Lidl v Tesco: the battle of the yellow circles

Robert Cumming: Robert is a partner, dual-qualified trade mark attorney and solicitor, and manages large international portfolios and complex multi-jurisdictional disputes for market-leading businesses.

Robert’s expertise lies in the strategic positioning of a brand. His experience managing international trade mark portfolios and complex cross-border litigation, complements his background working on large corporate transactions. 

Chris Hoole: Chris is a partner, dual-qualified solicitor and chartered trade mark attorney, experienced in contentious and non-contentious intellectual property (IP) matters, including trade marks, designs, copyright and patents.

Working closely with a range of businesses, from blue-chip multinationals to SMEs, Chris provides tailored strategic and commercial advice to help IP-conscious businesses better protect and police their IP rights.  

Lisa Thomson is a trainee trade mark attorney. Lisa works with a wide range of clients, from start-ups to SMEs, all the way through to large household names in a number of different sectors.

Lidl & another v Tesco & another [2023] EWHC 873 (Ch)

In a judgment handed down on 19 April 2023, the High Court of England and Wales has found Tesco to infringe Lidl’s trade mark rights, copyright and rights in passing off in its blue and yellow logo.

The decision was not a complete success for Lidl, with the court finding that Lidl had filed its ‘Wordless Mark’ in bad faith.  

The decision can be read in full here https://www.judiciary.uk/wp-content/uploads/2023/04/Lidl-v-Tesco-judgment190423.pdf

Recap

As discussed in our previous article, which can be found here, Lidl had accused Tesco of trade mark and copyright infringement, as well as passing off. Lidl alleged that Tesco’s yellow and blue Clubcard Logo was similar to Lidl’s registered marks (depicted below), and that such use took unfair advantage and/or was detrimental to the distinctive character in its earlier registrations. Interestingly, Lidl did not allege a likelihood of confusion under section 10(2) of the Trade Marks Act 1994 (the Act), with its claim in registered trade mark infringement founded in section 10(3) only.

Tesco counterclaimed and sought to rely on the following grounds:

A. Lidl had never genuinely used the ‘Wordless Mark’, and so the registration should be declared invalid on the basis of non-use.

B. Lidl had acted in bad faith when it applied to register the ‘Wordless Mark.’

The marks at issue are shown below. 

Tesco’s signs:

Tesco's signs

Lidl’s trade marks:

Lidl's trade marks

The decision

Until shortly before the trial, Lidl sought to rely on their wordless mark. This prompted Tesco to allege that Lidl had never used the wordless mark and that it had been applied for in bad faith. However, the final decision was based on a comparison of Lidl’s mark with text and Tesco’s Clubcard mark. Though, it is worth mentioning that the judge stated that, if Lidl’s Wordless Mark registration was deemed to be valid, it too would be infringed by Tesco’s use.

In summary, Judge Joanna Smith found as follows:

Trade mark infringement

1.The Tesco Clubcard mark and the Lidl ’Mark with Text’ were sufficiently similar when considered from the point of view of an average consumer. 

Despite the significant difference between the words TESCO and LIDL used on the marks, it was held that the differing texts did not have the effect of ‘extinguishing the strong impression of similarity conveyed by their backgrounds in the form of the yellow circle, sitting in the middle of the blue square’.

2. The evidence submitted by Lidl, including survey and witness evidence, was sufficient to establish that the average consumer would make a link between the marks (which was part of the test of infringement under section 10(3) of the Act.

3.Use of the Tesco Clubcard mark would result in detriment to the distinctive character of Lidl’s ‘Mark with Text’. In particular, Lidl submitted evidence to illustrate a change in economic behaviour, including in the form of corrective advertising in response to Tesco’s extensive use of the Clubcard mark.

4. Tesco was held to have taken unfair advantage of the distinctive reputation residing in the Lidl marks for low-priced goods.

5. The judge did not find that there was a subjective intention on behalf of Tesco to take unfair advantage, or to ‘free-ride’ on Lidl’s reputation as Tesco had simply been trying to promote its own agenda.

6.The section 10(3) claim could succeed even if the subjective intention was not established (quoting Jack Wills). 

7. Tesco failed to establish the burden of due cause.

Tesco sought to argue that it had a right to use the combination of the yellow and blue colours for commercial reasons. This argument did not satisfy the judge and she specified that it was those characteristics that are specific to Lidl’s brand.

Passing off

The judge held that Tesco’s use of the Clubcard mark gave rise to an actionable passing off, since consumers made a link between the Lidl mark and the Tesco mark.

Copyright

Lidl’s mark with text was found to be protected by copyright as an original artistic work under section 4 of the Copyright, Designs and Patents Act 1988. The judge held that Tesco had copied a substantial part of Lidl’s mark with text, and thus infringed Lidl’s copyright in the logo.  

The counterclaim:

Although the judge stated that the counterclaim doesn’t advance Tesco’s position because it only relates to Lidl’s wordless mark, she briefly dealt with Tesco’s arguments:

1. Tesco sought to argue that Lidl’s ‘Wordless Mark’ was invalid on the grounds of non-use and lack of distinctive character. This argument was dismissed.

The Judge considered that enough evidence had been put forward by Lidl to show genuine use of the ‘Wordless Mark’. The following evidence, inter alia, was deemed particularly persuasive:

i). a YouGov survey showing that the ‘Wordless Mark’ is ‘immediately recognisable by the public as denoting the Lidl brand, and

ii). internal warnings from Tesco employees stating that the proposed Tesco sign was similar to Lidl’s marks.

However, it was decided that where use of the wordless mark has not been made out in relation to specific goods and services, the mark will be revoked to that extent.

2.Use of Lidl’s mark with text is use of the wordless mark.

3. Tesco’s bad faith argument succeeded:

• Tesco’s main argument here was based on the proposition that Lidl had no intention to use the wordless mark when they applied to register it and that it was registered simply to be used as a ‘legal weapon’. Tesco put forward a further argument of ‘evergreening’ and claimed that any future registrations made by Lidl for the wordless mark were merely attempts to avoid having to prove use of the mark.

• As discussed in our aforementioned article, the Court of Appeal previously decided that the burden of proof fell to Lidl to prove that they had not acted in bad faith, and that is what Lidl attempted to show at this trial.

• In the end, the judge decided that Lidl had not done enough to prove that they had acted in good faith and so, it was held that the Wordless Mark registrations had been filed in bad faith and that they should be invalidated.

This conclusion may seem surprising given that the Judge had found genuine use of the wordless mark.

Conclusion

Lidl succeeded in establishing infringement but lost several of its registrations because its evergreening strategy was found to be in bad faith.

We understand that Tesco intends to appeal this decision and will continue to use its Clubcard marks for the time being .

The decision is fascinating for a number of reasons, not least because it illustrates the potential strength of marks shown to possess a repute in the UK, but also the strength of unregistered rights, both in passing off and copyright, with the court confirming that an actionable misrepresentation does not require confusion.

We will await any appeal. 

Authors

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