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UNFAIR COMPETITION

Sanjeev Kumar Chaswal

LL.M. (IPR & ARB)

M.S. Cyber Security & Cyber law

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A market economy allows and encourages competitionbetween industrial and commercial organisations. Ascompetitors are out to win, they may sometimes be

tempted to use malicious means to gain an unfairadvantage such as making a direct attack against acompetitor or misleading the public to the detriment ofa competitor.

Self-regulation, via associations of organisations, canplay an important role by setting up a code of conductor controlling practices, however, it often fails to berespected by participants or followed by judicialauthorities.

In 1900, at the Brussels Diplomatic Conference for theRevision of the Paris Convention, Article 10 bis wasadded to the Convention to try and prevent unfaircompetition.

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What is Unfair competition As a general rule, any act or practice carried out in the

course of industrial or commercial activities contraryto honest practices constitutes an act of unfaircompetition; the decisive criterion being contrary tohonest practices. In Belgium and Luxembourg honest

practices are sometimes referred to as honest tradepractices, in Switzerland and Spain as the principleof good faith and in Italy as professionalcorrectness.

It is not easy to find a clear-cut and worldwidedefinition of what constitutes an act contrary to honestpractices. Standards of honesty and fairness maydiffer from country to country to reflect the economic,sociological and moral concepts of a given society

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Behaviour classified as unfaircompetition

To prevent unfair practice certain actions arelimited by law. Article 10 bis of the ParisConvention classifies unfair business practicesinto three broad categories:

Acts causing confusion.

Acts that are misleading.

Acts damaging goodwill or reputation.

t.

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Acts causing confusion.

An act or practice, in the course of industrial or

commercial activities, that causes, or is likely to cause,confusion with respect to anothers enterprise or itsactivities, in particular, the products or services offeredby such an enterprise constitutes an act of unfair

competition. Even the likelihood of confusion having a detrimental

effect comparable to actual confusion constitutes anact of unfair competition and this widely enlarges thescope of protection. For instance, a trademark, whetherregistered or not, or a products appearance may leadto confusion. Appearance of a product includespackaging, shape or other non-functionalcharacteristic features of the products.

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Acts that are misleading

A misleading act can create a false impression of acompetitors product or services leading to theconsumer, acting on false information, sufferingfinancial damage.

Misleading acts can take the form of a statement givingincorrect indications or allegations about an enterpriseor its products or services.

For example, misleading statements concerning themanufacturing process of a product may relate to aproducts safety and create a false impression.

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Acts damaging goodwill or reputation

Reducing the distinctive character, appearance, value orthe reputation attached to a product could damageanothers goodwill or reputation. For instance, any actthat dilutes the effect of a trademark is considered

unfair as it could destroy the originality and distinctivecharacter of a trademark.

Other acts that could be classified as causing unfair

competition include discrediting anothers enterprise orits activities, industrial or commercial espionage, andacting unfairly with respect to confidential informationsuch as breach of contract or breach of confidence.

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Protection against unfair competition Protection against unfair competition is an ever-evolving

notion that has to adapt to the evolution of trade, and the

development of new principles and obligations forparticipants in the business market. Originally designed toprotect the honestbusinessman, the scope of protectionagainst unfair competition has now been enlarged to

include protection of the customer. Nowadays lawsagainst unfair competition aim to ensure fair competitionin the interests of all concerned.

Under the Paris Convention, Member States are obliged toprovide protection against unfair competition. Thisobligation is reinforced by Article 2 of the Trade-RelatedAspects of Intellectual Property Rights (TRIPS) thatobliges members of the WTO to comply with the Paris

Convention.

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What is Unfair Competition Law Two potential meanings of the term competition law

Set of provisions ensuring that competition continues to

exist in anti-trust law Rules of fair practice in an existing market - unfair

competition law. Both areas are generally distinct.

What is acts of competition:

The Acts done for the purpose of selling goods orproviding services.

Unfair competition law addresses traders

In proceedings concerning unfair competition thedefendant is generally a trader.

It may, however, protect consumers.

Some legal systems give locus-standi to consumerorganisations in unfair competition proceedings.

Other legal systems distinguish between unfair

competition law and consumer protection law.

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What is Unfair Competition Law Areas of unfair competition law

Focus: consumer protection Misleading advertising

Aggressive advertising = Undue influence on consumers

Cold calling, e-mail spamming, ect. (some jurisdictions

only)

Focus: protection of trade values

Damaging goodwill

Exploiting goodwill

Interference with contractual relations

Misappropriation of trade secrets

Product imitation

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The international legal framework Article 10bis Paris Convention:

(1) The countries of the Union are bound to assure to nationals ofsuch countries effective protection against unfair competition.

(2) Any act of competition contrary to honest practices in industrial

or commercial matters constitutes an act of unfair competition.

(3) The following in particular shall be prohibited:

1. all acts of such a nature as to create confusion by any means

whatever with the establishment, the goods, or the industrial or

commercial activities, of a competitor;

2. false allegations in the course of trade of such a nature as to

discredit the establishment, the goods, or the industrial orcommercial activities, of a competitor;

3. indications or allegations the use of which in the course of trade

is liable to mislead the public as to the nature, the manufacturing

process, the characteristics, the suitability for their purpose, or the

quantity, of the goods.

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The international legal framework

Provisions on unfair competition in the TRIPSagreement?

No consensus on the question of a general tort of unfair

competition.

(Art. 22) Protection of geographical indications.

(Art. 39) undisclosed information,

borderline areas between intellectual property and unfair

competition

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The international legal framework

Examples of unfair competition according to WIPOModel Provisions:

Causing confusion

Damaging anothers goodwill or reputation

Misleading the public

Discrediting anothers business

Disclosing or misappropriating trade secrets

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The Unfair competition and IP legal

framework Unfair competition and intellectual property :

Theory:

Unfair competition law is a specific branch of tort law. It prohibits

certain acts without granting rights.

Example: Art. 10bis of the Paris Convention aims at the prevention of

prevent misleading advertising without protecting a competitors orconsumers subjective right.

Practice:

Some areas of unfair competition law do protect rights. There is no

clear dividing line between unfair competition and intellectual

property law. Examples:

protection of trade secrets, protection of goodwill against acts

causing confusion

Open (and debated) question: Should unfair competition law be

allowed to fill gaps in the intellectual property system.

h f d l l

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The Unfair competition and IP legal

framework

IP UC

Geographical indications

Trade secret protection

Unregistered TMs

Misappropriation of

reputation

Product imitation

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WIPO M d l P i i P t ti

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WIPO Model Provisions on ProtectionAgainst Unfair Competition

A wide interpretation can be given to an act or practice contrary

to honest practices. For example, an omission to act can alsobe considered an act of unfair competition.

The WIPO Model Provisions on Protection Against UnfairCompetition defines the failure to correct or supplementinformation concerning a product test published in a consumermagazine, thereby giving a wrong impression of the quality ofthe product offered on the market, or failure to give sufficientinformation concerning the correct operation of a product orconcerning possible side-effects of a product, as an act of

unfair competition.

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WIPO also states that failure to comply with honest

practices should arise in the course of industrial orcommercial activities.

This can be broadly understood as being activities oforganisations providing goods or services

particularly the selling or buying of such products orservices

and activities of professionals such as medical doctors orlegal experts.

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