Thwartin’ Morton’s
A private club proved its wider influence, reports Nicola Hill. T-223/15, Morton’s of Chicago, Inc v EUIPO and Mortons the Restaurant Ltd, CJEU, 15th May 2017.
T-223/15, Morton’s of Chicago, Inc v EUIPO and Mortons the Restaurant Ltd, CJEU, 15th May 2017
Key points
- Goodwill is legal property that is capable of being assigned. Anyone wishing to assert prior rights under the tort of passing off should verify the intended applicant for invalidity owns the goodwill prior to proceeding
- Under Article 8(4), a sign used in the course of trade having more than local significance is considered from both a geographic and economic perspective. Even a small, private London club may be able to demonstrate more than local significance with sufficient evidence
This decision of the General Court (GC) upheld a decision of EUIPO’s Board of Appeal (BoA) in which an EU figurative mark (the EUTM) containing the word MORTON’S was found to be invalid under Article 53(1)(c) of Council Regulation (EC) No 207/2009, read in conjunction with Article 8(4), in light of prior use in the UK by the Intervener of a series of unregistered marks containing the word MORTONS/MORTON’S.
In January 2012, Mortons the Restaurant Ltd (MTRL), operator of a UK private members’ club, filed an application for a declaration of invalidity of the EUTM (registered, inter alia, in class 43, including restaurant and bar services), relying on its prior use of unregistered marks including MORTON’s and MORTONS RESTAURANT in the provision of food and entertainment. The Cancellation Division rejected the application. However, on 15th February 2015, the BoA annulled the Cancellation Division’s decision, holding that MTRL had successfully invoked its prior rights, relying on the law of passing off.
The Applicant appealed the decision to the GC, relying on two grounds: infringement of Article 8(4), that the contested decision was flawed; and Article 52(1)(b), bad faith (not considered by the GC). The GC examined five complaints from the Applicant. All arguments were ultimately unsuccessful, but two points of interest bear further consideration.
Goodwill owned
To establish passing off, MTRL needed to demonstrate that it owned the goodwill in the earlier marks. MTRL is, however, only the operator of Morton’s club, not the owner. Goodwill is inseparable from the business to which it adds value (IRC v Muller [1901] AC 217), and is recognised as legal property capable of being assigned. Did the goodwill therefore reside with MTRL or the owner? A 2002 agreement demonstrated that MTRL had been granted the exclusive right to operate the club and use the trading names associated with it. It was, therefore, concluded from the evidence that goodwill was assigned with the management rights. This case thus demonstrates that it is important to ensure that goodwill is properly dealt with in any transfer of rights.
Local presence
The GC also rejected the argument pursuant to Article 8(4) that MTRL’s prior rights had mere local significance, although club membership was small and localised in London. In applying Article 8(4), the GC was required to consider both the geographic and economic significance of the marks. Economic significance is demonstrated by the duration of use of the earlier unregistered mark and the degree of use , both of which must be non-negligible. On the evidence (including accounts and membership records), MTRL’s degree of use was held to be non-negligible, despite modest membership and turnover due to its private-member status. From a geographical perspective, a series of national and international press articles, magazines and restaurant guides were submitted, including an article in British Airways’ High Life magazine. Based on this evidence, the GC found Morton’s Club to have a reputation extending beyond merely local significance.
Nicola Hill is an Associate at Browne Jacobson LLP
Nicola specialises in trade mark, copyright and design law.