The Court of Appeal has dismissed Tesco’s appeal against the findings of trademark infringement and passing off.
Background
Since 1987, Lidl has used a logo consisting of the word “Lidl” within a yellow circle edged in red on a square background. Lidl also owns a number of UK trademark registrations which include the following:
Lidl is the registered proprietor of several other trademark registrations which were referenced in these proceedings, namely UK0002570518 for the Mark with Text. UK registrations: UK2016658A, UK2016658B, UK2016658C and UK2016658D for the wordless mark (“the 1995 Registration”). Lidl is also the proprietor of four additional trademarks for the Wordless Mark namely, UK00902936185 (“the 2002 Registration”), UK00904746343 (“the 2005 Registration”), UK00906560571 (“the 2007 Registration”) and UK00003599128 (“the 2021 Application”) – collectively the ‘Trade Marks’. It was admitted by Lidl in the course of the proceedings that they had never used the Wordless Mark in the form in which it is registered but they asserted that use of the Mark with the Text constitutes use of the Wordless Mark.
In September 2020, Tesco started using a sign comprised of a yellow circle in a square with a blue background as shown below as part of a promotion for its Clubcard prices (“CCP”), whereby Tesco Clubcard holders are charged a lower price than shoppers who are not Clubcard holders. Tesco’s promotions have been used extensively in stores, on websites, print media, social media, and out of home locations such as bus stops and television advertisements.
Lidl claimed:
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Tesco has infringed the Trade Marks, under section 10(3) of the Trade Marks Act 1994 which extends protection for trademarks with a reputation. Lidl argued that Tesco’s use of the sign is liable to be detrimental to the distinctive character of its Trade Marks, and that use is liable to alter the economic behaviour of consumers.
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Tesco committed passing off, insofar as Tesco had misrepresented that products sold by them share the qualities of those of Lidl; or were sold at the same or equivalent prices as similar goods sold in the course of Lidl’s business; or that Tesco had otherwise ‘price matched’ the prices of its products with those of Lidl.
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Tesco Infringed Lidl’s copyright in the Mark with Text as an artistic work.
As well as denying these claims, Tesco counterclaimed for revocation of the Wordless Mark on the grounds of non-use, and also for invalidation of the Wordless Mark on the grounds of bad faith.
High Court Decision – 19 April 2023
The judge held that Lidl succeeded in their claims of trademark infringement. This was due to the fact there was evidence of both origin confusion and price comparison confusion, as well as recognition by Tesco of the potential for confusion. The evidence included messages from consumers, a survey commissioned by Tesco prior to launching the Clubcard campaign, and warnings or concerns raised internally by Tesco employees. It was held that the CCP signs were plainly intended to convey value and thereby influence the economic behaviour of shoppers. Accordingly, it was also held that due to the resemblance of the signs, Tesco had taken an unfair advantage of the reputation which resides in the Lidl marks for the low-price discounted value.
In respect to the passing off claim, the judge found that Lidl had goodwill which included its reputation as a discounted retailer that offers goods and low prices, and there was also evidence to suggest that a substantial number of consumers were deceived, and that Lidl had suffered damage by reason of Tesco’s misrepresentation.
Regarding the infringement of copyright, the judge found that CCP signs had been copied, for the reasons that the blue background with the yellow circle forms a substantial part of the Trade Mark.
In respect to Tesco’s counter claim, the judge found in favour of Lidl on the issue of non-use revocation and dismissed Tesco’s counterclaim for revocation. This was based on the judge’s finding that the Wordless Mark was perceived as a trademark as a result of the widespread use which Lidl had made of the mark with Text.
With respect to invalidation of the registration on the grounds of bad faith, Tesco argued that the Wordless Mark was a defensive trademark, and there was no intention for Lidl to use it in the course of trade. Furthermore, Tesco argued that Lidl had registered the Wordless Mark in 2002, 2005, 2007 and 2021 purely to obtain a wider scope of protection. Tesco also argued evergreening as an independent basis for attacking the validity of the later registration. The judge held that Lidl failed to demonstrate that the earliest filing of the Wordless Mark was not filed for any purpose other than to secure a wide legal monopoly that it was not entitled to and had no genuine intention to use it. This was sufficient to amount to bad faith and rendered the 1995 registration invalid. In respect to the point on evergreening, the judge upheld the allegation and found that the 2002, 2005 and 2007 registrations were filed to avoid sanctions for non-use (which is an abuse of the trademark system) and were therefore invalid. In respect to the 2021 Application, the Wordless Mark had enjoyed its own reputation and Lidl had presented reasons explaining why this specific application was filed.
Court of Appeal Decision – 19 March 2024
The basis of the appeal ultimately rested on one overarching issue – the price matching allegation – whereby the average consumer seeing the CCP sign would be led to believe that the price(s) being advertised had been priced matched by Tesco with the equivalent Lidl price, so that it was the same, or a lower price.
On reviewing the case and evidence, the court dismissed Tesco’s appeal against trademark infringement based on detriment to the distinctive character and against the finding of passing off.
In respect to Lidl’s appeal against the invalidity of the Wordless Mark, the appeal against the judge’s finding that the 1995, 2002, 2005, and 2007 registrations were applied for in bad faith were dismissed.
In respect of Tesco’s appeal against the finding of copyright infringement, the Court agreed with Tesco that it had not infringed the copyright in the stage 3 work that is, the shade of blue and the distance between the circle and the square. This is because the blue shade was part of Tesco’s corporate livery, and because Tesco has also previously used yellow circles in their signage.
Commentary
Whilst the Court of Appeal upheld the first instance judge’s decision, it appears particularly in relation to the appeal against infringement and passing off that their Lordships felt bound to accept the first instance assessment of the evidence. It does however seem that there was some reluctance in reaching this decision, as it was stated by Lewison LJ that “I have found the trademark infringement and passing off claim very difficult, at the outer boundaries of trademark protection and passing off”. In respect to the initial judge’s finding of fact he stated that “it is not open to us to simply substitute our own evaluation. The question is whether the judge’s finding was rationally insupportable”. In this case their Lordships did not consider the initial judge’s decision was insupportable, as such with reluctance Tesco’s appeal against infringement and passing off was dismissed.
The evidence confirmed that Tesco chose to use the CCP sign with a view to them having brand significance and influencing their consumers. Tesco had recognised that the price conscious customers were switching or “trading” out to Lidl and other discount retailers because they were offering good value at low prices and was anxious to win these customers back. However, by Tesco wishing to differentiate itself from Lidl and promote the value of its own brand, it has ultimately found itself liable for trademark infringement and passing off. Tesco will now have to remove the infringing signs which could cost the supermarket over £7m to do so.