Lidl v Tesco – The Importance of the Clubcard Judgment

Background

Discount retailer Lidl is the owner of multiple UK-registered trade marks, including two figurative trade marks, one representing its “Lidl” logo in the yellow circle outlined with a thin red line on blue background (the “Lidl Mark with Text”), and the other consisting just of the red-outlined yellow circle on blue background without any word elements (the “Lidl Wordless Mark”).

Originally, Lidl brought a claim against Tesco in respect of trade mark and copyright infringement and passing off in relation to Tesco’s use of a yellow circle centred on a blue square to identify discounted goods for Tesco Clubcard members (the “Tesco Clubcard Mark”).

Lidl argued that Tesco’s use of the Tesco Clubcard Mark took unfair advantage of its reputation for good value. Tesco defended the case and counterclaimed that the Lidl Wordless Mark should be declared invalid on the grounds of bad faith and lack of distinctiveness and/or that it should be revoked for non-use in view of the fact Lidl does not actually use it in the course of trade (and instead, it used the Lidl Mark with Text).

The case was first decided by the High Court.

The High Court Decision

The High Court concluded that there were sufficient similarities between the Tesco Clubcard Mark and the Lidl Mark with Text to lead to confusion on the part of the public in respect of the origin of the goods and in respect of the price match association.

It was also held that the Tesco Clubcard Mark took unfair advantage of the reputation of the Lidl Mark with Text related to low-priced goods and that it was detrimental to the latter’s distinctive character pursuant to s. 10(3) of the Trade Marks Act 1994 (“TMA”). The High Court also decided the passing off claim in favour of Lidl.

It is worth pointing out that multiple separate IP rights can subsist in the same piece of work – in this case, the trade marks in question attracted not only trade mark protection considerations but also copyright protection issues.

On the issue of copyright, the High Court found that the Lidl Mark with Text was an artistic work and as such, it was protected by copyright. It further held that Lidl was successful in establishing the presumption that their work was copied by Tesco and that the requirements of the copyright infringement test were satisfied in that a substantive part of the Lidl Mark with Text was copied by Tesco in its work, i.e.: in the Tesco Clubcard Mark.

Tesco appealed these parts of the decision.

The Court of Appeal Decision

In March 2024, the Court of Appeal (“CoA”) upheld the High Court’s decision in respect of registered trade mark infringement by Tesco.

Tesco’s key ground of appeal to the CoA was that the High Court judge was incorrect in finding that the average consumer would be misled that Tesco would price-match Lidl prices (or sell at lower prices) upon seeing the Clubcard goods sold under the Tesco Clubcard Mark.

The Court of Appeal disagreed and held that the High Court’s decision can be supported if considered in view of the three elements: 1) the fact that the Lidl Wordless Mark had become distinctive (by virtue of Lidl’s use of the Lidl Mark with Text), 2) the fact that the Tesco Clubcard Mark would bring the Lidl Mark with Text to the consumers’ mind, and 3) Lidl has an established reputation for being a low-price retailer. The CoA held that each of those three elements reinforces the other.

However, the CoA overturned the finding of copyright infringement. It was held that the Lidl Mark with Text was protected by copyright, but the scope of copyright protection was limited. Tesco did not infringe copyright in the Lidl Mark with Text because it did not reproduce a substantial part of that work. The CoA set out differences between the works in question, such as different shades of blue and the fact that Tesco used the shade of blue in question previously.

Secondly, Tesco used yellow circles as part of their signage before. Finally, the positioning of the yellow circle in the Tesco Clubcard Mark was different from the Lidl Mark with Text. As such, the CoA held that Tesco copied the idea of the work and not the substantial part(s) of it which in this case were interpreted narrowly due to the simplicity of the work in question. Since ideas and concepts are not afforded copyright protection under UK law, the CoA held that Tesco was not liable for copyright infringement.

Another important aspect of the CoA’s decision relates to ‘evergreening’, i.e.: the practice of refiling certain trade marks in the same jurisdiction that are identical to previously registered trade marks belonging to the same owner to preserve their ongoing protection without the need to prove genuine use. For context, in the UK, a registered trade mark can be challenged for non-use after it is not used for a continuous period of five years.

In this case, Lidl applied to register the Lidl Wordless Mark five times – in 1995, 2002, 2005, 2007 and more recently, in 2021. Most of Lidl’s applications covered the same list of goods and services.

As such, it can be reasonably concluded that Lidl made a strategic branding decision to apply for protection of the Lidl Wordless Mark regularly to ensure at least one of those registrations remained valid at any given time (i.e.: ‘evergreening’) and that it could not be exposed to revocation proceedings on the grounds of non-use. The reasons for this decision could include, for example, an intention to ensure third parties do not use a mark similar to the Lidl Wordless Mark despite the fact Lidl itself does not use it and has no genuine intention to do so.

Dismissing Lid’s appeal related to the validity point, the CoA held that four out of five registrations covering the Lidl Wordless Mark were made in bad faith and that they should be declared invalid accordingly. As part of these considerations, the CoA pointed out that Lidl failed to provide evidence of its intention why the above four applications were filed. Whilst some of the applications were filed a while ago, the issue in question was not that the relevant documents were destroyed. The Court noted that Lidl invoked privilege between them and their trade mark attorneys over the relevant documents.

Conclusion

The Court of Appeal’s decision is a helpful clarification in the context of copyright protection and the narrow applicability of the substantial part test for copyright infringement in cases involving relatively simple work.

The decision further highlights the importance of transparency of evidence showing genuine intention to use the mark and good faith in filing it to successfully defend potential evergreening allegations.

Whether Lidl will fall on its own sword as a result of this judgment remains to be seen – the discount retailer is known for sailing close to the wind in terms of selling goods branded similarly to well-established and reputable brands. The upheld part of the High Court decision related to the key elements of Lidl’s trade marks being the colour and shape (and less so the word element “Lidl”) will be particularly helpful to those challenging the ‘lookalike’ branding often adopted by discount retailers. Without a doubt, Aldi and Thatchers will be considering this decision very carefully.

If you have any queries related to protection or enforcement of your Intellectual Property rights, please do not hesitate to get in touch with one of our experienced Intellectual Property lawyers.