Morley's (Fast Foods) Ltd v Nanthakumar & Ors

Factual and Procedural Background

This dispute concerns trade mark infringement between two fast food restaurant chains specialising in fried chicken and other dishes, both founded by members of the Sri Lankan community in South London and operating under a franchise model. The Claimant's business, originally founded in 1985 as Morley's, has grown to over 100 outlets and owns several registered trade marks. The Defendants, led by the Seventh Defendant ("KK"), operate a smaller chain called Metro's, also with franchisees among the Defendants.

HHJ Melissa Clarke found on 7 June 2024 that the Defendants infringed one or more of the Claimant's trade marks and that KK breached a 2018 settlement agreement ("the 2018 Agreement"). The Defendants appealed the consequential order made on 17 July 2024, with permission granted by the appellate court.

Legal Issues Presented

1. Whether the Defendants infringed the Claimant's registered trade marks by use of certain signs ("Sign 1", "Sign 2", and "Sign 3").
2. The proper identification and attributes of the average consumer relevant to the likelihood of confusion assessment.
3. The visual, aural, and conceptual similarity between the Claimant's trade marks and the Defendants' signs.
4. The effect of the context of use of the signs on the likelihood of confusion.
5. The interpretation and effect of the 2018 Agreement, particularly whether it permits KK or the Franchisee Defendants to use or sub-license the Metro's Signs.
6. Whether KK breached the 2018 Agreement.
7. The validity and scope of the judge's factual findings and legal conclusions on the above issues.

Arguments of the Parties

Appellants' Arguments (Defendants)

• The judge incorrectly assessed the identity and attributes of the average consumer, improperly dividing them into two classes including intoxicated consumers who are not reasonably circumspect.
• The judge erred in the visual and conceptual comparison between Sign 1 and the Claimant's Morley's Red and White Mark.
• The judge wrongly considered the context of use of Sign 1 as increasing likelihood of confusion.
• The judge misinterpreted the 2018 Agreement, arguing it should permit KK and the Franchisee Defendants to use or sub-license the Metro's Signs.
• The judge wrongly found KK to have breached the 2018 Agreement.
• The judge erred in assessing the similarity between Sign 2 and the Triple M Mark and thus the likelihood of confusion.
• They also sought to contest whether the Sixth Defendant and KK used Sign 2 or rather "MMM burger".

Respondent's Arguments (Claimant)

• Use of Sign 3 infringed the Triple M Mark under section 10(1) or alternatively section 10(2)(b) of the Trade Marks Act 1994.
• Use of Sign 1 infringed the Morley's Red and White Mark under section 10(2)(b).
• Use of Sign 2 infringed the Triple M Mark under section 10(2)(b).
• The 2018 Agreement does not permit KK to use modifications of the Settlement Sign that increase similarity to the Claimant's trade marks.
• The 2018 Agreement does not permit KK to sub-license the Metro's Signs to third parties who were not using the Signs at the date of the Agreement.
• There is a likelihood of confusion caused by the Defendants' use of the contested signs, including in the relevant context of use.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Specsavers International Healthcare Ltd v Asda Stores Ltd [2012] EWCA Civ 24	Assessment of likelihood of confusion considering the sign in context and from the perspective of the average consumer.	The court applied the principle that the sign must be considered in its actual use context, not stripped of it.
Volpi v Volpi [2022] EWCA Civ 464	Standard for appellate intervention on findings of fact: only if findings are rationally insupportable.	The court held it could only intervene if the judge's factual findings were irrational.
Magmatic Ltd v PMS International Group plc [2016] UKSC 12	Appellate intervention on multi-factorial evaluations only if there is an error in law or principle.	The court reviewed the judge's multi-factorial evaluations for legal or principled error.
Actavis Group PTC EHF v ICOS Corp [2019] UKSC 15	Similar appellate standard for multi-factorial evaluations.	Supported the principle that appellate courts defer to trial judge's evaluations absent error in law.
Lifestyle Equities CV v Amazon UK Services Ltd [2024] UKSC 8	Clarified appellate review standards on factual and multi-factorial findings.	Applied the standard that appellate courts only intervene for legal or principled error.
Lidl Great Britain Limited v Tesco Stores Limited [2024] EWCA Civ 262	Definition and characteristics of the average consumer in trade mark cases.	The court adopted this summary in defining the average consumer for likelihood of confusion.
London Taxi Corporation Ltd v Frazer-Nash Research Ltd [2017] EWCA Civ 1729	Rejection of averaging different consumer classes in likelihood of confusion assessment.	The court agreed that the average consumer concept requires considering relevant classes separately.
Lifestyle Equities CV v Royal County of Berkshire Polo Club Ltd [2024] EWCA Civ 814	Role and limits of "context of use" in assessing likelihood of confusion.	The court applied this reasoning to reject the argument that context of use could create confusion where it otherwise would not exist.

Court's Reasoning and Analysis

The court carefully analysed the likelihood of confusion arising from the Defendants' use of signs similar to the Claimant's registered trade marks. It applied established principles requiring a global assessment from the perspective of the average consumer, considering visual, aural, and conceptual similarities as well as the context of use.

The court found that the judge's identification of two classes of average consumers was flawed, particularly the inclusion of intoxicated consumers, but these errors were not material to the outcome. The relevant level of consumer attention was medium-to-low, and the likelihood of confusion assessment remained valid.

On visual similarity, the court upheld the judge's finding that Sign 1 and the Morley's Red and White Mark were visually quite similar, focusing on the dominant elements such as the stylised letter "M", font, layout, and colour scheme, despite differences in brand names and straplines.

Conceptually, the court accepted that although the brand names differ, the similar straplines created an overall conceptual similarity.

Regarding the context of use, the court rejected the Defendants' contention that the judge erred by treating context as creating confusion where none existed. The judge did not find the context was determinative but rather a supporting factor alongside other elements such as distinctiveness and similarity.

In interpreting the 2018 Agreement, the court concluded that KK was permitted to use the Metro's Signs but not reasonable modifications that increased similarity to the Claimant's marks. Further, KK was not authorised to sub-license the Metro's Signs to franchisees who were not using the signs at the date of the Agreement. The court rejected arguments that implied or interpretative principles extended such rights to KK.

The court also found no error in the judge's findings that KK breached the 2018 Agreement by using signs beyond the permitted scope.

Regarding Sign 2, the court accepted the judge's view that "MMM" would be aurally and conceptually perceived as "Triple M" by a substantial subset of consumers, supporting a medium-high degree of similarity and likelihood of confusion.

Overall, the court found the judge's factual and legal conclusions rational, well-reasoned, and consistent with applicable legal principles and precedents.

Holding and Implications

The court DISMISSED THE APPEAL, affirming the lower court's findings that the Defendants infringed the Claimant's registered trade marks through use of Signs 1, 2, and 3, and that KK breached the 2018 Agreement.

The direct consequence is that the infringing use by the Defendants, including franchisees, is confirmed unlawful, and KK is liable for breaches of the settlement agreement. The ruling does not establish new precedent but reinforces established principles on trade mark infringement, the assessment of likelihood of confusion, and contractual interpretation in the context of trade mark settlements.