UK Court of Appeal Backs Morley’s in Takeaway Trade Mark Dispute

Morley’s fast food recently enjoyed another tasty win in the takeaway trade mark wars, this time before the UK Court of Appeal. Read on to learn what the Court said about the impact of intoxicated consumers on the trade mark analysis, and the lessons from the case for food and beverage brand owners.

The UK Court of Appeal has dismissed an appeal brought by franchisees of a South London fast food chain named Metro’s and its director. The appeal was against a finding by the UK High Court in June 2024 that Metro’s had infringed the trade marks of a rival fast food chain named Morley’s. We reported on the High Court decision in our previous article. Although the High Court ruling was ultimately emphatically upheld, the Court of Appeal judgment is interesting in that it considered at length:

• Who the average consumer of fast food goods is, noting an element may be intoxicated, and
• The standard required to establish a likelihood of confusion in trade mark infringement cases

The case will therefore provide food for thought for brand owners in the food and beverage sector.

Background

Morley’s owns the following UK registered trade marks:

• The below trade mark in classes 29, 30 and 32 and for food preparation and restaurant/takeaway related services in class 43

• TRIPLE M, TRIPLE-M in class 29 and for food preparation and restaurant/takeaway related services in class 43, and in classes 29, 30 and 32 and for food preparation and restaurant/takeaway related services in class 43.

It complained about the use of the following signs by the defendant’s in connection with a rival fast food chain:

Along with:

• MMM
• TRIPLE M / TRIPLE ‘M’

The UK High Court, in June 2024, held that the defendants had infringed Morley’s trade marks. In addition, the Court found that an individual named Kunalingam Kunatheeswaran (KK) who had founded Metro’s business, had acted in breach of a settlement agreement previously entered into by the parties (the 2018 Agreement). The defendants appealed against the High Court decision on eight grounds. This included that the judge wrongly assessed the identity and attributes of the average consumer and that the judge wrongly held that KK had acted in breach of the 2018 Agreement.

The average consumer

The High Court had previously found that there are two classes of average consumer for the goods at issue:

1. Children, young people, students and families, who buy at lunch, at teatime and into the evening and have low disposable income. They will choose a chicken fast food shop by convenience of location and shop front, or from an advert on a delivery website, with a medium to low degree of attention.
2. Late-night and early-morning revellers who are likely tired, hungry and a significant subset of which will be intoxicated. They will also choose by convenience of location, shopfront and what is open late and will pay a low degree of attention.

On appeal, the defendants argued that the High Court judge made three errors of principle with the above classification:

• The judge focused on Morley’s actual consumers as opposed to the relevant class of notional consumers. The Court of Appeal rejected this argument.

• The judge wrongly engaged in the process of “salami slicing” the relevant population. The Court of Appeal agreed with this argument. This was because the same consumer might attend one of the defendant’s premises at different times on different days. In addition, the Court noted that a consumer who attends late at night is not necessarily more tired or hungry than one who attends earlier in the day. The Court of Appeal held that there is a single class of consumers who “patronise such establishments.”

• The judge wrongly focused upon consumers who were intoxicated, and therefore by definition are not reasonably well informed and cautious. The Court of Appeal agreed with this argument and noted that “Likelihood of confusion is not to be assessed by reference to those who are intoxicated.”

Was this sufficient to overturn the decision?

Despite acknowledging that the High Court judge “fell into error in these respects” the Court of Appeal did not find that these errors were material. The purpose of the exercise, according to the Court of Appeal, was to assess how the average consumer would select the relevant goods and services and the level of attention which would be paid by the average consumer. The two classes identified by the High Court judge would both choose by convenience of location and shopfront and their levels of attention would overlap: medium-to-low in the case of the first and low in the case of the second.

In addition, although the High Court was wrong to take intoxicated consumers into account, this does not appear to have affected her assessment of the level of attention paid by her second class. Intoxicated consumers only formed “a significant subset” of that class, while all of the class would have a low degree of attention. On the whole, therefore, the Court of Appeal was satisfied with the judge’s conclusion. It saw no reason to think she would have reached a different view as to likelihood of confusion, even if she had assessed matters from the perspective of consumers who paid a medium-to-low degree of attention rather than a low degree of attention. The High Court ultimately reached the correct conclusion on the likelihood of confusion assessment.

Other grounds of appeal

All other grounds of appeal were rejected by the Court of Appeal. For example, the defendants had sought to argue that the 2018 Agreement permitted KK to sub-license use of the Metro trade marks to franchisees, and the latter, therefore, could not be liable for trade mark infringement of Morley’s trade marks. The Court of Appeal rejected this argument. The Court clarified that “there is no principle of trade mark law which dictates that a license must include a power to sub-license.” In the case of the 2018 Agreement, no agreement was contained in the express terms. Nor was it necessary or obvious that such a term should be implied.

The Court of Appeal therefore held that the High Court was correct to hold that the 2018 Agreement did not empower KK to sub-license use of the Metro trade marks to franchisees.

Comment

In upholding the High Court decision, the Court of Appeal emphasised that it could only intervene where the lower Court’s findings were rationally insupportable or where the High Court judge was incorrect in law or principle. Although the judge had made errors in this case, that high bar had not been reached here.

The two key takeaways from the case for brand owners in the food and beverage sector are:

• When considering the average consumer for the purposes of assessing the likelihood of confusion, intoxicated consumers should be discounted from the analysis. Instead, the average consumer should be notional, fictitious and sober, as opposed to actual consumers of the goods and services in question.
• Courts will be reluctant to imply terms into contracts in favour of sub-licensees or franchisees. Brand owners should therefore consider their future plans in terms of brand expansion and sub-licensing before entering into written contracts and settlement agreements with third parties.

People also ask

Can the Court of Appeal decision be appealed further?

Yes, the decision could be appealed to the UK Supreme Court.

Is this decision binding on Irish Courts?

No, but the decision does have persuasive authority before an Irish Court.

Could Morley’s have relied on any other IP rights in its sign?

Yes, potentially Morley’s could have relied on copyright and unregistered rights, but this was not necessary where they held a registered trade mark for the above sign.

For more information and expert advice, contact a member of our Intellectual Property team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.