Background
Lidl sued Tesco for trade mark and copyright infringement and passing off in relation to Tesco’s use of a series of yellow circles centred on a blue square to identify goods, discounted for members of Tesco’s Clubcard scheme.
(the “Tesco Signs”)
Tesco counterclaimed that some of the marks relied on by Lidl should be declared invalid on the basis that they had no distinctive character, were registered in bad faith, or alternatively that they should be revoked for non-use.
The Judgment
Lidl claimed that Tesco’s use of this graphic identifier infringed its rights under section 10(3) of the UK Trade Marks Act (“TMA”) contending that Tesco had intentionally adopted the identifier to support its efforts to compete with discount supermarkets, deliberately riding on the coat tails of Lidl’s reputation as a value discount supermarket.
Lidl relied on its registered trade mark rights in two versions of its logo shown below referred to in the judgment as the “Mark with Text” and the “Wordless Mark”.
(Mark with Text) (Wordless Mark)
To succeed in a claim under section 10(3) Lidl needed to show: (i) that it had acquired a reputation in its marks; (ii) that Lidl’s marks and Tesco’s Signs were sufficiently similar (iii) that consumers would make a link between them; and (iv) that Tesco’s use would harm the distinctiveness of Lidl’s marks or take unfair advantage of its reputation.
Tesco accepted that Lidl enjoyed a reputation in the UK for its Mark with Text and despite acknowledging that the differing textual elements represented an important point of difference - Tesco’s Signs featuring various wording referencing its Clubcard scheme and, Lidl’s Mark with Text featuring the stylised word “Lidl” - the effect was not considered strong enough to extinguish the similar impression conveyed by the respective backgrounds. Tesco’s marketing team identifying the similarities and risk of brand misattribution with Lidl in internal correspondence fortified this determination.
In assessing the likeliness of a ‘link’ being made in the mind of consumers, the Court found the evidence (including Tesco’s internal surveys, unprompted social media posts, and customer feedback) of actual consumer confusion, both as to origin and to price parity (Lidl’s primary case) coupled with internal recognition by Tesco to be determinative.
On damage, the Court found Tesco’s use of the Tesco Signs had diluted Lidl’s reputation as a discounter, evidenced by Lidl’s “evasive action” in the form of corrective marketing though price comparison advertising directly targeting Tesco. The Court also found Tesco had taken unfair advantage of Lidl’s reputation (albeit not deliberately) for discounted value, as Tesco’s Signs were plainly intended to convey value and influence consumer behaviour, their use causing a “subtle but insidious” transfer of image from Lidl to Tesco, unfairly riding on the coat tails of Lidl’s reputation for value to enhance its own.
The Court reached the same conclusions for the Wordless Mark.
Tesco’s Counterclaim
Tesco’s counterclaim related solely to Lidl’s Wordless Mark, protected by separate trade mark registrations filed between 1995 and 2021. Whilst Tesco’s Signs were found to infringe Lidl’s Mark with Text and therefore the outcome of the counterclaim did not improve Tesco’s position, the parties’ arguments were still addressed in the judgment and will be of interest to brand owners.
Tesco claimed that the marks were invalid and should be revoked as (i) the Wordless Mark lacked distinctive character; (ii) should be cancelled for non-use as it had not been used in the form registered; and (iii) had been filed in bad faith as Lidl had no intention to use at the date of application.
Whilst the Court accepted that generally where a mark is composed of word and figurative elements, the word elements are in principle more distinctive, it found that the specific combination of a yellow central circle surrounded by a thin red ring centred on a blue square in the Wordless Mark had clear distinctive significance and the presence of the word “Lidl” did not alter these elements, and, as in case of Specsavers (referenced heavily in this judgment), the survey evidence submitted, social media posts, customer feedback from both Lidl and Tesco’s records and Tesco’s own internal communications, showed recognition of the Wordless Mark as denoting the Lidl brand rather than mere descriptive background. Consumer recognition of the Wordless Mark indicative of origin as a component of the Mark with Text also meant Lidl had established genuine use of the Wordless Mark through use of the Mark with Text.
However, the Wordless Mark was not home and dry as Lidl failed to rebut Tesco’s assertion that Lidl’s original registration for the Wordless Mark (in 1995) was filed in bad faith as Lidl had no intention to use the mark and it was registered purely to secure wider legal protection. This was on the basis that (i) Lidl applied for the Wordless Mark when it already had registered protection for the Mark with Text; and (ii) it has adopted a policy of “evergreening” the mark by periodically re-filing for the same specification to avoid non-use sanctions.
The Court’s finding that the Wordless Mark had been used as a component part of the Mark with Text was not sufficient to protect against a finding of bad faith, as the question of bad faith looks at the intention of the applicant at the time of filing and, with Lidl unable to provide evidence of its intentions in 1995 (beyond achieving wider protection), the Court found the 1995 Wordless Mark invalid. The same presumption of bad faith arose for Lidl’s later marks (dated 2002, 2005, 2007). However, Lidl was able to provide sufficient evidence to save its 2021 mark as it was filed 11 years after the previous mark, rebutting its perceived policy of evergreening.
Copyright and Passing Off
Tesco was also found liable for passing off (misrepresenting that its prices were as low as Lidl’s) and infringing Lidl’s copyright in the Mark with Text, with the Court finding inconsistencies in Tesco’s evidence on the design of the Tesco Signs and drawing an adverse inference from Tesco’s failure to call a witness from its external design agency.
Commentary
Whilst Tesco’s internal marketing communications on their own were not determinative, they clearly had an impact on the Court’s assessment, and the survey evidence and customer commentary clearly demonstrates the power of consistent brand usage in consumer recognition.
Whilst Tesco’s counterclaim was not sufficient to spare it from liability, it is an important illustration of the significant evidential difficulties a brand can expect to face if a third party challenge to a historic trade mark has sufficient weight to raise the question of bad faith.
For more information or if you have any questions, please contact Amy Salter, Harry Jewson or Emily Roberts.
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