Franchise Case Law Update: Morley's v Metro's – trade mark dispute establishes joint tortfeasorship and demonstrates need for careful drafting of settlement agreements

In Morley's (Fast Foods) Limited v Thurairasa Nanthakumar (and 7 others) [2024] EWHC 1369 (IPEC), Morley's claimed that its trade mark had been infringed in breach of a settlement with the seventh defendant.

The ruling in favour of Morley's is not surprising, for reasons explained below, but the case is noteworthy because this is the first case to apply the Supreme Court’s recent decision about joint tortfeasorship for IP claims, and it highlights some important lessons for drafting settlement agreements.

Background

Morley's is a long-established and popular fried chicken franchise. In 2018, Morley's and the seventh defendant, who operated a franchise business called "Mowley's", settled a trade mark infringement dispute, by agreeing that the seventh defendant would re-brand as "Metro's" and use a logo which was different from Morley's logo.

In the settlement agreement, the seventh defendant was entitled to make "reasonable modifications". They decided to use a different sign to the one agreed, and granted franchises to the other defendants.

Morley's alleged that the modified sign was not a "reasonable modification" and increased the similarity between the marks.

Judgment

The Court agreed with Morley's, which was not a surprising judgment.

What is noteworthy about this case is that this is the first case to apply the Supreme Court’s recent decision about joint tortfeasorship for IP claims¹. In this case the judge was satisfied that the seventh defendant had reasonable grounds for knowing and should have appreciated that the modified sign was infringing.

From a drafting perspective, whilst the settlement agreement provided no protection for the seventh defendant on these facts, in any event it was not drafted to extend to the Metro's franchisees, so they would not have benefited from protection had the settlement agreement provided a shield against the claim for infringement.

If you would like more information about this case, please contact Gordon Drakes