High Court rules in a key trademark battle

April 25, 2023

High Court rules in a key trademark battle

All eyes were on the High Court last week as Mrs Justice Joanna Smith handed down judgment in the high-profile trademark battle brought by German discount supermarket Lidl against rival Tesco.

As we reported in March, the two competitors have been locked in a fierce dispute over a rather simplistic image – a yellow circle on a blue background. The image is used in Lidl’s main logo, and since September 2020, Tesco has also been using it for Clubcard promotions. Lidl accused Tesco of infringing its trademark.

In an eagerly awaited, 102-page judgment last week, Mrs Justice Joanna Smith ruled in favour of Lidl, finding that Tesco had ‘taken unfair advantage of the distinctive reputation which resides in the Lidl [trademarks] for low price (discounted) value’.

But interestingly, she rejected the assertion in Lidl’s pleaded claim – which was played down during the hearing itself – that Tesco had done so deliberately, with ‘subjective intent and deliberate “coat-tailing”’. Lidl’s claim could still succeed, however, because it did not need to prove ‘subjective intention’ on the part of Tesco. The judge pointed to the earlier cases of Jack Wills Limited v House of Fraser (Stores) Limited [2014] EWHC 110 (Ch) and Lifestyle Equities C.V. v Santa Monica Polo Club Ltd [2018] F.S.R. 15 as authority that subjective intention is not required.

Mrs Justice Joanna Smith said: ‘I do not doubt that… Tesco did not want its customers mistaking its advertising for that of Lidl, just as it did not want to do anything which might tarnish its Clubcard brand; I also do not doubt that despite internal disquiet [by some Tesco staff], Tesco ultimately convinced itself that the [Clubcard price] signs would involve no misattribution to Lidl.

‘This seems to have been because Tesco considered its Clubcard brand to be so strong that the reference to “Clubcard” on the [sign] would immediately dispel any issues that there might otherwise have been.

‘However, looking closely at the evidence, Tesco provided instructions to [an advertising agency] which plainly invited them to focus on achieving a perception of value and, amongst other things, to look at how Lidl (amongst other “discounter” competitors) went about doing this. [The agency] produced a design which Tesco’s employees immediately appreciated was likely to cause confusion with Lidl, but Tesco went ahead with the Clubcard Prices promotion in any event.

‘In my judgment, none of these facts is inconsistent with copying with a view to enhancing the value perception of Tesco’s own Clubcard Prices offering by adopting a get up, in the form of a blue background and yellow circle, which already had a proven association with a strong value proposition (ie. the Lidl Logo) in the minds of consumers. I find that is what occurred.

‘Put another way, the fact that there was no deliberate intention positively to evoke Lidl does not mean that the design was not copied with the focus being on the message that a blue and yellow background would convey for the Clubcard campaign.’

So will this ruling have a big impact for other retailers? It will always depend on the factual evidence, of course. In the Lidl ruling, the judge was quite persuaded by evidence that Lidl provided of ‘spontaneous, unprompted comments’ made by members of the public in relation to Tesco’s advertising. As Lidl’s barrister put it, these comments were valuable because they were made by people with ‘no dog in the fight’. There was evidence that Tesco’s advertising was causing customers to make a link with Lidl, and even to assume that the Clubcard offers were price-matched with the discounter. One customer had commented: ‘I now like the fact you price match with Lidl and the special price for Clubcard holders is great – I saved quite a bit today’.

Mrs Justice Joanna Smith was also swayed by evidence of various comments made by Tesco’s own internal team, which referred to the similarity with Lidl’s branding. For example, a member of the marketing team, on returning from paternity leave, had sent an email that said: ‘When I first saw it, I immediately thought that [it] looks very similar to the Lidl brand logo. I assuming you guys are conscious of that?”.

In last week’s ruling, Tesco did succeed in a counterclaim that other trademarks (‘the Wordless Mark’) were invalid because they had been registered as a ‘legal weapon’ with no intention to use them at the time. The judge noted, however, that this issue did not ‘advance Tesco’s position’ in the main claim.

Every case will turn on its facts, but last week’s ruling is bound to encourage other similar claims to be brought – particularly in the ultra-competitive grocery sector, where retailers are chasing the same price-conscious consumers. And next time, it could well be a discount supermarket that finds itself in the firing line over one of its designs.

As for the yellow circle – Tesco has already announced its intention to appeal.

April 25, 2023