MORTONS: A local club, for local people

Mortons the Restaurant Ltd (‘Mortons UK’) and Morton’s of Chicago (‘Morton’s US’) recently involved the General Court (‘GC’) in their dispute over the EUTM, MORTON’S. Registered in June 2010 by Morton’s US, in 2012 the EUTM became the subject of a cancellation action brought by Mortons UK, based upon their claim to a number of earlier unregistered rights in the UK, including MORTON’S, MORTON’S CLUB, MORTON’S RESTAURANT. Mortons UK were initially unsuccessful before the Cancellation Division, but the Board of Appeal (‘BoA’) later found in their favour, overturning the decision and declaring the EUTM invalid. Morton’s US in turn appealed to the GC who, spoiler alert, upheld the BoA’s decision.

The key issues considered in this decision were whether:

1) Mortons UK was the owner of the goodwill in the unregistered marks; 2) a relatively exclusive private members club could, and should, form the relevant public for the purposes of assessing misrepresentation; 3) the scale of use of the earlier right was of more than mere local significance.

On the first point, Mortons UK relied upon various agreements dating back 25 years which related to their management of Morton’s restaurant. Morton’s US asserted that there were several parties to these agreements, hence Mortons UK specifically could not demonstrate exclusive ownership of goodwill in the mark. The GC did not accept this reasoning, reminding Morton’s US that a sign may acquire goodwill even though it used by several traders in the course of business. This extended form of passing off has been recognised by the UK Courts previously in cases such as Tilda Riceland Private v OHIM (BASmALI). In any case, the GC also interpreted the agreements to have assigned the goodwill to Mortons UK by virtue of the fact that Mortons UK has acquired the exclusive right to operate the club and use the trade names associated with it.

On the second point, Morton’s US argued that the low number of members who were affiliated with the club rendered a misrepresentation impossible, since those customers had undoubtedly been members for a long time and were likely to be particularly attentive to the club’s activities, hence were unlikely to be misled. Once more the GC declined to accept this reasoning, opining instead that the relevant consumer for a claim of passing off should be the actual consumers of the mark, not a hypothetical group or the general public at large ( LAST MINUTE TOUR). Due to the high similarity of both the relevant marks and the goods and services in question, the GC found that a likelihood of misrepresentation was unavoidable.

The final point considered the cumulative requirements of Article 8(4), specifically that the earlier right relied upon must be of more than mere local significance. Morton’s US claimed that, as an exclusive members club based only in London with so small a number of members (a little over 500), the club could not be said to have had more than mere local significance if compared with the size of the UK restaurant and entertainment market as a whole.

However, the GC ruled that, contrary to submissions by Morton’s US, it was not appropriate to compare the figures against the size of the food/drinks market in the UK or EU at large. Rather, the economic significance and impact of the earlier right in question must be assessed by reference to the particular circumstances of the relevant consumers and not the general public. So in this case, the fact that their membership numbers were restricted by virtue of selective membership criteria was a highly relevant factor to be taken into consideration. Furthermore, the GC found that the evidence submitted by Mortons UK of national press articles mentioning the club and reverences to the club in restaurant guides indicated a clear awareness on the part of the public of more than mere local significance.

A further criticism raised by Morton’s US was the lack of evidence of use/goodwill of the earlier marks by Mortons UK between 2002 and 2004. However, the GC sympathised with Mortons UK on this point, rationalising that the club had been closed for renovation during this period. It noted that the overall economic impact of the earlier mark was not insignificant taking account of the length of prior use of the marks (dating back to the 1970s), the selective nature of the membership and its closure for refurbishment.

Some may consider this decision to be a fairly generous interpretation of the cumulative requirements in order for the GC to have established the existence of the requisite goodwill for a passing off action. Nonetheless, it serves as a useful reminder that the test is highly flexible, and that the GC will take into account the specific manner in which the claimant is using a sign, rather than holding them to account in comparison to the entirety of the industry in which they are active.

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