SUPERMARKETS SQUARE OFF AGAIN

KEY POINTS

This case underscores the value of a registered trade mark and solid evidence of reputation, and the potential value of comments posted online by consumers

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It demonstrates the need for a party to disclose, in litigation, comments made by consumers and to supply details that would enable the other party to call them as witnesses

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It demonstrates also the dangers inherent in re-registering marks in order to ‘evergreen’ them

MARKS

In March 2024, the Court of Appeal issued its decision on the appeals filed by the supermarket chains Lidl and Tesco against the High Court’s 2023 decision that Tesco had infringed Lidl’s trade marks and copyright and was guilty of passing off, and that Lidl had repeatedly re-registered one of its marks in bad faith.

This case concerned Tesco’s use, from September 2020 onwards, of signs in the form shown (the Clubcard Signs) as part of its Clubcard programme, which offers discounted prices to members. Lidl owned UK trade mark registrations for two marks, also shown, referred to as the Textless Mark and the Combination Mark.

 Lidl claimed that Tesco’s use of the Clubcard Signs:

1. infringed its reputed trade mark registrations, under s10(3) of the Trade Marks Act 1994 (TMA), by taking unfair advantage of, and causing detriment to, Lidl’s reputed marks;
2. constituted passing off; and
3. infringed Lidl’s copyright.

Tesco counterclaimed for cancellation of Lidl’s UK trade mark registration of the Textless Mark on the grounds of both:

1. non-use; and
2. its having been invalidly registered in bad faith contrary to s3(6) TMA. Tesco’s case was that Lidl had repeatedly registered the Textless Mark purely as a means of blocking use by others, rather than with any intention to actually use it in practice.

The 2023 decision

Defending, Tesco argued that the shared backgrounds in the marks were commonplace and drowned by the contrasting texts. It also argued that the superimposition of the word ‘Clubcard’ and, where applicable, the Tesco price was sufficient to “block out the sun”. Lidl relied on the results of a 2021 survey commissioned from the polling agency YouGov plc, which involved more than 1,200 respondents, and on social media posts and unprompted feedback from consumers.

Interestingly, there was no evidence from the parties’ disclosure and Lidl’s searches of social media that any consumer had noticed that the Clubcard Signs did not include the red border that forms part of Lidl’s Combination Mark.

Witness issues

Lidl called as witnesses two individual consumers who had interpreted Tesco’s use of the Clubcard Signs in advertising as an offer that Tesco was guaranteeing the same prices as Lidl for the products concerned. The trial Judge considered this consistent evidence as significant. The High Court noted the fact that, as revealed in disclosure, Tesco employees developing the Clubcard Signs had identified a similarity between them and the Combination Mark.

The Court found that the Clubcard Signs were similar to the Combination Mark on the basis that the text within the Clubcard Signs did not have “the effect of extinguishing the strong impression of similarity conveyed by their backgrounds in the form of a yellow circle sitting in the middle of a blue square”. On the claim of unfair detriment, the Court relied upon the respondents to the YouGov survey, who on being presented with the Clubcard Signs thought that Tesco was matching Lidl’s prices, even where it was not.

“Ultimately, the Court found s10(3) trade mark infringement, passing off and copyright infringement”

The Court found that the fact that Tesco’s use of the Clubcard Signs had obliged Lidl to carry out a corrective marketing campaign constituted detriment. Criticising the fact that Tesco had not provided any evidence from its external creative marketing agents about the creation of the Clubcard Signs, the Court dismissed Tesco’s claim that its use had been with due cause. Ultimately, the Court found s10(3) trade mark infringement, passing off and copyright infringement.

Bad faith defence

Defending the bad-faith invalidity action against its UK registrations of the Textless Mark, Lidl relied on the Slovakian Trade Mark Registry’s earlier rejection of Tesco’s non-use revocation action against Lidl’s Slovakian registration of the Textless Mark. Lidl argued that the Slovakian Registry’s finding that use of the Combination Mark constituted use of the Textless Mark was evidence that the Textless Mark had not been registered in bad faith.

The High Court found that Lidl had, through its use of the Combination Mark, made genuine use of the Textless Mark in the UK. This followed the ECJ’s finding in Specsavers International Healthcare Ltd v Asda Stores Ltd¹ that superimposing text onto a mark did not alter its distinctive character. However, in what might seem to be a contradictory position to its finding of genuine use, the High Court found that, since Lidl had failed to show a genuine intention to use the Textless Mark without the Lidl name inside it, those registrations of the Textless Mark had been registered in bad faith and should be cancelled as Tesco requested. The High Court commented that “a finding of use is not sufficient to protect against a finding of bad faith”.

Appeal bases

Tesco appealed the findings of trade mark and copyright infringement and passing off. Lidl appealed the cancellation of its registrations of the Textless Mark on the basis that they had been invalidly registered in bad faith.

The basis of Tesco’s appeal was that the trial Judge had not assessed the evidence filed by Lidl correctly: specifically, that she had been wrong to find that an average consumer seeing the Clubcard Signs would be led to believe that the price being advertised had been price-matched by Tesco with the equivalent Lidl price, so that it was the same or a lower price than Lidl’s. Tesco argued that, without that error, there was no basis for finding trade mark infringement or passing off. Tesco also appealed the conclusions reached on detriment, unfair advantage and due cause in the trade mark infringement claim.

Tesco argued that the trial Judge had erred in principle by accepting evidence based on two individuals and comments filed online because such evidence could not stand as representative or indicative of the response of the average consumer. However, the Court of Appeal pointed out that, at the trial, Tesco’s counsel never contended that such evidence was irrelevant and therefore inadmissible.

Tesco’s other criticism was that the Judge erred in principle in taking into account results of a 2020 survey commissioned by Tesco from an external agency without deciding whether these results were statistically significant. However, as the Court of Appeal pointed out, Tesco’s counsel had not contended at the trial that these survey results were irrelevant and therefore inadmissible.

“Tesco criticised the trial Judge for placing weight upon comments submitted by consumers”

Tesco further challenged the trial Judge’s reliance on the evidence of the two consumer witnesses called by Lidl to support her findings of unfair advantage (for the trade mark infringement claim) and misrepresentation (passing off). Tesco criticised the Judge for finding that the witnesses’ evidence was representative of ordinary consumers. The Court of Appeal held that the weight to be given to their evidence was a matter for the trial Judge to decide. The Court of Appeal pointed out that while Tesco submitted in its appeal that its evidence was atypical, it did not make such submissions at the trial.

Tesco criticised the trial Judge for placing weight upon comments submitted by consumers since, apart from the two individuals called by Lidl to give evidence, it had not been possible to probe their reasons for making these comments. However, the Court of Appeal pointed out that Tesco had not provided Lidl with contact details for relevant consumers until it was too late for Lidl to obtain evidence related to them. Lidl had thus called the only two people for whom contact details had been provided. On that basis the Court of Appeal held that the trial Judge was entitled to read the other comments as supplementing the evidence of the two consumers who had been called.

Tesco’s only challenge to the trial Judge’s finding of unfair advantage and detriment was that the Judge erred in finding that there had been a change in the economic behaviour of consumers. Tesco accepted that, if Lidl’s price-matching allegation were proven, that would be evidence of such a change. Tesco did not dispute the finding that its use of the Clubcard Signs diluted the distinctiveness of the Combination Mark, but contended that this was not sufficient for the other findings in the absence of a consequential change in the behaviour of consumers.

The Court of Appeal pointed out that the trial Judge’s conclusion was not based explicitly on Lidl’s price-matching allegation, but was also based on the fact that:

1. Tesco’s Clubcard campaign was successful in slowing consumers’ switch from Tesco to Lidl; and
2. Lidl felt obliged to engage in corrective advertising to promote its lower prices, making a comparison to Tesco Clubcard prices.

Appeal outcomes

The Court of Appeal dismissed Tesco’s appeal against the findings of trade mark infringement and passing off on the basis that it had not been persuaded that the trial Judge’s decision on these was not “rationally unsupportable”. In its general comments on evidence, the Court of Appeal said that “it can be of value for the court to receive evidence as to the shopping habits of consumers of the relevant goods or services: for example, as to whether they are in the habit of reading the label on an item before selecting it for purchase or whether they simply rely upon the appearance of the packaging”.

In its appeal, Tesco challenged the finding that a substantial part of Lidl’s copyright work had been copied. The Court of Appeal agreed with Tesco here, pointing out that Tesco had “not copied at least two of the elements” that made Lidl’s work original. Thus, the finding of copyright infringement was quashed.

In relation to Lidl’s appeal against the invalidity of its registrations of the Textless Mark, the Court of Appeal commented that “the multiplicity of grounds suggests that Lidl are unable to identify any serious flaw in the judge’s reasoning”. The Court of Appeal dismissed as irrelevant the Slovakian Registry’s findings and the statements of intention to use the Textless Mark filed by Lidl with the US trade mark registration authorities.

The Court of Appeal held that, if Lidl’s argument that use of the Combination Mark constituted use of the Textless Mark were correct, there would have been no necessity to register the Textless Mark unless the intention was to give Lidl broader protection. The Court of Appeal held that Lidl had failed to rebut the allegation of bad faith filing in relation to these registrations by demonstrating that at the applicable filing dates it had the necessary intention to use the Textless Mark. The Court of Appeal held that it could therefore be inferred that the registrations had been applied for solely so that they could function as weapons, rather than for actual use. Accordingly, the finding of invalidity of these registrations of the Textless Mark was upheld.

Again, to some, this upholding of the invalidity of the registrations of the Textless Mark may sit uncomfortably with the High Court’s finding that Lidl had made genuine use of the Textless Mark and consequent rejection of Tesco’s non-use revocation claim against the Textless Mark registrations.

Practical effects

The quashing of the finding of copyright infringement and the upholding of the cancellation of the Textless Mark registrations makes little practical difference, given that the findings of trade mark infringement (of the Combination Mark) and passing off were upheld. Although its Clubcard graphics still use blue and yellow colours, Tesco has since the decision abandoned its use of a yellow circle within a blue square in its Clubcard advertising. Given the long period of use of the Clubcard Mark, Lidl is likely to be awarded substantial damages.

1. Case C-252/12

David Birchall is a Chartered Trade Mark Attorney and a Partner at Venner Shipley LLP
dbirchall@vennershipley.co.uk

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