A closer look at the trademark dispute between retail giants Lidl and Tesco

Mrs Justice Joanna Smith DBE has recently issued a judgment in the dispute between Lidl and Tesco, which concerned Lidl’s trademarks and related rights. The dispute focused on the Wordless Mark (there were a number of registrations in respect of the Wordless Mark and the Mark with Text, which are only relevant to the counterclaim and so in the remainder of this article each is treated as a single registration) and the Mark with Text (the ‘Lidl Marks’) and signs used by Tesco, which included the words ‘clubcard prices’ sometimes together with other words and/or a price (the ‘CCP Signs’). 

 
                    Wordless Mark                              Mark with Text                          Example CCP Sign

Trademark infringement

Lidl alleged that both the Wordless Mark and Mark with Text were infringed by Tesco, relying on s10(3) Trade Marks Act 1994 (TMA), which provides that:

‘A person infringes a registered trade mark if he uses in the course of trade, in relation to goods and services, a sign which

(a) is identical with or similar to the trade mark, where the trade mark has a reputation in the United Kingdom and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.’

Section 10(3) does not require that the infringing use is in relation to identical or similar goods or services and does not require the use to cause any confusion.

The judge explained that the basic conditions for infringement of s10(3) were summarised by Kitchin LJ in Comic Enterprises v Twentieth Century Fox [2016] EWCA Civ 41 at [111]. Here it was explained that the proprietor of the trademark must show that:

‘(i) the registered trade mark must have a reputation in the relevant territory; (ii) there must be use of a sign by a third party in the relevant territory; (iii) the use must be in the course of trade; (iv) it must be without the consent of the proprietor; (v) it must be of a sign which is identical with or similar to the trade mark; (vi) it must be in relation to goods or services; (vii) it must give rise to a link between the sign and the trade mark in the mind of the average consumer; (viii) it must give rise to one of three types of injury, that is to say, (a) detriment to the distinctive character of the trade mark, (b) detriment to the repute of the trade mark, or (c) unfair advantage being taken of the distinctive character or repute of the trade mark; and (ix) it must be without due cause.’

The areas of dispute that remained by trial were (v) similarity, (vii) link, (viii)(a) detriment, (viii)(c) unfair advantage and (ix) due cause. The judge’s reasoning focussed on the Mark with Text.

Similarity

The judge noted the differences between the Mark with Text and the CCP Signs, specifically the red line used in the former and the different words. Notwithstanding the differences, the judge was satisfied that the average consumer perceiving these signs as a whole would regard them as similar, not least given the evidence before her that even members of Tesco’s internal team had identified the similarities and scope for confusion. 

A link between mark and sign

The judge was presented with evidence that Tesco’s own external research showed that eight percent of customers shown one version of Tesco’s promotional materials thought it was for Lidl. There was also evidence that several members of the public had sent unprompted messages to both parties’ social media channels identifying a perceived link between Lidl and the CCP Signs.

The judge was “satisfied that Lidl has established the necessary ‘link’ and considered that the average reasonable observant consumer encountering the CCP Signs in the real world at the date of the launch of the Clubcard Price campaign would draw a link between the Uses of the CCP Signs and the Mark with Text.” The fact that Tesco subsequently “deluged the market” with advertising using the CCP Signs thereby leading to a strong association with the Tesco brand did not help Tesco as the requirements of s10(3) are to be assessed at the date of the launch of the CCP Signs.

Detriment

Detriment will be established where there is evidence of a change in the economic behaviour of the average consumer for the goods or services for which a mark is registered. The judge was satisfied that this was shown by the evidence that Lidl had found it necessary to take evasive action in the form of corrective advertising.

Unfair advantage

To establish unfair advantage, a proprietor must show a change in economic behaviour by the defendant’s customers (or the likelihood of such) and that this advantage is unfair.   

The judge rejected Lidl’s allegation about Tesco’s “deliberate subjective intention of riding on Lidl’s coat tails” but found that the lack of such intention was not fatal to Lidl’s claim, despite Tesco’s indication that it was unaware of any claim under s10(3) succeeding without subjective intention.

The judge was satisfied that the use of the CCP Signs had resulted in “a subtle but insidious transfer of image” from Lidl’s marks in the minds of some consumers and that the objective effect was to enable Tesco to benefit from the reputation and goodwill in those marks, such that it obtained an unfair advantage.

Without due cause

There is no infringement under s10(3) if the defendant establishes due cause for use of the sign. This requires something more than that the sign was innocently adopted. Tesco was unable to satisfy the judge that it had due cause and the judge rejected their suggestion that Lidl’s own “lookalike practices” should play any part in her reasoning.

The Wordless Mark and conclusion on infringement

As the Wordless Mark had not been used on its own in the UK, its reputation derived solely from the use of the Mark with Text. The judge found that the Wordless Mark was “more similar” to the CCP Signs and that her conclusions on all the other elements of s10(3) were the same as those identified for the Mark with Text, finding both marks infringed.

Counterclaim for invalidity and revocation

Tesco counterclaimed that the (numerous) registrations of the Wordless Mark were invalid due to non-use and because they were registered in bad faith.

Non-use

Under s46(1) TMA, the Wordless Mark could be revoked if it had not been used within five years of registration or if there was a period of five years’ non-use. However, under s46(2) use of the Mark with Words would count as use if the differing elements between those marks do not alter the distinctive character of the Wordless Mark.

The judge accepted Lidl’s argument that the case was akin to the CJEU’s ruling in Specsavers International Healthcare Ltd v Asda Stores Ltd (C-252/12) [2013] ETMR 46 and that Lidl had established genuine use through use of the Mark with Text.

Bad faith

Tesco’s case on bad faith was that the registrations (save for a registration in 2021) were “a legal artifice with no corresponding mark in the real word.” They also argued that the later registrations (including the 2021 mark) were evergreened versions of the 1995 Wordless Mark. 

Tesco’s pleading had raised a prima facie inference that the Wordless Mark was registered as “weapon to secure a wider legal monopoly than it was entitled to” and the evidential burden had shifted to Lidl. The judge did not accept Lidl’s limited evidence on this point and all of the registrations of the Wordless Mark (save for the 2021 registration) were held invalid.

Tesco’s pleadings also made out a prima facia case of evergreening and the burden shifted to Lidl.  Lidl were only able to discharge this burden in relation to the 2021 registration, which differed from the others in that the application reflected a brand-colour update and also the non-food products that Lidl had begun to sell. Further it was almost 11 years after the latest other registration and so ineffective as evergreening. Accordingly, while the other registrations were revoked, the most recent registration of the Wordless Mark survived.

Passing off

Lidl’s claim for passing off was also successful and largely followed the reasoning above in relation to trademark infringement. 

Copyright infringement

The agreed issues on copyright infringement were:

·                  whether copyright subsists in each of the Lidl Marks;

·                  if so, whether any copyright is owned by Lidl; and

·                  whether Tesco had copied a substantial part of any of the Works.

As there was no suggestion that Tesco had seen the Wordless Mark, the judge only considered infringement in respect of the Mark with Text.

Subsistence of copyright

Tesco disputed that the Mark with Text was original, as there was evidence that it was developed over many years and in stages, each of which Tesco said involved negligible additional artistic skill and labour. This was rejected by the judge who found that, firstly, the Mark with Text involves a combination of elements which the judge was satisfied had required skill and labour to bring together and, secondly, simplicity of design and/or a low level of artistic quality does not preclude originality.   On balance, she considered that it was “likely to have involved time, labour and creative freedom (even if the artistic quality involved is not ‘high’).”

Ownership

While the individual(s) who had created the Mark with Text could not be identified, the judge heard unchallenged evidence that it was likely to have been created by employees for Lidl who would have been German nationals and the judge was satisfied that the owners were Lidl. 

Copying

Tesco was well aware of and had access to the Mark with Text and as the judge had found the CCP Sign to be similar, it was for Tesco to provide an explanation for that similarity.

Unfortunately for Tesco, the judge found that the witness who had been put forward to give evidence on the design of the CCP Signs had given a misleading impression in his written evidence and was not always clear about who had done what. It became clear during the witness’s cross-examination that a design agency had been involved in the creation of the CCP Signs, but that there was no witness from that agency. The judge inferred that had there been they would have given evidence adverse to Tesco’s case. In any event, she did not consider that Tesco’s evidence on the creation of the CCP Signs had been sufficient to discharge the evidential burden that lay with Tesco.

The judge held that “always bearing in mind that copyists are most unlikely ever to admit copying,” Tesco’s evidence appeared designed to obscure and distract and found the design agency had copied the background to the Lidl logo as part of its exploratory work (and as a natural consequence of the brief provided to it by Tesco) and that Tesco adopted that copy as the basis for the CCP Signs.  Accordingly, the judge found that Tesco had also infringed Lidl’s copyright.

Angela Jack is a managing associate at EIP
https://eip.com/uk