Trade Marks - Morley's (Fast Foods) Ltd. v Nanthakumar and others
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Intellectual Property Enterprise Court (HH Judge Melissa Clarke) Morley's (Fast Foods) Ltd v Sivakumar and others [2024] EWHC 1369 (IPEC) (10 June 2024)
This is one of the first accessory liability cases since the Supreme Court's judgment in Lifestyle Equities CV and another v Ahmed and Another[2024] UKSC 17 on 15 May 2024 which I discussed in Trade Marks: Lifestyle Equities v Ahmed on 2 June 2024 and in Another Beverly Hills Polo Club Appeal in NIPC Branding on 4 June 2024. The claimant is the franchisor of the Morley's chain of fast food outlets which operate mainly in London. The seventh defendant, Kunalingam Kunatheeswaran, franchises a competing fast food chain called "Metro's". The other defendants were his franchisees The claimant complained that Metro's signage infringed its trade marks and misrepresented a connection with Morley's business. It also complained that Metro's branding breached a settlement agreement that the climate had made with the seventh defendant in 2018 to resolve a similar trade mark and passing-off dispute.
Claimant's Trade Marks
The claimant is the registered proprietor of the following trade marks in the following classes of goods and services:
The Settlement
Mr Kunatheeswaran was the registered proprietor of UK trade mark 3162189, The claimant applied to invalidate that registration in 2018. Those invalidation proceedings were settled by a written agreement between the claimant and Mr Kunatheeswaran dated 16 Dec 2018. By that agreement, Mr Kunatheeswaran agreed to
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The Claim
- surrender two UK trade marks,
- cease to use those UK trade marks or the sign "Mowley's" or "any other sign colourably similar" in the course of trade within 7 days, and
- make reasonable efforts to procure that any third party using those signs in the course of trade would cease such use.
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It also agreed that Mr Kunatheeswaran could apply for a trade mark for that sign.
The Claim
The claimant claimed to have traded under the signs that it later registered as trade marks since 1985 and that it had acquired substantial goodwill in those marks in relation to its fast food outlets. It alleged that those marks constituted a family of marks,
The claimant objected to the use of the following signage ("Sign 1") by all the defendants on their fascia boards:
It alleged that such use infringed UK00003335592 under s.10 (2) (b) of the Trade Marks Act 1994. It contended that Mr Kunatheeswaran was jointly liable with the franchisees as a joint tortfeasor.
It objected to the use by the sixth and seventh defendants of the letters "MMM" ("Sign 2") in their shop windows and on their menu boards on the grounds that it also infringed s.10 (2) (b),
The claimant complained that the use by the fifth, seventh and eighth defendants of the words "TRIPLE M" and "TRIPLE "M"" ("Sign 3") in the case of the fifth and seventh defendants on their menu boards and in the case of the eighth defendant on his Deliveroo menu infringed s.10 (1) or alternatively s.10 (2) (b).
The claimant alleges that the alleged trade mark infringements and acts of passing-off breached the 2018 settlement agreement.
The claimant alleges that the alleged trade mark infringements and acts of passing-off breached the 2018 settlement agreement.
The Defence
The defendants admitted the accrual of goodwill to those marks through use but denied that the claimant was entitled to that goodwill as it was not incorporated until 1996. They also denied that the marks constituted a family of marks. They admitted that they had used the red and white sign in respect of goods and services that were identical or similar to those for which UK0000333559 had been registered but denied that the sign was similar to the mark and that there was any likelihood of confusion. The third, fourth and sixth defendants also said that they had ceased to use the sign, The eighth defendant admitted infringement of the Triple M mark but he said that he had already discontinued such use,
The defendants admitted the accrual of goodwill to those marks through use but denied that the claimant was entitled to that goodwill as it was not incorporated until 1996. They also denied that the marks constituted a family of marks. They admitted that they had used the red and white sign in respect of goods and services that were identical or similar to those for which UK0000333559 had been registered but denied that the sign was similar to the mark and that there was any likelihood of confusion. The third, fourth and sixth defendants also said that they had ceased to use the sign, The eighth defendant admitted infringement of the Triple M mark but he said that he had already discontinued such use,
Mr Kunatheeswaran denied that he had breached the 2918 agreement and liability as a joint tortfeasor.
The Counterclaim
The defendants had originally counterclaimed for the invalidation or revocation of two of the claimant's marks, groundless threats and breach of the 2019 agreement.
The claimant denied liability under the counterclaim.
Case Management Conference
Her Honour Judge Melissa Clarke ordered 26 issues to be tried by her order dated 21 Nov 2023. Some of those issues fell aware in the course of the trial. The issues that remained were as follows:
- Issue 1: Do C's Marks comprise a family of marks?
- Issue 2: Who is the average consumer of the Claimant's goods and services?
- Issue 3 - Have any of C's Marks acquired an enhanced distinctiveness through use?
- Issue 4 - Is Sign 1 similar to the Morley's Red and White Mark?
- Issue 5: If so, is there (because Sign 1 is similar to the Morley's Red and White Mark and is used by the Defendants in relation to goods and services identical with those for which the Morley's Red and White Mark is registered) a likelihood of confusion on the part of the public, which includes the likelihood of association with the Morley's Red and White Mark?
- Issue 6: Have the Defendants or any of them infringed Sign 1?
- Issue 7: Is Sign 2 similar to the Triple M Mark?
- Issue 8: If so, is there (because Sign 2 is similar to the Triple M Mark and is used by the 6th Defendant and KK in relation to goods or services identical with those for which the Triple M Mark is registered) a likelihood of confusion on the part of the public, which includes the likelihood of association with the Triple M Mark?
- Issue 9: Have the 6th Defendant and KK or either of them infringed the Triple M Mark?
- Issue 10: Is Sign 3 identical to the Triple M Mar
- Issue 11: If the answer to issue 10 is yes, is Sign 3 used by the 5th Defendant and KK in relation to goods or services identical with those for which the Triple M Mark is registered?
- Issue 14: Have the 5th Defendant and KK or either of them infringed Sign 3?
- Issue 15: Is KK jointly and severally liable with the Franchisee Defendants or any of them in respect of any liability for trade mark infringement established against any of them?
- Issue 16: If liability for trademark infringement is established against the Defendants or any of them, did any of the liable Defendants threaten and intend to continue any acts of trade mark infringement
- Issue 17: If liability for trademark infringement is established against the Defendants or any of them, did any of the liable Defendants know or have reasonable grounds to know that they were engaging in infringing activity?
- Issue 18: Does Sign 1 fall within the definition of Metro's Signs in the 2018 Agreement?
- Issue 20: If no, is KK's use of Sign 1 in breach of the 2018 Agreement?
- Issue 21: Is KK's use of Sign 2 or Sign 3 in breach of the 2018 Agreement?
- Issues 24 and 25: Are the Claimant's allegations of and claims for trade mark infringement against KK/the Franchise Defendants or any of them in breach of the 2018 Agreement?
- Issue 26: Should any term be implied into the 2018 Agreement and if so, what term?
In their closing submissions, the defendants abandoned the invalidity and revocation heads of their counterclaim.
Trial
The action and counterclaim came on before Judge Melissa Clarke on 18 and 19 March 2024. She heard evidence from Shan Selvendran, the claimant's managing director, and also from Mr Kunatheeswaran. In her judgment, Her Honour referred to Mr Selvendran as "SS" and to Mr Kunatheeswaran as "KK".
Issue 2: Who is the average consumer of the Claimant's goods and services?
"It is firmly established that many issues in trade mark law, including the issues arising on claims for infringement, must be assessed from the perspective of the "average consumer" of the relevant goods and/or services, who is "deemed to be reasonably well informed and reasonably observant and circumspect": see Case C-342/97 Lloyd Schuhfabrik Meyer & Co. GmbH v Klijsen Handel BV [1999] ECR I-3819 at [26] and many subsequent authorities."
Lord Justice Arnold had considered the characteristics of the "average consumer" between paras [16] and [20] of his judgment in Lidl:
"[16] First, the average consumer is both a legal construct and a normative benchmark. They are a legal construct in that consumers who are ill-informed or careless and consumers with specialised knowledge or who are excessively careful are excluded from consideration. They are a normative benchmark in that they provide a standard which enables the courts to strike a balance between the various competing interests involved, including the interests of trade mark owners, their competitors and consumers.
[17] Secondly, the average consumer is neither a single hypothetical person nor some form of mathematical average, nor does assessment from the perspective of the average consumer involve a statistical test. They represent consumers who have a spectrum of attributes such as age, gender, ethnicity and social group. For this reason the European case law frequently refers to "the relevant public" and "average consumers" rather than, or interchangeably with, "the average consumer": see, for example, Case C-252/07 Intel Corporation Inc v CPM United Kingdom Ltd [2008] ECR I-8823 at [34]. It follows that assessment from the perspective of the average consumer does not involve the imposition of a single meaning rule akin to that applied in defamation law (but not malicious falsehood). Thus, when considering the issue of likelihood of confusion, a conclusion of infringement is not precluded by a finding that many consumers of whom the average consumer is representative would not be confused. To the contrary, if, having regard to the perceptions and expectations of the average consumer, the court considers that a significant proportion of the relevant public is likely to be confused, then a finding of infringement may properly be made.
[18] Thirdly, assessment from the perspective of the average consumer is designed to facilitate adjudication of trade mark disputes by providing an objective criterion, by promoting consistency of assessment and by enabling courts and tribunals to determine such issues so far as possible without the need for evidence. I shall return to the last of these considerations below.
[19] Fourthly, the average consumer's level of attention varies according to the category of goods or services in question.
[20] Fifthly, the average consumer rarely has the opportunity to make direct comparisons between trade marks (or between trade marks and signs) and must instead rely upon the imperfect picture of the trade mark they have kept in their mind."
Judge Melissa Clarke applied Lord Justice Arnold's reasoning between paras [74] and [81] of her judgment. Mr Selvendran had testified that the claimant's customers tended to be aged between 13 and 32 with low disposable incomes. They included schoolchildren and students but also young families. Demand tended to spike at meal times but there was also a late-night surge in demand from customers who had been drinking. The defendants had argued that persons on low incomes would be more discriminating than most others.
"[16] First, the average consumer is both a legal construct and a normative benchmark. They are a legal construct in that consumers who are ill-informed or careless and consumers with specialised knowledge or who are excessively careful are excluded from consideration. They are a normative benchmark in that they provide a standard which enables the courts to strike a balance between the various competing interests involved, including the interests of trade mark owners, their competitors and consumers.
[17] Secondly, the average consumer is neither a single hypothetical person nor some form of mathematical average, nor does assessment from the perspective of the average consumer involve a statistical test. They represent consumers who have a spectrum of attributes such as age, gender, ethnicity and social group. For this reason the European case law frequently refers to "the relevant public" and "average consumers" rather than, or interchangeably with, "the average consumer": see, for example, Case C-252/07 Intel Corporation Inc v CPM United Kingdom Ltd [2008] ECR I-8823 at [34]. It follows that assessment from the perspective of the average consumer does not involve the imposition of a single meaning rule akin to that applied in defamation law (but not malicious falsehood). Thus, when considering the issue of likelihood of confusion, a conclusion of infringement is not precluded by a finding that many consumers of whom the average consumer is representative would not be confused. To the contrary, if, having regard to the perceptions and expectations of the average consumer, the court considers that a significant proportion of the relevant public is likely to be confused, then a finding of infringement may properly be made.
[18] Thirdly, assessment from the perspective of the average consumer is designed to facilitate adjudication of trade mark disputes by providing an objective criterion, by promoting consistency of assessment and by enabling courts and tribunals to determine such issues so far as possible without the need for evidence. I shall return to the last of these considerations below.
[19] Fourthly, the average consumer's level of attention varies according to the category of goods or services in question.
[20] Fifthly, the average consumer rarely has the opportunity to make direct comparisons between trade marks (or between trade marks and signs) and must instead rely upon the imperfect picture of the trade mark they have kept in their mind."
Judge Melissa Clarke applied Lord Justice Arnold's reasoning between paras [74] and [81] of her judgment. Mr Selvendran had testified that the claimant's customers tended to be aged between 13 and 32 with low disposable incomes. They included schoolchildren and students but also young families. Demand tended to spike at meal times but there was also a late-night surge in demand from customers who had been drinking. The defendants had argued that persons on low incomes would be more discriminating than most others.
The judge concluded that there were two classes of average consumers to consider in this case:
- "One is the class made up of 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 shopfront, or from an advert on a delivery website, with a medium to low degree of attention" (para [79]}."
- The other is 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 in my judgment will pay a low degree of attention (para [80]}"
Her Honour noted at [81] that it was enough for one of those classes of average consumers to be confused for there to be a likelihood of confusion in relation to that class.
In W3 Ltd v easyGroup Ltd [2018] EWHC 7 (Ch) Mr Justice Arnold explained at [234] that where it is shown that the trade mark proprietor has used a "family" of trade marks with a common feature, and a third party uses a sign which shares that common feature, this can support the existence of a likelihood of confusion.
The claimant had contended that there was a family of marks for the following reasons:
The claimant had contended that there was a family of marks for the following reasons:
"i) There is a common element in the word "Morley's" in respect of the Morley's Mark and the Morley's Red and White Mark;
ii) The Morley's Mark is nearly identically incorporated into the Morley's Red and White Mark, save for a colour difference and subtle differences in the fonts such that it is nearly subsumed in the Morley's Red and White Mark;
iii) The distinctive form of the letter "M" in the word "Morley's" is present in both the Morley's Mark and the Morley's Red and White Mark ;
iv) The triple "M" in the Morley's Red and White Mark is identical in concept to the Triple M Mark and could be said in the same way which would make them orally and conceptually identical;
v) The "M" in the Triple M Mark makes reference to the distinctive "M" in the Morley's Mark and the Morley's Red and White Mark;
vi) C's Marks have been used across all Morley's restaurant franchises in a variety of manners, including but not limited to signage, menu cards and boards, marketing and promotional material;
vii) The same logos, marks and branding have been used, together, in the Morley's fast food business, since 1985. SS's evidence is that they "were, and still are, synonymous with each other."
The judge disagreed. She said at para [89]:
"In my judgment the "MMM..." in the Morley's Red and White Mark, found as it is in the context of a sentence forming the strapline, is likely to be seen, pronounced and conceptually understood by the average consumer as one long "mmm" sound, i.e. as the familiar expression of pleasure in something tasty. "Triple M" is a somewhat oblique reference to the "MMM..." in the strapline of the Morley's Red and White Mark, which I am satisfied many consumers would miss. They might think the "M" relates to Morley's and this is a triple burger, for example, or simply not think about the reason it was chosen. I am also satisfied that few if any consumers would look at the words "Triple M" and read, pronounce or understand it as "mmm". Similarly I am satisfied that few if any consumers would look at the strapline "MMM... It Tastes Better" and read or pronounce that as "Triple M... It Tastes Better". That seems to me to be extremely unlikely (but note that I have a different view when "MMM" is used in a different context, see the discussion in relation to Issue 7 below). I do not consider those visually and aurally different, and conceptually only obliquely similar, elements are a "common element" sufficient to found a family of marks."
That issue was conceded by the defendants. Her Honour commended that concession as sensible adding that she would have found that the marks had acquired enhanced distinctiveness had it been necessary to decide the point.
At para [27], the judge said that the manner in which the Court should assess the likelihood of confusion for the purposes of s.10 (2) of the Trade Marks Act 1994 was well established. They were set out by Lord Justice Kitchin in Comic Enterprises Ltd v Twentieth Century Fox Film Corporation [2016] EWCA Civ 41 between paras [27] and [34] of the judgment in that case. His lordship said at para [28] that a proprietor of a registered trade mark alleging infringement under art 5 (1) (b) of the Trade Marks Directive from which s.10 (2) was derived must satisfy six conditions. The fourth of those conditions is that the defendant's sign must be identical with or similar to the trade mark.
When determining similarity the Court of Appeal endorsed the following guidelines in Iconix Luxembourg Holdings SARL v Dream Pairs Europe Inc & Another [2024] EWCA Civ 29 (26 Jan 2024) at para [10]:
"(a) the likelihood of confusion must be appreciated globally, taking account of all relevant factors;
(b) the matter must be judged through the eyes of the average consumer of the goods or services in question, who is deemed to be reasonably well informed and reasonably circumspect and observant, but who rarely has the chance to make direct comparisons between marks and must instead rely upon the imperfect picture of them he has kept in his mind, and whose attention varies according to the category of goods or services in question;
(c) the average consumer normally perceives a mark as a whole and does not proceed to analyse its various details;
(d) the visual, aural and conceptual similarities of the marks must normally be assessed by reference to the overall impressions created by the marks bearing in mind their distinctive and dominant components, but it is only when all other components of a complex mark are negligible that it is permissible to make the comparison solely on the basis of the dominant elements;
(e) nevertheless, the overall impression conveyed to the public by a composite trade mark may, in certain circumstances, be dominated by one or more of its components;
(f) and beyond the usual case, where the overall impression created by a mark depends heavily on the dominant features of the mark, it is quite possible that in a particular case an element corresponding to an earlier trade mark may retain an independent distinctive role in a composite mark, without necessarily constituting a dominant element of that mark;
(g) a lesser degree of similarity between the goods or services may be offset by a greater degree of similarity between the marks, and vice versa;
(h) there is a greater likelihood of confusion where the earlier mark has a highly distinctive character, either per se or because of the use that has been made of it;
(i) mere association, in the strict sense that the later mark brings the earlier mark to mind, is not sufficient;
(j) the reputation of a mark does not give grounds for presuming a likelihood of confusion simply because of a likelihood of association in the strict sense; and
(k) if the association between the marks creates a risk that the public might believe that the respective goods or services come from the same or economically-linked undertakings, there is a likelihood of confusion."
The claimant relied on the following factors:
"[104] The Claimant submits that the similarities between Sign 1 and the Morley's Red and White Mark are likely to lead to confusion in the mind of the average consumer viewing the signs at a glance from street level, particularly because of the use by the Defendants of the same tones of red and white in Sign 1 as the Claimant uses in the Morley's Red and White Mark, which are the colours in which it is registered, and the way in which Sign 1 has been laid out, which means that from a distance, the average consumer, particularly that in the class of late night revellers who pay a low degree of attention and may be impaired by alcohol, may perceive Sign 1 as the Morley's Red and White Mark. The Claimant relies on SS's evidence that the similarity between Sign 1 and the Morley's Red and White Mark is enhanced when Sign 1 is seen on a lit up shop fascia at night, as it shows bright red with the layout of the white script closely resembling Morley's script and layout producing an effect very similar to the Morley's Red and White Mark, such that he told the court in oral evidence that on occasion, driving home through the streets of South London late at night, he has mistaken a Metro's for one of his own stores.
[105] The Claimant also relies on instances of actual confusion set out in my review of the evidence - SS's conversation with the barista who thought the Metro's across the road was a Morley's, the TikTok and YouTube videos, and other social media comments.
[106] The Claimant also relies on the context in which the Defendants have used Sign 1 as increasing the likelihood of confusion, including:
i) KK authorising new Metro's shops and franchises in close proximity to Morley's stores, even following Morley's to Birmingham;
ii) Copying Morley's in the get-up of store interiors, down to brick walls, and identical posters on the walls."
"[104] The Claimant submits that the similarities between Sign 1 and the Morley's Red and White Mark are likely to lead to confusion in the mind of the average consumer viewing the signs at a glance from street level, particularly because of the use by the Defendants of the same tones of red and white in Sign 1 as the Claimant uses in the Morley's Red and White Mark, which are the colours in which it is registered, and the way in which Sign 1 has been laid out, which means that from a distance, the average consumer, particularly that in the class of late night revellers who pay a low degree of attention and may be impaired by alcohol, may perceive Sign 1 as the Morley's Red and White Mark. The Claimant relies on SS's evidence that the similarity between Sign 1 and the Morley's Red and White Mark is enhanced when Sign 1 is seen on a lit up shop fascia at night, as it shows bright red with the layout of the white script closely resembling Morley's script and layout producing an effect very similar to the Morley's Red and White Mark, such that he told the court in oral evidence that on occasion, driving home through the streets of South London late at night, he has mistaken a Metro's for one of his own stores.
[105] The Claimant also relies on instances of actual confusion set out in my review of the evidence - SS's conversation with the barista who thought the Metro's across the road was a Morley's, the TikTok and YouTube videos, and other social media comments.
[106] The Claimant also relies on the context in which the Defendants have used Sign 1 as increasing the likelihood of confusion, including:
i) KK authorising new Metro's shops and franchises in close proximity to Morley's stores, even following Morley's to Birmingham;
ii) Copying Morley's in the get-up of store interiors, down to brick walls, and identical posters on the walls."
The defendants replied as follows:
"i) the average consumer would pay attention to the dominant element of Sign 1, being the brand "Metro's", and understand that to be a completely different brand to "Morley's";
ii) they rely on the evidence of the TikTok videomaker, who believed he was going to a Morley's but realised it was a Metro's before he entered the store, and so was not confused by it;
iii) the shade of red used in the Sign 1 is not the same as that in the Morley's Red and White Sign; and
iv) the Court should accept KK's evidence that he paid no attention to the location of Morley's stores when authorising the opening of new franchised or owned stores."
"i) the average consumer would pay attention to the dominant element of Sign 1, being the brand "Metro's", and understand that to be a completely different brand to "Morley's";
ii) they rely on the evidence of the TikTok videomaker, who believed he was going to a Morley's but realised it was a Metro's before he entered the store, and so was not confused by it;
iii) the shade of red used in the Sign 1 is not the same as that in the Morley's Red and White Sign; and
iv) the Court should accept KK's evidence that he paid no attention to the location of Morley's stores when authorising the opening of new franchised or owned stores."
The judge decided in favour of the claimant at [111]:
"The combination of the following factors:
i) that a class of the average consumer is made up of late-night revellers a subset of whom are intoxicated and who pay a low degree of attention to their choice of fast-food shop;
ii) that I have found that Sign 1 is similar to the Morley's Red and White Mark to a medium degree;
iii) that the Morley's Red and White Mark has a higher level of distinctiveness giving rise to an increased risk of confusion;
iv) that part of the context of the use of Sign 1 is that it is used in and on Metro's shops with a very similar get-up to that of Morley's stores, some of which (the large wall posters of a woman eating a burger, the brick walls, the red and white interior tiles) is visible from the street outside the stores through the shop windows;
v) that I accept SS's evidence that the similarity between Sign 1 and the Morley's Red and White Mark is more marked when Sign 1 is viewed on a lit-up fascia at night, such that it has confused even him into mistaking a Metro's shop for one of his own;
means that I am satisfied that there is a likelihood of confusion by a substantial part of that class of average consumer. That is sufficient."
ii) that I have found that Sign 1 is similar to the Morley's Red and White Mark to a medium degree;
iii) that the Morley's Red and White Mark has a higher level of distinctiveness giving rise to an increased risk of confusion;
iv) that part of the context of the use of Sign 1 is that it is used in and on Metro's shops with a very similar get-up to that of Morley's stores, some of which (the large wall posters of a woman eating a burger, the brick walls, the red and white interior tiles) is visible from the street outside the stores through the shop windows;
v) that I accept SS's evidence that the similarity between Sign 1 and the Morley's Red and White Mark is more marked when Sign 1 is viewed on a lit-up fascia at night, such that it has confused even him into mistaking a Metro's shop for one of his own;
means that I am satisfied that there is a likelihood of confusion by a substantial part of that class of average consumer. That is sufficient."
This issue boiled down to whether the 2018 settlement agreement entitled the franchisees to use Sign 1. The defendants submitted that it was understood that Mr Kunatheeswaran would franchisee his business, that it was an implied term that his franchisees could use the "Metro's Fried Chicken sign that had been annexed to that agreement and that Sign 1 was substantially the same as the annexed sign.
Judge Melissa Clarke referred to para [51] of Lady Justice Carr's judgment in Yoo Design Services Limited v Iliv Realty Pte Limited [2021] EWCA Civ 560 which set out the principles by which terms can be implied in a contract:
"[51] i) A term will not be implied unless, on an objective assessment of the terms of the contract, it is necessary to give business efficacy to the contract and/or on the basis of the obviousness test;
ii) The business efficacy and the obviousness tests are alternative tests. However, it will be a rare (or unusual) case where one, but not the other, is satisfied;
iii) The business efficacy test will only be satisfied if, without the term, the contract would lack commercial or practical coherence. Its application involves a value judgment;
iv) The obviousness test will only be met when the implied term is so obvious that it goes without saying. It needs to be obvious not only that a term is to be implied, but precisely what that term (which must be capable of clear expression) is. It is vital to formulate the question to be posed by the officious bystander with the utmost care;
v) A term will not be implied if it is inconsistent with an express term of the contract;
vi) The implication of a term is not critically dependent on proof of an actual intention of the parties. If one is approaching the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time;
vii) The question is to be assessed at the time that the contract was made: it is wrong to approach the question with the benefit of hindsight in the light of the particular issue that has in fact arisen. Nor is it enough to show that, had the parties foreseen the eventuality which in fact occurred, they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred;
viii) The equity of a suggested implied term is an essential but not sufficient pre-condition for inclusion. A term should not be implied into a detailed commercial contract merely because it appears fair or merely because the court considers the parties would have agreed it if it had been suggested to them. The test is one of necessity, not reasonableness. That is a stringent test."
Judge Melissa Clarke referred to para [51] of Lady Justice Carr's judgment in Yoo Design Services Limited v Iliv Realty Pte Limited [2021] EWCA Civ 560 which set out the principles by which terms can be implied in a contract:
"[51] i) A term will not be implied unless, on an objective assessment of the terms of the contract, it is necessary to give business efficacy to the contract and/or on the basis of the obviousness test;
ii) The business efficacy and the obviousness tests are alternative tests. However, it will be a rare (or unusual) case where one, but not the other, is satisfied;
iii) The business efficacy test will only be satisfied if, without the term, the contract would lack commercial or practical coherence. Its application involves a value judgment;
iv) The obviousness test will only be met when the implied term is so obvious that it goes without saying. It needs to be obvious not only that a term is to be implied, but precisely what that term (which must be capable of clear expression) is. It is vital to formulate the question to be posed by the officious bystander with the utmost care;
v) A term will not be implied if it is inconsistent with an express term of the contract;
vi) The implication of a term is not critically dependent on proof of an actual intention of the parties. If one is approaching the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time;
vii) The question is to be assessed at the time that the contract was made: it is wrong to approach the question with the benefit of hindsight in the light of the particular issue that has in fact arisen. Nor is it enough to show that, had the parties foreseen the eventuality which in fact occurred, they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred;
viii) The equity of a suggested implied term is an essential but not sufficient pre-condition for inclusion. A term should not be implied into a detailed commercial contract merely because it appears fair or merely because the court considers the parties would have agreed it if it had been suggested to them. The test is one of necessity, not reasonableness. That is a stringent test."
The judge decided that there was no implied term that the franchisees could use the annexed sign in the 2018 agreement for the following reasons:
"i) It is not disputed that the Franchisee Defendants are not parties to the 2018 Agreement;ii) The 2018 Agreement provides at clause 11 that its terms are not enforceable by any third party, which includes the Franchisee Defendants, under the Contracts (Rights of Third Parties) Act 1989;
iii) The 2018 Agreement does provide in clause 5.6 that KK will use reasonable efforts within 14 days of the effective date to procure any third party using "Mowley's" or similar signs in the course of trade to cease such use and use the Settlement Sign instead, but the evidence shows that none of the Franchisee Defendants were using "Mowley's" or similar signs in the course of trade at the date of the Settlement Agreement, only becoming franchisees of KK at later dates, and so that does not provide them with consent;
iv) SS's evidence, which I accept, is that KK told him only one other person was using "Mowley's" or "Metro's" and that was a man called Ameen, who is not one of the Defendants and is no longer a franchisee of KK, that at the time he signed the 2018 Agreement SS did so in the belief and intention that it would allow only KK and Ameen to use the Settlement Sign, and no one else, and that he would not have signed the 2018 Agreement if he believed it allowed KK to franchise the Metro's brand;
v) Conversely, I reject as incorrect KK's evidence that the parties entered into the 2018 Agreement in the mutual understanding that he intended to and would be permitted to franchise the Metro's brand under the Settlement Sign or any reasonable modification thereto;
vi) In any event, the 2018 Agreement has an entire agreement clause at clause 9 ("9.1 This agreement constitutes the entire understanding and agreement between the parties in relation to the subject matter of this agreement. 9.2 Each party acknowledges that it has not entered into this agreement in reliance wholly or partly on any representation or warranty made by or on behalf of the other party (whether orally or in writing) other than as expressly set out in this agreement."). If I am wrong and there was such a mutual understanding, it should have been dealt with expressly in the agreement.
vii) In addition, the Franchisee Defendants did not fall within the definition of Related Parties in the 2018 Agreement ("a party's parent, subsidiaries, assigns, transferees, representatives, principals, agents, officers or directors excluding for the avoidance of doubt any third party using in the course of trade the Signs") either when it was executed or at the time this claim was issued, and indeed appear to be specifically excluded from the definition by the reference to a third party using the Signs in the course of trade;
viii) In addition, clause 3.2 of the 2018 Agreement provides that "this settlement and release does not waive, release, settle or in any other way compromise any claim [the Claimant] may have against any other third party (or release them thereof) in respect of third party's dealings in the course of trade under and by reference to the Signs". The implied term the Defendants seek would be inconsistent with this express term of the agreement and in those circumstances will not be implied (see Yoo Design Services Limited at [51](v));
ix) For all those reasons I am satisfied there is no ambiguity in the 2018 Agreement which requires to be resolved by implication of a term such as the Defendants seek. The 2018 Agreement makes clear on its face that it is intended to provide full and final settlement of the dispute relating to use of the Signs in the UK by: KK; his Related Parties, as they are closely defined not to include licensees and to specifically exclude third parties: and only such third parties which fall within the provision of clause 5.6 which the Franchisee Defendants, and any future third party franchisee, do not. It has business efficacy without requiring any such term to be implied and the implication of such a term would be inconsistent with express terms of the 2018 Agreement and undermine its purpose, in my judgment. I decline to imply such a term."
It followed that Mr Kunatheeswaran's franchisees were not entitled to use Sign 1 under the 2018 agreement.
The sixth and eighth defendants used the initials "MMM" on the menu boards of their premises in Erith and Lewisham to identify a burger as shown in the following photograph.
Although the letters looked nothing like the TRIPLR M or TRIPLE-M the judge thought it likely that customers would order the burger by the name "triple M burger". On a global assessment, she found Sign 2 to be `similar to UK0000253310 to a medium-high degree.
Issue 8: If so, is there (because Sign 2 is similar to the Triple M Mark and is used by the 6th Defendant and KK in relation to goods or services identical with those for which the Triple M Mark is registered) a likelihood of confusion on the #part of the public, which includes the likelihood of association with the Triple M Mark?
The judge found that there was a likelihood of confusion in respect of Sign 1. Because of the similarity of Metro's get up to the Morley stores many late-night revellers may suppose they are in a Morley outlet. Even some of the daytime consumers could be led to believe that they were in one of the claimants's restaurants by the use of Sign 2 to refer to a burger.
As the only defence was a denial of confusion which was undermined by the judge's finding on issue 8, it followed that the sixth and eighth defendants had infringed the Triple M Mark,
There was no dispute that the answer was "yes". The only difference was between upper and lower case which was unlikely to be noticed by the average consumer. Mr Justice Lewinson held that there was no difference between "Web-Sphere" and "WEBSPHERE" in International Business Machines Corp v Web-Sphere Ltd and Others [2004] EWHC 529 (Ch).
The answer was "yes". The Tripe M Mark was registered for "Meat,... fast food products namely beef burgers,... vegetarian burgers" in class 29 and the "Provision of food and drink; services for the preparation of food and drink; restaurant services for the provision of fast food; fast food takeaway services" in class 43 and the fifth and eight defendants used Sign 3 for burgers.
It followed from the finding in the previous issue that the fifth and eighth defendants had infringed UK00002533108 by their use of Sign 3 under s.10 (1) of the Trade Marks Act 1994.
Judge Melissa Clarke records at para [137] that her draft judgment referred to the Supreme Court's judgment in Fish & Fish Ltd v Sea Shepherd UK [2015] AC 1229 but not its very recent decision in Lifestyle Equities v Ahmed [2024] UKSC 17. The defendants referred her to that case and invited her to reconsider this issue in the light of para [137] of Lord Leggatt's judgment:
"Although procuring a tort and assisting another to commit a tort pursuant to a common design are distinct bases for imposing accessory liability, they must operate consistently with each other and such that the law of accessory liability in tort is coherent. Considerations of principle, authority and analogy with principles of accessory liability in other areas of private law all support the conclusion that knowledge of the essential features of the tort is necessary to justify imposing joint liability on someone who has not actually committed the tort. This is so even where, as in the case of infringement of intellectual property rights, the tort does not itself require such knowledge."
"Although procuring a tort and assisting another to commit a tort pursuant to a common design are distinct bases for imposing accessory liability, they must operate consistently with each other and such that the law of accessory liability in tort is coherent. Considerations of principle, authority and analogy with principles of accessory liability in other areas of private law all support the conclusion that knowledge of the essential features of the tort is necessary to justify imposing joint liability on someone who has not actually committed the tort. This is so even where, as in the case of infringement of intellectual property rights, the tort does not itself require such knowledge."
The claimant submitted that by granting licences to the franchisees, the eighth defendant had authorized, caused, procured, enabled and assisted them in a common design to infringe its trade marks. The eighth defendant admitted that the franchise agreements required the franchisees to use Sign 1 but denied that the franchisees were liable for trade mark infringement.
The judge responded to the defendants' submission that she had already found the defendant liable for their use of Sign 1 which infringed the claimant's mark in circumstances where:
"i) KK was not only aware of the Morley's Red and White Mark but had been injuncted from using his previous "New Mawleys" brand as an infringement of that mark;
ii) the Claimant had brought proceedings for infringement of the same mark against his new "Metro's" brand, where those proceedings were settled by entry into the 2018 Agreement which permitted him to use the Settlement Sign; and
iii) I have found, as was fairly put to him in cross-examination but he denied, that he deliberately developed the get-up of his Metro's stores and Sign 1 to make them as similar to the Morley's stores and Morley's Red and White Mark as he thought he could get away with."
The judge responded to the defendants' submission that she had already found the defendant liable for their use of Sign 1 which infringed the claimant's mark in circumstances where:
"i) KK was not only aware of the Morley's Red and White Mark but had been injuncted from using his previous "New Mawleys" brand as an infringement of that mark;
ii) the Claimant had brought proceedings for infringement of the same mark against his new "Metro's" brand, where those proceedings were settled by entry into the 2018 Agreement which permitted him to use the Settlement Sign; and
iii) I have found, as was fairly put to him in cross-examination but he denied, that he deliberately developed the get-up of his Metro's stores and Sign 1 to make them as similar to the Morley's stores and Morley's Red and White Mark as he thought he could get away with."
Although the third, fourth, sixth and possibly other defendants had ceased trading as Metro franchisees Mr Kunatheeswaran and some of the other franchisees were continuing to use Signs 1, 2 and 3. Her Honour was minded to issue injunctions to restrain such use.
The judge accepted the claimant's submission that the franchisees should have carried out basic due diligence to determine whether Mr Kunatheeswaran was entitled to grant them a licence to use Signs 1, 2 and 3.
She also accepted its submission that Mr Kunatheeswaran "knew that Sign 1 was different to the Settlement Sign, and he knew that the Settlement Sign was reached in order to compromise infringement proceedings against him." She recalled that she had made specific findings that in developing Sign 1 he intended to make it as similar to Morley's Red and White Mark as he thought he could get away with. In her judgment, he had reasonable grounds to know that the use of Sign 1 which was materially modified from the Settlement Sign, would be infringing, particularly given his history of following a strategy of imitating the Claimant's branding and locations as closely as possible, and the Claimant's history of taking infringement actions against him.
Lastly, she accepted the claimant's submission that Mr Kunatheeswaran knew that the franchisees were not named in the 2018 Agreement, were not within the definition of "Related Parties", and that the 2018 Agreement contained a clause excluding third-party rights.
Issue 18: Does Sign 1 fall within the definition of Metro's Signs in the 2018 Agreement?
Clause 5.8 of the 2018 settlement agreement entitled Mr o use in the course of trade "The Metro's Signs to include for the avoidance of doubt the application of The Metro's Signs to any packaging and any application for a registered trade mark in respect of the Metro's Signs." Clause 1 of the agreement defined "The Metro Signs" as "'Metro's Fried Chicken' the logo a copy of which is included at Annex A and any reasonable modifications thereto". The issue turned on whether Sign 1 was a "of reasonable modification" to the annexed sign,
(i) the natural and ordinary meaning of the clause,
(ii) any other relevant provisions of the [agreement];
(iii) the overall purpose of the clause and the [agreement];
(iv) the facts and circumstances known or assumed by the parties at the time that the document was executed; and
(v) commercial common sense, but
(vi) disregarding subjective evidence of any party's intentions.
The claimant submitted that the reference to "reasonable modifications" meant modifications that did not increase the similarity of the Settlement Sign to the Morley's Red and White Mark, but only which took it further away." The defendants submitted that the removal of the blue border and change of strapline were minor changes and well within the contemplation of the parties during the negotiations,
The judge agreed with the claimant, She explained at [154]:
"I note that the natural and ordinary meaning of the words "reasonable modifications" in the context of a licence being granted to KK to use the Settlement Sign "subject to reasonable modifications thereto", is that KK as licensee may make modifications to the Settlement Sign but they must be reasonable when viewed through the eyes of the Claimant, acting reasonably, as the licensor. In my judgment, and taking into account that natural and ordinary meaning: in the context of this settlement agreement in which the parties sat down and produced a Settlement Sign which neither may have liked but both were prepared to compromise and live with in order to settle their trade mark dispute and get on with their businesses; where it is reasonable to assume that their focus was on the Settlement Sign and the wording of the definition of that sign; the reasonable person with all the background knowledge, including the knowledge of the Claimant's previous history of trade mark disputes involving KK, would have understood the parties to be using "reasonable modifications" to mean modifications which did not increase the similarity of the Settlement Sign to the Morley's Red and White Mark. It is also in accordance with commercial common sense, in my judgment. It would not make commercial common sense for KK as the licensee against whom allegations of trade mark infringement had been made, which the 2018 Agreement was intended to settle, to be permitted to make modifications to the Settlement Sign which undermined that settlement by bringing it closer in similarity to the mark alleged to have been infringed."
"I note that the natural and ordinary meaning of the words "reasonable modifications" in the context of a licence being granted to KK to use the Settlement Sign "subject to reasonable modifications thereto", is that KK as licensee may make modifications to the Settlement Sign but they must be reasonable when viewed through the eyes of the Claimant, acting reasonably, as the licensor. In my judgment, and taking into account that natural and ordinary meaning: in the context of this settlement agreement in which the parties sat down and produced a Settlement Sign which neither may have liked but both were prepared to compromise and live with in order to settle their trade mark dispute and get on with their businesses; where it is reasonable to assume that their focus was on the Settlement Sign and the wording of the definition of that sign; the reasonable person with all the background knowledge, including the knowledge of the Claimant's previous history of trade mark disputes involving KK, would have understood the parties to be using "reasonable modifications" to mean modifications which did not increase the similarity of the Settlement Sign to the Morley's Red and White Mark. It is also in accordance with commercial common sense, in my judgment. It would not make commercial common sense for KK as the licensee against whom allegations of trade mark infringement had been made, which the 2018 Agreement was intended to settle, to be permitted to make modifications to the Settlement Sign which undermined that settlement by bringing it closer in similarity to the mark alleged to have been infringed."
Given that construction, she was "satisfied that each of: (i) the addition of the strapline; (ii) the removal of one edge of the border; (iii) the dulling of the colour of the border from electric blue to dark blue and (iv) the reduced spacing between the letters of "Metro's" are not reasonable modifications, as each of them increases the similarity of the Settlement Sign to the Morley's Red and White Mark." Accordingly, she found that Sign 1 did not fall within the definition of Metro's Signs in the 2018 Agreement.
Because of her determination of Issue 18, Issue 19 fell away.
Because of her determination of Issue 18, Issue 19 fell away.
The judge held that it was,
Issues 22 and 23 related to the counterclaim for invalidity and revocation of the claimant's marks which the defendants withdrew in closing.
In view of the judge's previous findings on liability for trade mark infringement, the claimant was not in breach of the agreement,
That issue had already been decided against the defendants.
Summary
The judge summarized her findings as follows at para [162]:@
ii) Sign 1 does not fall within the definition of Metro's Signs in the 2018 Agreement;
iii) The Franchisee Defendants and KK have infringed the Morley's Red and White Mark by use of Sign 1 pursuant to section 10 (2) (b) TMA;
iv) Both the 6th Defendant and KK have infringed the Triple M Mark by use of Sign 2 pursuant to section 10 (2) (b) TMA;
v) Both the 5th Defendant and KK have infringed the Triple M Mark by use of Sign 3 pursuant to section 10 (1) TMA;
vi) KK is jointly and severally liable with the Franchisee Defendants for their infringement of the Morley's Red and White Mark by use of Sign 1;
vii) KK's use of Signs 1, 2 and 3 are in breach of the 2018 Agreement;
viii) The Claimant is entitled to injunctive relief against those Defendants who are still using the Signs; and
ix) The Defendants' counterclaim against the Claimant for breach of contract is dismissed."
Comment
Except for the question of whether the claimant's trade marks constituted a family of marks, the judge was with the claimant on every issue. She focused on one of the issues in the Lifestyle Equities appeal but does not a[appear to have considered the others. Anyone wishing to discuss this case can call me on 020 7404 5252 during office hours or send me a message through my contact page,
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