Lidl v Tesco – Court of Appeal Upholds High Court Findings on Trade Mark Infringement

The Court of Appeal (CA) has handed down its decision in Lidl v. Tesco [2024] EWCA Civ 262 upholding the High Court’s (HC) judgment (2023] EWHC 873 (Ch)) that Tesco’s use of its Clubcard Prices logo infringes Lidl’s house mark and constitutes passing off. The CA upheld all of the HC’s findings with the exception of Lidl’s claim of copyright infringement.

That does not alter the overall outcome of the case: Tesco will have to stop using its Clubcard Prices loyalty scheme logo unless permission is granted for a further appeal to the Supreme Court (unlikely, as Tesco has already started to unveil its new Clubcard prices branding).

The ruling is significant in that it shows that trade mark and passing off laws can be ‘stretched’ – in this case, to a situation where elements of a third-party brand were used, without permission, to convey a message of equivalence. While the case is an unusual one (“at the outer boundaries of trade mark infringement and passing off”, as Lewison LJ put it), the issues it raises are of wider importance. As well as covering key issues concerning the laws of trade mark infringement, copyright infringement and passing off, the case also considers bad faith and genuine use of component elements of composite marks.

What was the case about?

Lidl owns various trade mark registrations for a yellow roundel with a red outline within a blue square as well as the same sign overlaid with the word Lidl (all registered for supermarket related services). Multiple applications for the “wordless” mark had been filed by Lidl – in 1995, 2002, 2005, 2007 and 2021.

Lidl has never used the wordless mark by itself as a standalone sign; the sign has always featured the LiDL word element (as depicted below right). A key point of Lidl’s case was that both versions of its mark had come to be associated by consumers with Lidl’s core branding message that it is a discount supermarket offering quality goods at affordable prices.

In September 2020, Tesco began using a yellow roundel within a blue square for its Clubcard prices loyalty program, the mark typically being overlaid by text tailored to the specific price promotion being offered (as illustrated in the example above right).

Lidl sued Tesco for trade mark infringement, copyright infringement, and passing off. Interestingly, Lidl did not bring a confusion-based trade mark infringement claim but only a reputation-based claim under section 10(3) of the Trade Marks Act 1994 (TMA94). Tesco counterclaimed that Lidl’s trade mark registrations for its wordless mark were revocable for non-use (having never been used on a stand-alone basis) and invalid having been filed in bad faith.

What did the High Court decide?

The HC held as follows:

• By using the Clubcard prices logo, Tesco had infringed Lidl’s trade mark registrations for its wordless mark and mark with text under section 10(3) of the TMA94. The court accepted the extensive evidence of the reputation of Lidl’s logos. It considered the Tesco and Lidl logos similar since any differences in word elements did not extinguish the strong similarity conveyed by the logos’ backgrounds (which supermarket shoppers would be likely to focus on).
• Although confusion was not an element to be proved, there was clear evidence of both origin and “price match” confusion (i.e. that consumers would mistakenly believe that Tesco’s prices were the same as or lower than Lidl’s for the equivalent product). There was also evidence that Tesco’s employees appreciated the potential for confusion.  This constituted the necessary link and unfair advantage for the reputation-based claim. Tesco’s use was also detrimental to the distinctive character of Lidl’s marks as it would dilute their uniqueness (as evidenced by the fact that Lidl was compelled to undertake corrective advertising).
• For the same reason, Tesco’s use of the logo amounted to passing off. Damage would result as budget-conscious consumers might switch from Lidl to Tesco.
• There was copyright infringement. Lidl’s mark with text was considered a graphic work, protected “irrespective of artistic quality”.  Given the degree of similarity between the logos and the fact that Tesco had access to the Lidl logos, the burden of proving lack of copying passed to Tesco. It was unable to discharge that burden.
• Lidl had made genuine use of its wordless mark. Applying Specsavers v Asda [2012] EWCA Civ 24, use of the mark with text amounted to genuine use of the wordless mark because the average consumer had been educated (at least in the last few years) to see the wordless mark (independently) within the mark with text. This emphasises the importance of educating consumers to view component parts of composite marks as indicators of origin of themselves (if they are to be separately registered and relied upon).
• As already found by the CA in an earlier ruling, there was prima facie evidence that Lidl’s trade mark registrations for its wordless mark had been filed in bad faith. This flowed from the repeat filings, the fact that the mark had not been used as stand-alone mark (in fact) and the lack of an obvious commercial rationale for the filing in the first place. The burden of proving no bad faith therefore passed to Lidl.
• Lidl could not provide any evidence to show why it had applied for the wordless mark initially or subsequently. The court concluded that the mark had initially been filed in an attempt to broaden Lidl’s monopoly (i.e. to use as a defensive weapon) and had been subsequently refiled in an attempt to circumvent the proof of use requirements applied when enforcing registrations more than five years old (so-called ever-greening). The applications had been filed in bad faith. This was despite the court’s finding that Lidl had put the wordless mark to genuine use (in fact) – as part of the mark with text.
• However, the 2021 registration for the wordless mark survived since there was evidence that, by that point, Lidl genuinely believed that use of the mark with text also constituted use of the wordless mark and that the wordless mark enjoyed its own reputation. The more than a decade’s gap in filings also suggested that Lidl did not have an ever-greening strategy by that point.

What did the Court of Appeal find?

The CA upheld all of the HC’s findings with the exception of those on copyright infringement. Key points to note are as follows:

• By the time of the appeal, the parties seem to have accepted that a mere transfer of Lidl’s value proposition to Tesco (without price matching confusion) would not be sufficient of itself for a finding of trade mark infringement or passing off. The appeal therefore hinged on whether Lidl could make out its price matching confusion claim (the claim of origin confusion also falling somewhat by the wayside).
• After reviewing all of the evidence of price matching confusion, the CA could only find one small error in the CA’s reasoning. Since the CA can only interfere with a lower court’s findings of fact if they are rationally insupportable, the CA had no option but to uphold the HC’s findings of unfair advantage and passing off. This was despite the fact that Arnold LJ considered the judge’s conclusion on price matching confusion (at least, initially) ”somewhat surprising” and Lewison LJ doubted whether he would have reached the same conclusion as the trial judge on the facts.
• This is not the first case where a UK appellate court has upheld a finding of the lower court despite the former casting doubt on whether it would have come to the same conclusion as the latter on the facts. Appellate courts and tribunals won’t interfere with first instance rulings lightly. Making sure that pleadings, evidence, and arguments are right the first time around is therefore key.
• The decision also highlights the crucial role consumer evidence can play in some trade mark infringement and passing off cases. In particular, the trial judge had not seemingly formed her own independent view on the price matching confusion claim but relied solely on the consumer evidence submitted by Lidl. Interestingly, the CA does not (at least, expressly) say that the trial judge was wrong to take this approach. While it is arguably one of the more positive judgments on the value of such evidence, the questions being considered were very fact specific and unusual.
• The ruling contains an interesting (although largely, obiter) discussion on the role of the “without due cause” element of a reputation-based claim and the differences between unfair advantage and detriment claims. The CA suggests that the “without due cause” element does not add anything, at least where the claim is based on unfair advantage. While it would be a rare case for the “without due cause” element to come into play of itself, the CA suggestion that it might not have to be separately considered goes further. The decision also potentially suggests that there might be greater scope to evidence a change in the economic behaviour of consumers where detriment is alleged (compared to unfair advantage), although Birss LJ strongly dissented on this.
• The bad faith ruling was upheld in its entirety. The judgment makes clear that brand owners will have an uphill struggle to show lack of bad faith if the burden of proof is reversed. Making sure that trade mark applications “smell right” (objectively) will therefore be key. If the burden of proof is reversed, witness or documentary evidence is likely to be needed to show why the application in question was filed – the CA saying that brand owners are best placed to evidence this. This underscores the importance of brand owners documenting the reasons for filing a particular trade mark application at the time of filing and ensuring that such records form part of document retention policies.
• Although Tesco was successful in overturning the decision that it had infringed Lidl’s copyright, this was largely because Lidl had developed its logo in three stages and the creators of stages one and two were unidentified such that the only copyright Lidl could assert was in the addition of the blue square. Since Tesco’s blue square was a different colour and had different dimensions from Lidl’s, there was no infringement. Key points here are that copyright can subsist in what some might view as relatively banal logos and being able to evidence copyright ownership is of obvious importance.

While the case is quite unusual on the facts, there are a number of “take home” points, and it illustrates the potential for trade mark and passing off laws to be stretched in certain circumstances to scenarios outside of the usual origin confusion and unfair advantage/detriment type cases.