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Passing off: Goodwill: Premises: Fast food restaurants: Franchise agreement

Appeal by Dixy Fried Chicken (Euro) Ltd (E) from a decision of the Registrar of Trade Marks in which he had declared invalid Trade Mark Registration No. 2111700, a mark consisting of a line drawing of a cartoon-style smiling chicken’s head and the words DIXY FRIED CHICKEN. The mark was registered in Class 29 in respect of chicken and chicken products. Dixy Friend Chicken (Stratford) Ltd (S) had sought a declaration of invalidity of the mark under various sections of the Trade Marks Act 1994. It had been successful under s.5(4)(a) of the Act on the basis that on the balance or probabilities S had enough goodwill in the mark to succeed in a passing off action against E. E claimed that it and its predecessor in title (G) had carried on a franchise fast food business since the mid-1980s under and by reference to the mark. Each franchisee had been licensed to use the mark but on terms that ensured that the reputation and goodwill accrued to the franchisor. S contended that it had a reputation in the market before any relevant reputation acquired by E, by virtue of it and its predecessors’ interest in two restaurants S claimed to have acquired the goodwill of a fast food restaurant in Station Road, operation by a Mr Raja (R) which had traded under the mark since 1986. S alleged that R had withdrawn an opposition to the registration of the mark because he was being blackmailed by E. S also contended that it had purchased a restaurant in West Ham Lane in 1989 and had traded there under the mark, initially in partnership with R, then through a previous incorporation of the company and finally through S. E submitted that R did not have a transferable goodwill in the mark and that although R had a right to operate a fast food restaurant under and by reference to the mark it had all been done pursuant to a franchise agreement in 1986 between R and G and according to the terms of the agreement goodwill in the business had vested in G. S alleged that the franchise agreement of 1986 was a forgery.

HELD: (1) Before one could invalidate a registration under s.5(4)(a) and thereby deprive a trader of his exclusive rights one had to produce relevant credible evidence of sufficient weight. (2) There was insufficient material to challenge the validity of the franchise agreement of 1986. (3) The goodwill generated by the trading from Station Road did not therefore belong to R thus the agreement by which he had purported to sell the Station Road premises and the goodwill in the business to S was incapable of transferring any goodwill relating to the trade mark. There was no evidence that goodwill in the West Ham Lane restaurant had been transferred to S. (3) The evidence from S got nowhere near making out a prima facie case of the likelihood of passing off as required by s.5(4)(a) of the Act.

“Lawtel”: 29.12.03