Knock-out Win for Lidl

In the battle of the supermarkets, the UK Court of Appeal has recently upheld a High Court decision in favour of Lidl in its ongoing IP infringement fight with Tesco. As a result of the judgment, Tesco must now stop, or significantly amend the use of its clubcard prices signs in the UK. Gerard Kelly, Head of Intellectual Property, considers the impact for food and beverage brand owners.

We previously reported on a High Court dispute between the supermarket chains Lidl and Tesco regarding trade mark infringement concerning Tesco’s use of its clubcard prices logo. The UK Court of Appeal has since delivered judgment in favour of Lidl upholding the High Court decision. The Court of Appeal left the High Court decision largely undisturbed, save for one issue relating to copyright infringement. The Court referenced the well-established principle that apart from any obvious error in law, or rationally insupportable conclusion, the role of the Appeal Court is not to interfere with the findings of the trial judge. As a result, Lidl’s trade mark infringement and passing off claims were upheld. Lidl will now benefit from an injunction against Tesco’s use of its clubcard prices signs, referred to as “the CCP signs”, and a significant damages award, given Tesco’s prolonged use of the CCP signs over a four year period.

Background

Lidl has used a logo consisting of the word LIDL within a yellow circle edged in red on a square blue background since approximately 1987. Lidl own trade mark registrations for both the logo including the word LIDL and without the word, the latter of which is referred to here as “the Wordless Mark. The Lidl marks and an example of how they are used are depicted below.

Tesco has used the CCP signs since 2020 as part of a promotion called clubcard prices, in which Tesco clubcard holders are charged lower prices than shoppers who are not clubcard holders. The CCP signs also incorporate text: either the words “clubcard prices” or the words “clubcard price” together with a price. Examples are shown below.

Lidl’s claim was that Tesco had infringed their trade marks and copyright, and committed passing off. Tesco counterclaimed that Lidl’s Wordless Mark was invalidly registered, or that it should be revoked due to non-use.

High Court decision

In separate judgments delivered in April and May 2023, the UK High Cout held that:

• Lidl succeeded in their claims for trade mark infringement by taking unfair advantage of the reputation of Lidl’s marks. However, Tesco’s counterclaim was later upheld that the Wordless Mark was invalid as it had been applied for in bad faith.
• For copyright purposes, the simplicity of a design or low level of artistic quality does not preclude originality. The combination of the ‘Lidl’ text, the yellow circle, the red border and the superimposing of these elements onto a blue background involved time, labour and creative freedom, even if the artistic quality was not high. Lidl was therefore granted an injunction to restrain copyright infringement.

Tesco appealed the infringement and passing off findings while Lidl appealed the finding that the registration of the Wordless Mark was invalid.

Court of Appeal decision – trade marks

Tesco’s main appeal argued that the High Court judge erred in finding that consumers would believe the advertised prices were "price-matched" by Tesco with Lidl's prices. They contended that it implied the same or lower prices. They also argued that the judge should have reached a conclusion purely from her own common sense and experience and that she should have ignored the evidence relied upon by Lidl. Most importantly, Tesco argued that the judge was wrong to conclude that the evidence supported a finding of deception. In light of these criticisms, the Court of Appeal found it necessary to review the evidence cited by the judge. However, they cautioned that their role wasn't to determine if they would have reached the same conclusion based on the evidence, but rather if there was sufficient evidence to support the judge's finding. The three main strands of evidence considered by the judge in reaching her conclusion about the price matching allegations were:

• Two customer witnesses who gave evidence at trial of their reaction to seeing the CCP signs
• The Lidl ‘Vox Pupuli’ of other consumer reactions to the CCP signs, and
• A market research survey commissioned by Tesco to gauge spontaneous reactions from customers encountering the CCP signs for the first time

The Court of Appeal held that the judge did not make the mistake of treating any of these strands of evidence as determinative of any issue she had to decide. Rather, she treated each as one piece of evidence among a number of others which assisted her to gauge the perceptions of ordinary consumers, including their subconscious reactions. It had to be noted that the judge “had the advantage of being immersed in all of the evidence” whereas the Court of Appeal had only been asked to consider selected parts of the written record. Standing back, the Court of Appeal was not persuaded that the High Court’s finding was rationally insupportable.

Separately, the Court of Appeal concluded that Lidl's appeal against the invalidity of the registration of the Wordless Mark was dismissed. The Court noted that Lidl's 12 grounds of appeal failed to identify any serious flaw in the judge's reasoning.

Court of Appeal decision – copyright

Tesco’s appeal against the copyright infringement claim was allowed. This was because, the Court determined that although the design of the Lidl logo comprising their trade marks is sufficiently original to attract copyright, the scope of protection allowed by that copyright is narrow. Tesco had not copied at least two elements that make the work original i.e. the shade of blue and the distance between the circle and the square. Although Tesco had clearly copied the visual concept of a blue square surrounding a yellow circle, that was all they had copied. In the case of the cropped and rectangular forms of the CCP signs, they had not even done that. The Court therefore concluded that Tesco had not infringed Lidl’s copyright.

Comment

Despite the finding on the copyright point, the Court of Appeal judgment is a win for Lidl. The comprehensive evidence submitted enabled it to establish its claims under section 10(3) of the UK Trade Marks Act 1994 regarding unfair advantage or “free riding”. It also established that Tesco’s use of the CCP signs conveyed a false price matching message to some consumers and/or caused some other change in economic behaviour. The decision is also interesting because it demonstrates the limitations of the Court appeal process. Two Court of Appeal judges admitted that they found the trial judge’s finding of fact “surprising.” One Court of Appeal judge stated that he doubted whether he would have come to the same conclusion, but that was not the question on appeal and “it is not open to us simply to substitute our own evaluation.”

Accordingly, the appeal Court was “constrained” and “with undisguised reluctance,” Tesco’s appeal was dismissed. In the context of that reluctance, Tesco will likely feel aggrieved with this decision. This leaves open the fact that it can be difficult to predict results in trade mark matters as it may have been decided differently at first instance with a different judge.

For more information and expert advice, contact a member of our Intellectual Property team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.