passing off and reverse passing off. Passing off is defined as the sale of the goods of one manufacturer passed off as those of another (trademark infringement). In contrast, in reverse passing off, the seller misrepresents the source of its product by removing or obliterating the original trademark. Reverse passing off falls into two categories: 1) Express and 2) Implied. In express reverse passing off, the infringer replaces the original trademark with his trademark and sells the produce. In implied reverse passing off, the infringer only removes the trademark prior to selling the product, leaving the product unbranded. In both instances of passing off and reverse passing off, the infringer prevents the customers from knowing the true source of the product, creating a means for deceiving the customer, causing damages to the true product owners’ goodwill with their customers.
Another example of common law unfair competition is misappropriation, which involves the unauthorized use of intangible assets not protected by trademark or copyright laws. Misappropriation is the principle that one may not misappropriate the results of the skill, expenditure and labors of a competitor. Most state recognize a common law claim for misappropriation, even though it is not codified.