Lidl v Tesco: Trade Mark Infringement
Background
Lidl and Tesco are both well-known supermarket chains in the United Kingdom and commercial rivals.
This dispute concerns two of Lidl’s trade marks registered at the UK Intellectual Property Office (“UKIPO”): one being a figurative mark of a blue square with a yellow disc with a thin red outline (the “Wordless Mark”), and the other being of similar design with the word ‘Lidl’ (the “Mark with Text”), as seen below.
In 1995, Tesco launched their Clubcard loyalty scheme and in 2020 introduced its ‘Clubcard Prices’ feature, which offers its Clubcard members discounted prices on selected items. Along with this development came a new sign to advertise the discounted prices with a blue square background and a yellow disc with the word ‘Clubcard Prices’ as seen below.
Court History
Lidl’s Claim
In 2020, Lidl sued Tesco for trade mark infringement, passing off and copyright infringement. Specifically, Lidl alleged that Tesco’s use of the yellow circle against a blue background (the “Sign”), infringed upon Lidl’s registered trade marks. Interestingly, Lidl did not bring a likelihood of confusion-based claim under section 10(2) Trade Marks Act 1994. Instead, it brought a reputation-based passing off claim under section 10(3) of the Trade Marks Act 1994, asserting that Tesco misrepresented its products by implying similarities with Lidl’s offerings, such as price parity or matching.
It is pertinent to note that the Wordless Mark has never been used as a standalone mark in the UK, which Lidl acknowledged in its claim. However, it alleged that the combined use of the Wordless Mark with the Mark with Text has garnered recognition, establishing it as being distinct to Lidl’s business. Consequently, the trade marks had acquired a reputation in the UK, and Tesco’s production and use of the Sign was considered as being unfair exploitation and deliberate leveraging of Lidl’s status as a ‘budget’ supermarket.
Tesco’s Counterclaim
Tesco filed a counterclaim seeking the revocation of Lidl’s Wordless Mark – asserting that the Wordless Mark is a “legal artifice” that has never been used by Lidle as registered. Tesco challenged that the registration of the Wordless Mark was done so in ‘bad faith’ and lacked inherent distinctiveness. Tesco argued that Lidl had pursued registration of the Wordless Mark with no genuine intention of utilising it, but rather as a strategic legal tool against competitors. Tesco further accused Lidl of engaging in "evergreening" practices, by making further applications for the Wordless Mark to circumvent the non-use periods, including applications made in 2005 and even as late as 2021, subsequent to the commencement of legal proceedings.
Regarding the lack of distinctiveness, Tesco maintained that the Wordless Mark never possessed distinctive characteristics from the outset. Furthermore, since Lidl had never actively employed the Wordless Mark to establish distinctiveness through use, consumers would not inherently associate it solely with the origin of Lidl's goods and services, as stipulated by legal requirements.
In response, Lidl brought an application to strike out the bad faith allegation in Tesco’s counterclaim. In an interim decision, the court agreed with Lidl that the bad faith allegation did not have a realistic prospect of success and struck it out. Tesco appealed and won, which reinstated the allegation of bad faith.
The 2023 High Court Hearing
In February 2023, a 3-day hearing was held on the merits of the case, following which the court ruled that Lidl’s Mark with Text was infringed, and that passing off and copyright infringement were established. The court concluded that despite variations in their textual components, the Tesco and Lidl marks exhibited significant similarity, primarily attributable to their shared visual backgrounds. The court reasoned that discrepancies in textual elements did not diminish the pronounced likeness conveyed by the marks’ overall design. Consequently, the court concluded that Tesco's utilisation of the Sign unfairly leveraged the reputation associated with Lidl's marks, particularly the value proposition they communicated.
On Tesco’s counterclaim, the court partially revoked the Wordless Mark for non-use and upheld the allegation of bad faith registration in respect of it. Tesco failed in its attempt to revoke Lidl’s trade marks as a whole on the basis that there had been no use of it in the five years following each of the registrations. However, Lidl conceded that the Mark with Text had not been used across all the goods and services for which it registered protections and consented to the revocation of those goods and services where it had not been used.
Interestingly, Tesco did succeed in having the Wordless Mark invalidated on the basis of bad faith. When Tesco won its appeal to reinstate the allegation of bad faith, the court caused Lidl to have to provide positive evidence of an intention to use the Wordless Mark in 1995 (and on the subsequent registrations). It seems given the passage of time that Lidl was not able to produce this evidence and could not discharge the presumption of lack of good faith. As a result, the court invalidated Lidl's registrations of the Wordless Mark in 1995 and 2007, however, the 2021 registration survived. The court did not find an attempt to “evergreen” the 1995 registration through the 2021 registration given the gap of 11 years and that the 2021 registration consisted of slightly revised colour scheme and wider specification of goods and services, supporting its position that Lidl had widened its scope of products over this period. The court accepted Lidl’s position that it genuinely believed it would make use of the 2021 version of the Wordless Mark.
Following the hearing, the court made a final order on 22 May 2023 which granted a final injunction against copyright infringement by Tesco.
The 2024 Appeal Hearing
Tesco has since appealed the court’s determination that Tesco infringed the Mark with Text, had passed of its goods and had infringed Lidl’s copyright. Lidl has appealed the finding that the Wordless Mark was invalid.
On 19 February 2024, a 3-day hearing was held to specifically address Tesco’s appeal to the imposition of the injunction as the appropriate remedy. If unsuccessful, it will be required to stop use of its Sign, which is now well-known across its stores.
What does this case mean for trade marks?
This battle of the brands highlights the importance for businesses to exercise caution when creating marks that are similar to those already in the public domain, even if the marks appear to be simple in nature. Simply adding words to an existing mark may not suffice to avoid a potential trade mark infringement claim. Further, copyrights could exist in even seemingly banal logos and signs.
The significance of keeping comprehensive records to justify the rationale behind specific trade mark applications and to document the genesis of one’s mark to counter any allegations of copying is also highlighted by this case. This is especially crucial for repeat filings and situations where a mark may not be utilised in the exact form in which it was registered, including instances where it serves as a component part of another mark, or where unusual circumstances arise.
Protecting component parts of intricate marks may also be something brand owners should consider. Careful evaluation should precede any filing, particularly concerning the ease of proving use of the mark and any potential bad faith considerations.
Ultimately, the trade mark process can be a complicated one and trade marks themselves can still carry risk even after successful registration. Obtaining legal advice prior to filing trade mark applications can help offset such risks.
For more bespoke advice on applying for and registering trade marks or intellectual property rights generally, please contact a member of our Intellectual Property team by scheduling a discovery call.
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