On June 10, Morley's Ltd. — South London's iconic fried chicken franchise — emerged victorious in a trademark infringement action in the Intellectual Property Enterprise Court of the High Court of Justice of England and Wales1 against defendants that had copied its distinctive mark.
Judge Melissa Clarke made this finding in light of (1) the reputation of the Morley's marks, (2) the similarity between the Morley's marks and the infringing marks, and (3) the class of the average consumer, which included intoxicated late-night partygoers who pay a low degree of attention to their choice of fast-food shop. As to the latter point, Morley's (Fast Foods) Ltd. v. Jeyatharini Sivakumar emphasizes the importance of defining the "average consumer."
Although the infringement analysis was straightforward, the defense relied on the terms of a settlement agreement dated Dec. 16, 2018, that resolved a dispute brought by Morley's to invalidate U.K. trademark 3162189, registered by Kunalingam Kunatheeswaran, a fast-food franchiser and defendant in the present case.
This raised the question as to whether the settlement agreement conferred any rights on the other defendants who were franchisees. In any event, the key question was whether the sign used by the defendants constituted "reasonable modifications" to the sign, as permitted by the settlement agreement.
Judge Clarke answered both questions in the negative. The latter aspect of the decision provides some noteworthy learning points. In particular, franchisors should ensure any settlement agreement they enter into includes express terms to allow franchisees to benefit.
A further key learning is that a party may be found to have knowingly authorized and procured infringements where it had reasonable grounds for knowing and appreciating there has been trademark infringement by grant of licenses of an infringing mark.
Background
Morley's marks in dispute included (1) a figurative trademark incorporating the text "Morley's," (2) a figurative mark incorporating the text "Morley's MMM ... It Tastes Better" in a red and white coloring, and (3) a series word mark comprising the text "Triple M." These were all used in the provision of restaurant and takeaway-related services.
Kunatheeswaran is the owner and franchiser of a network of "Metro's" fast-food restaurant franchises. The remaining defendants were franchisees of the Metro's brand, and offered food and takeaway services under the Metro's brand.
The parties had been in dispute in relation to Kunatheeswaran's use of signs, including "Mowley's" and "Metro's," a number of years ago. The dispute was concluded through a settlement agreement in 2018, which provided that Kunatheeswaran would cease to use "Mowley's" or "any other sign colourably similar."
The settlement agreement did, however, permit Kunatheeswaran to use, in the course of trade, a specific logo with the words "Metro's Fried Chicken" in a blue outline with a descriptive tagline, "Peri Peri & Fried Chicken — Burgers — BBQ Ribs — Wings," found underneath the word "Metro's," and any reasonable modifications thereto.
Notably, "reasonable modifications" was not defined in the settlement agreement. Further, there was no express term in the settlement agreement that allowed franchisees to benefit from the settlement agreement.
Morley's brought a trademark infringement claim in 2022 as the defendants used signs that were not agreed to in the settlement agreement. The infringing signs incorporated the text "Metro's ... It's The Real Taste," "MMM" and "Triple M."
The Trademarks in Dispute
To support the argument that a likelihood of confusion existed, Morley's submitted that the three marks constituted a family of marks. This was because they had been used together since 1985 for the goods and services for which they are now registered, and that they shared distinctive characteristics.
Given that the common element "Morley's" was not used in the signs complained of, this assessment was based on the common element of the letter "M" in all of Morley's marks.
Ultimately, Judge Clarke rejected this claim, finding that most consumers would miss any intended association between the "MMM..." and "Triple M." She found these elements to be "visually and aurally different, and conceptually only obliquely similar," and therefore did not share a similar "common element" with the level of sufficiency needed to be a family of marks.
While Morley's did not succeed on this point, the decision reiterated that, where it is shown that the trademark proprietor has used a family of trademarks with a common feature, and a third party uses a sign that shares that common feature, this can support the existence of a likelihood of confusion.
Another interesting aspect of this decision is its confirmation that, where there is more than one class of average consumer, it is enough for one of those classes of average consumer to be confused for there to be a finding of likelihood of confusion. In this case, there were two classes of average consumer:
- Children, young people, students and families, who buy from fast-food chicken shops at lunch, at teatime and into the evening, and have low disposable income, with a medium to low degree of attention; and
- The late-night and early-morning revelers, described as likely tired and hungry, and a significant subset of which will be intoxicated, with a low degree of attention.
Given (1) the distinctiveness of the Morley's marks, (2) the similarity between the Morley's red and white mark and the infringing marks, and (3) low degree of attention paid by the latter class of consumer, the judge found a likelihood of confusion by a substantial part of that group.
Additionally, evidence that showed a TikTok video-maker noticing Metro's branding was not of particular significance. On the facts of this case, "chicken shop" influencers were viewed as specialist critics who would pay a high degree of attention, and, therefore, they were not average consumers.
Practitioners should note that, while social media evidence can be persuasive, consideration will be given to their field of influence when assessing whether or not they can be deemed the average consumer.
Reasonable Modifications
As "reasonable modifications" was not defined, Judge Clarke considered the natural and ordinary meaning of the words. It was found that, in the context of a license being granted and the background between the parties, the reasonable person would have understood the parties to be using "reasonable modifications" to mean modifications that did not increase the similarity of the sign agreed upon in settlement to the Morley's red and white mark.
Given that the changes made to the marks in question reduced the distinction between the registered trademarks and the settlements sign, the signs in dispute did not constitute reasonable modifications.
This analysis by the judge is in accordance with commercial common sense. For instance, it would not make commercial common sense for a licensee against whom allegations of trademark infringement had been made, where there is an agreement in place intended to settle the dispute, to be permitted to modify the settlement sign in a way to undermine settlement by bringing it closer in similarity to the mark alleged to have been infringed.
Although this was a positive finding for Morley's, practitioners should always ensure to provide definitions of any terms that leave room for interpretation. In this instance, "reasonable modifications" should have been defined.
Those drafting a settlement agreement should also ensure to include a dispute resolution clause that would allow for faster and lower value determination. Again, the settlement agreement in this dispute was lacking in this regard.
Franchiser and Franchisees
This was the first judgment to apply the U.K. Supreme Court's May 15 decision in Lifestyle Equities CV v. Ahmed,2 which clarified that to be held jointly liable with a tortfeasor for a tort, defendants must have knowledge of the essential facts that make the acts wrongful. In considering this decision, Kunatheeswaran was found jointly and severally liable with the franchisee defendants for their infringement.
Practitioners should note that where a potential infringer has reasonable grounds for knowing and appreciating there has been trademark infringement by grant of licenses of an infringing mark, this can constitute knowingly authorizing and procuring the infringements.
In this instance, the use complained of, in a common design with the franchisee defendants, was more than de minimis, and so Kunatheeswaran was jointly liable with them for those infringements.
The settlement agreement did not confer any rights upon the franchisee defendants. The judge found that the settlement agreement had business efficacy without requiring any such term to be implied, and the implication of such a term benefiting the franchisees would have been inconsistent with express terms of the settlement agreement and undermine its purpose.
This highlighted another important practice point for anyone drafting a settlement agreement. It is in a franchiser's interest to protect franchisees from future claims, as such any settlement agreement should be drafted to allow franchisees to benefit.
The judgment emphasizes the importance of a well-drafted settlement agreement to avoid any confusion or further disputes between the parties. For any disputes that are escalated, fortunately, as confirmed by this decision, the Intellectual Property Enterprise Court again proves to be a valuable forum for resolving copycat disputes among small and medium sizes businesses.
For clients requiring a streamlined and cost-effective forum to hear lower value and lower complexity intellectual property claims, practitioners should remember to give consideration to the Intellectual Property Enterprise Court when devising their litigation strategy.
Footnotes
1 Morley's (Fast Foods) Ltd v Sivakumar & Ors [2024] EWHC 1369 (IPEC)(10 June 2024).
2 Lifestyle Equities v Ahmed [2024] UKSC 17(15 May 2024).
Originally published by Law360
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