The Appeal Court in England and Wales recently confirmed that one of Lidl's trademarks, the 'famous' yellow circle on a blue square background, was infringed by Tesco. The Court confirmed that shoppers were misled into thinking that products under Tesco's Clubcard Scheme were offered at the same or lower prices than those in Lidl.
This is a reminder that care should be taken when formulating new products, or marketing incentives, to ensure that due diligence is carried out to avoid any financial or reputational damage.
Lidl v Tesco – The Background
As most people will be aware, Tesco operates a loyalty scheme for its customers via its Clubcard. In 2020, as part of this scheme, Tesco began promoting reduced prices for Clubcard holders by using a sign consisting of a yellow circle against a blue square background.
Lidl contended that Tesco was infringing registered trademark rights in Lidl's logo, which consists of a yellow circle against a blue background.
Arguments
Lidl contended that their logo was distinctive of their goods and services, and that reputation and goodwill had been generated in their logo, both with and without the "Lidl" text. They specifically argued that this reputation and goodwill was tied to the fact that they are a discounter supermarket, known for offering quality goods at low prices. Tesco's use of the logo would, Lidl maintained, deceive a substantial proportion of customers into thinking that the Clubcard promotion signage was linked to Lidl's brand and reputation.
Lidl accused Tesco of deliberately trying to piggyback onto its reputation as a "discount supermarket". They argued that the Clubcard Prices promotion was part of a wider campaign by Tesco to compete with discount supermarkets like Lidl.
Tesco denied Lidl's claims and pursued a counter claim. Lidl hold UK registered trademarks in respect of their logo, both with and without text, but appear to have only actually used the logo with text. In respect of the logo without text, the registration was originally filed in 1995 and further registrations were also granted in respect of this logo in 2002, 2005 and 2007. A further application, which has not yet been registered, was also made in 2021. Tesco argued that Lidl's trademarks without the Lidl text (1) were liable to be declared invalid, having been registered in bad faith; (2) revokable for non-use; or (3) had no distinctive character.
The Judgment
Lidl relied on section 10(3) of the Trade Marks Act 1994 which aims to protect registered trademark holders, whose trademark has a reputation in the UK, from use of identical or similar signage by others which takes advantage of or is detrimental to the distinctive character or reputation of the trademark.
There are number of requirements which a claimant must show in order to be successful under this section. The court identified that only certain of these were in dispute between the parties, namely:
- The defendant's sign must be identical with or similar to the trademark;
- The use of the sign must give rise to a link between the sign and the trademark in the mind of the average consumer;
- This will lead to:
- Detriment to the distinctive character of the mark, or
- Unfair advantage being taken of the distinctive character or repute of the mark; and
- The use of the sign must be without due cause.
The court found in Lidl's favour on all points.
It held that the Clubcard Prices promotion signage was similar to Lidl's logo because of the commonality of the backgrounds in colours and shapes – and the similarity was not removed by the use of "Lidl" and "Clubcard" text respectively.
The court also found that the average consumer would consider there to be a link between Tesco's signage and Lidl's logo.
Tesco did succeed with some aspects of their counterclaim, as the court was persuaded to invalidate (although not revoke) Lidl's four trademark registrations for its logo without text. It agreed with Tesco that, at the time of applying for its first trademark registration in 1995 for the logo without text, Lidl had no intention of using the logo in that form. That application had therefore been in bad faith, as had the subsequent applications in 2002, 2005 and 2007 which sought to "evergreen" the initial registration (rights in which would be lost for non-use in each successive five-year period). However, Tesco's trademark argument in respect of Lidl's most recent application for registration in 2021 was unsuccessful; this was not considered by the court to be an "evergreening" attempt given the 11-year period that had passed since the previous registration, changes to the logo's colour scheme and the wider range of goods and services specified in the application.
What does this judgement mean for holders of trademarks?
The judgement carries some important reminders for holders of trademarks about when the court will consider their rights to have been infringed. Key things to bear in mind are:
- Colours – both Lidl and Tesco's logos were composed of a yellow shape upon a blue background.
- Shapes – both logos consisted of a yellow circle upon a blue square background. Minor differences, such as the red outline in Lidl's logo, were not enough to remove the similarity between the signs.
- Text – the use of different text also did not save Tesco's signage, despite how recognisable Tesco's brand name and Clubcard Scheme is - the combination of colours and shapes was enough for Lidl's trademark rights to have been infringed.
- Reputation – there was a strong reputation attached to Lidl's logo with text, which created "scope for a greater likelihood that a connection will be made". Therefore, even where logos would appear to be undistinctive where they do not include a brand name, the association with the version of the logo with text may still be strong enough to cause confusion and thereby infringe trademark rights.
Conclusion
Overall, the court's findings signify that broad protection may be afforded to branding which consists of combinations of words, shapes and colours. This may cause particular concern for supermarkets who sell "look-a-like" products and mimic branding.
There are also some useful reminders in respect of trademark filing, including whether or not an application has been made in good faith will be assessed at the time of filing regardless of whether it is subsequently used. It serves as a warning against taking an overly cautious or excessive approach to trademark filing and reinforces the importance of retaining records evidencing good faith intentions to actually use trademarks that are registered.
Tesco have confirmed that they shall appeal the decision of the Court, therefore we shall need to wait to find out if Tesco are able to overturn the Court's judgment. If an appeal proceeds, Lidl are likely to cross-appeal the aspects of the decision that relate to the invalidation of their trade mark registrations.
