Feathers Ruffled – The Trade Mark Battle Between Chicken Shops

In a recent Court of Appeal case, two chicken shop brands went head-to-head over the use of similar marks and the scope of a settlement agreement. The decision provides valuable insights into how courts assess the similarity of trade marks, the characteristics of the average consumer, and the interpretation of licensing provisions.

From “Mowley’s” to “Metro’s”

Morley’s, originally founded in 1985, operates over one hundred chicken shop outlets across the UK. Present on many a London high street, its shop front signage and registered trade mark is:

In addition to this mark, Morley’s have also registered the marks “MMM” (triple M) and “TRIPLE M”.

KK entered the chicken shop market around 2015, initially under the name “Mowley’s”, which unsurprisingly led to a complaint from Morley’s. KK and Morley’s settled this dispute in 2018. Under the settlement, KK was to drop the name “Mowley’s”, move away from Morley’s branding in general, and instead adopt the “Metro’s Signs”, with the logo being:

“and any reasonable modifications thereto” (the “Agreed Sign”).

KK re-opened its business using the below sign, the "Contested Sign", which prompted a new complaint by Morley's:

This time, as well as the similarities between the marks and the branding used in the respective establishments, questions arose as to whether the 2018 settlement permitted KK to sub-license the Metro’s Signs to others.

The first instance decision was favourable to Morley’s, and Metro’s appealed on various grounds.

Key Discussion Points in the Appeal

The Average Customer

At first instance, the judge considered there to be two types of average consumer in this case:

•  Families, children and young people visiting chicken shops during the day, often on lower incomes, all paying a medium-to-low degree of attention to signage.
•  Late-night and early morning revellers, often tired, hungry, and  sometimes intoxicated, who were likely to pay very little attention to the shopfront.

On appeal, Metro’s argued that splitting consumers into two groups was an error, and that the subset of the second group bring described as intoxicated (implying not well-informed or considered in their decision making), was also incorrect.

While the appeal court accepted these arguments (with the judge observing that instead, there was a single class of consumers, namely those who visit chicken shops) the previous dissection of the group was not regarded as a "material" error. The essential factors influencing consumer choice, such as convenience of location and the appearance of the shopfront, had still been properly assessed, and the levels of attention paid by consumers were found to overlap.

In short, the mentioned errors did not significantly impact the trial judge’s overall assessment of the likelihood of confusion. From the perspective of the average consumer, paying a medium to low degree of attention, the two marks appeared similar.

“The discussion around the average consumer and the level of attention paid is a lively one and worth reading. It perhaps reinforces the principle that the average consumer and their attributes differ from case to case. Further, even if part of an initial assessment may have been flawed, a reassessment can still result in the same outcome."

- Cynthia Houng, Legal Director

Similarity Between the Marks

Metro’s had argued that the Contested Sign was a reasonable modification of the Agreed Sign. The trial judge did not agree, and this view was supported on appeal. It was observed (and the following was not disputed by Metro’s) that the differences between the two signs were:

• The addition of a strapline
• Removal of one edge of the border
• Darkening of the colour of the border from electric blue to dark blue
• Reduced spacing between the letters of Metro’s.

The appeal court agreed that these changes brought the Metro’s Signs closer to the Morley’s logo, and so they were not “reasonable modifications”.

In comparing the Contested Sign with the Morley’s logo, the following characteristics were considered to have resulted in the marks’ similarity:

• Distinctive form of the letter “M” at the beginning of each mark
• Similar structure and font of the two brand names
• Two straplines placed in similar positions in the two marks.

The straplines themselves also appeared to be similar as they shared certain features.

The use of white text on a red background was also considered. This colour combination was recognised as common in the fast-food sector and therefore not distinctive. While the Contested Mark used different shades of red and white compared to the Morley’s logo, the similarities in the font and size of the brand names, as well as the overall layout of other elements created an “arrangement of white on red” that was visually similar to the Morley’s logo.

Coupled with imperfect recollection, these differences in shade would be unlikely to register with the average consumer . Collectively, all of these factors rendered the Contested Mark and the Morley’s logo confusingly similar to a medium degree.

On appeal, Metro argued that this assessment failed to recognise that words generally speak louder than figurative elements, and that too much importance had been placed on the significance of the two straplines.

The appeal court dismissed these arguments, observing that due consideration had been afforded to the two brand names Morley’s and Metro’s, and the importance attributed to the straplines had not been “excessive” (as claimed Metro’s). The overall conclusion on similarity of the marks was therefore upheld.

“Despite clear visual and phonetic differences between the verbal elements of two marks, as a whole the marks can be assessed as similar. Here, the surrounding features of the mark collectively negated verbal and visual differences. These are just some of the interesting points arising from the similarity assessment in a case that may serve as illustration of what brand owners can or cannot “get away with”".

- Cynthia Houng, Legal Director

Settlement Agreement

Another key issue on appeal concerned the construction of the 2018 settlement agreement and, in particular, whether it permitted KK to sub-license use of the Agreed Sign.

Metro’s argued that sub-licensing was implicitly allowed. According to KK, before the parties signed the agreement, he had informed Morley’s that one other person would be using the Agreed Sign. On this basis, Metro’s contended that there was a mutual understanding that KK would be free to authorise franchisees to use the branding.

The Court rejected this argument. It found that the agreement had to be read as a whole, and that:

• The contract expressly stated that it was not enforceable by any third parties.
• KK was permitted to use the Agreed Sign himself in the course of trade, but he was not entitled to grant sub-licences to others (save for the one individual already using the sign at the time of the agreement).
• The term “use in the course of trade” did not extend to third-party use authorised by KK.

The trial judge comment, which was upheld by the Court of Appeal, states:

“There is no principle of trade mark law which dictates that a licence must include a power to sub-license. Whether a licence includes the power to sub-license depends on whether the parties have agreed that it should. In the case of the 2018 Settlement Agreement no such agreement is contained in express terms. Nor is it either necessary, or so obvious that it goes without saying, that such a term should be implied”.

“This comment succinctly serves as a reminder that in drafting all types of agreements, the parties’ obligations towards each other should be written in clear terms. If a contract needs to be interpreted in court, the parties intentions are afforded consideration, but as made clear in the Morley’s decision, an agreement “must be objectively interpreted without reference to the parties’ subjective intentions”.

- Cynthia Houng, Legal Director

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