Lidl and Tesco Caught in a Vicious Circle

Does creating a coloured circle involve sufficient artistic skill and labour to amount to an intellectual creation for copyright purposes? The High Court in the UK considered this very question in IP infringement proceedings brought before it by Lidl against Tesco. Lidl has owned registered trade marks in the UK for their primary logo dating back as far as 1989. These marks consist of a yellow circle outlined in red and placed on a blue background with the word ‘Lidl’ in the centre. This was referred to in the judgment as the “Mark with Text”. However, Lidl also holds registrations for the same figurative logo minus the word aspect, referred to in the judgment as the “Wordless Mark”. These have been in existence in the UK since 1995.

The logo that gave rise to these proceedings is Tesco’s ‘Clubcard Prices’ sign, which consisted of a yellow circle on a blue background with ‘Clubcard Prices’ in black text printed in the centre.

Tesco had been using this sign since September 2020. Lidl claimed that Tesco was riding on the coat-tails of their logos by the use of their Clubcard Prices sign. In other words, Lidl alleged that Tesco was taking unfair advantage of the reputation of its trade marks, as well as infringing the copyright they held in the marks. Tesco counterclaimed that the Wordless Mark was registered in bad faith as the mark had never been used before without ‘Lidl’ in the circle and that it lacked distinctiveness. Tesco further countered that the ‘kindergarten shapes’ did not employ sufficient skill and/or labour to be able to avail of protection.

Trade mark infringement claims

Lidl claimed that Tesco was infringing its trade marks and deliberately taking advantage of Lidl’s goodwill and reputation, particularly, their reputation as a low-cost supermarket selling quality goods. Lidl accused Tesco of ‘deception’ and claimed that the use of Tesco’s similar logo was ‘not accidental.’ They claimed that their customers were mistaking the ‘Clubcard prices’ logo as one of their own and therefore, that Tesco was taking advantage of the association being made between the marks. Lidl argued the figurative aspect of the registered marks are ‘distinctive of its service and goods quite apart from the name Lidl’ and had generated a significant reputation and goodwill for both marks.

Copyright infringement and passing off claims

Lidl further claimed copyright infringement and passing off. Tesco argued that, for Lidl to be successful in their claim, they would need to show that creating a yellow circle involved sufficient artistic skill and labour to avail of protection. They were of the view that since the mark was developed over the span of 20 years in 3 distinct stages by different authors, there was negligible additional artistic skill and labour involved in the logo’s creation. Unfortunately for Tesco, the court considered that combining the ‘Lidl’ text, the yellow circle, the red border and superimposing these onto a blue background, involved time, labour and creative freedom, even if the artistic quality was not high. The court confirmed that the simplicity of a design or low level of artistic quality does not preclude originality. Therefore, the Mark with Text was protected by copyright.

The Court’s decision

Ultimately, the UK High Court found in favour of Lidl. Tesco had infringed the Mark with Text pursuant to Section 10(3) of the UK’s Trade Marks Act; the equivalent of Section 14(3) of the Irish Trade Marks Act. Regarding the Wordless Mark, the court consider the position of infringement to be the same. The court held that analysis of the Wordless Mark added nothing to Lidl’s case, considering that it was never used on its own in the UK. Therefore, the reputation of the Wordless Mark arose solely from the use of the Mark with Text. Nevertheless, the court acknowledged that the Wordless Mark was similar to that of Tesco’s.

As for Tesco’s counterclaim for invalidity, the court found that these arguments related solely to the Wordless Mark. The court was satisfied Lidl had established that the Wordless Mark was perceived as a trade mark by the relevant public and that it did not lack distinctiveness given that its ‘use of a specific combination of simple geometric shapes and primary contrasting colours is both memorable and distinctive of trade origin’.

On the other hand, the court found that the ‘Wordless Mark was registered in order to use it as a weapon to serve a wider legal monopoly than it was entitled to, with no genuine intention to use it.’ The court ultimately found in Tesco’s favour that there had been bad faith in the registration of the Wordless Mark. Despite this, the court found that there had been trade mark infringement in respect of Lidl’s Mark with Text, passing off and copyright infringement.

Conclusion

The parties are now to liaise over the terms of the Order to be granted by the Court. However, it is notable that, in Ireland at least, Tesco has resorted to using a ‘Clubcard Prices’ sign that is now a yellow square with rounded edges. This could be an indication as to the direction the parties are heading in when agreeing the terms of the court order.

Therefore, there are two key take aways from this case:

• Even a simplistic collection of ‘kindergarten shapes’ can be afforded protection where they have generated a reputation amongst consumers, and
• Proprietors should not register a mark where there is no intention to use that mark in its registered form, i.e. the Wordless Mark, or else it runs the risk of being invalidated for bad faith

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

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