Sectors

Services

Background
14 June 2023

Supermarket Wars

Summary

To the surprise of some, the trade mark fight between Lidl and Tesco has resolved in Lidl’s favour. The issue was over the latter’s use of a yellow circle on a blue background as part of its Clubcard marketing,[1] and Mrs. Justice Smith concluded that Tesco’s marks did infringe Lidl’s registered marks. However, she also found that Lidl’s trade mark without the word ‘Lidl’ had been registered in bad faith, and was therefore invalid. The judgment is notable for the fact that the judge placed significant reliance on Lidl’s survey evidence, something that might be breathing life back into survey evidence for future cases.

Background

This case involves two consolidated claims between Lidl and Tesco concerning infringement of Lidl’s registered trade marks, passing off, and an allegation of copyright infringement. In this article, we shall focus on the ramifications of the primary trade mark infringement case. Tesco counterclaimed for some of Lidl’s trade marks to be declared invalid or revoked for non-use, and/or lack of distinctive character, and/or bad faith. Lidl relied upon its trade mark rights in relation to two versions of its logo: One with the word ‘Lidl’ (the ‘Mark with Text’) and one without (the ‘Wordless Mark’). Lidl contended that the graphical device forming the Wordless Mark was itself distinctive of its service and goods as a ‘discounter supermarket that offers value,’ and had generated a reputation and goodwill since 2017 in connection with its marketing slogan ‘Big on quality, Lidl on prices.’

The respective marks are set out below:

 

Party Submissions

Lidl’s claim relied solely on section 10(3) of the Trade Marks Act 1994, which is designed to protect trade marks with a reputation against others taking unfair advantage of the mark to the detriment of that mark, without due cause. As well as witness statement evidence, Lidl relied on a survey carried out by YouGov between February 19th-22nd 2021 (the ‘YouGov Survey’), and the so-called ‘Lidl Vox Populi’ (i.e. social media posts and unprompted feedback received from Lidl’s customers). Lidl admitted that Tesco never used the ‘CCP Signifiers Background’ by itself, and so the correct comparison was between the Lidl marks and the ‘CCP Signs.’

Tesco stressed the differences between the marks, being the word ‘Lidl’ on the Mark with Text and the word ‘Clubcard’ on the CCP Signs, both of which are well-known distinctive trademarks in their own right. Counsel for Tesco argued that the word ‘Clubcard’ along with the particular price offer literally ‘block[s] out the sun.’[2] Tesco also argued that those pieces of text are the only part of the respective marks that exist aurally, and the backgrounds to those textual elements are conceptually commonplace and drowned out by the text.[3] Tesco also claimed that it did not use the Tesco Marks without due cause, the test for which must, they said, balance the interests of the proprietor trade mark and the interests of other economic operators in having signs capable of denoting their products and services.[4]  Additionally, Tesco counterclaimed that the Wordless Mark should be declared invalid due to 1) non-use, 2) lack of distinctive character, and 3) registration in bad faith. The bad faith arose from registering the Wordless Mark several times over without the intention to use such but rather to benefit from the five year ‘shield’ against non-use as a basis for invalidation.

Decision and Reasons for Judgment

Smith J. made the following findings:

  1. Tesco’s use of the CCP infringed both the Market with Text and the Wordless Mark under s10(3);
  2. Lidl had used the Wordless Mark (except with regard to certain specific goods and services), so it could not be invalid for non-use;
  3. The Wordless Mark did not lack distinctive character, so could not be invalid for such reason; but
  4. The Wordless Mark was invalid, due to being registered in bad faith.

Infringement

Despite Tesco’s objections, Smith J. found that the CCP Signs were similar to the Mark with Text:

“The visual similarity is here the significant feature and, whilst I accept that the text represents an important point of difference, nonetheless I do not consider that it has 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. This was an impression that I formed myself upon seeing the Mark with Text and the CCP Signs.[5]

Tesco apparently did not help themselves when it came to this conclusion, because during disclosure, it came to light that several members of Tesco’s internal team (whose job it is to understand perceptions of the average consumer) identified the similarity between the Mark with Text and the CCP Signs (together with the potential confusion) during the development phase of the CCP Signs.[6]  This evidence clearly weighed heavily on the judge.

In terms of whether the CCP Signs took unfair advantage of the Mark with Text, Smith J. relied on the YouGov Survey, which showed that a number of people who viewed the CCP Signs thought that Tesco was matching Lidl’s prices, even when they were not. This was particularly evident when the CCP signs were used in conjunction with nearby signage showing that Tesco was price-matching with Aldi (which has a similar consumer perception to Lidl). Perhaps generously, Smith J. rejected Lidl’s case that Tesco had the deliberate subjective intention of riding on Lidl’s coat tails.[7] However, following earlier case law,[8] she found that subjective intention was not required to establish unfair advantage.

In terms of detriment, Smith J. found that the use of the CCP Signs had forced Lidl to undertake a corrective marketing strategy, referencing ‘Unmatched Value.’[9] She also found that the use of the CCP Signs had resulted in ‘a subtle but insidious transfer of image’ from Lidl’s Marks to the CCP Signs in the perception of some consumers.[10]  Ultimately, Smith J. dismissed Tesco’s arguments with regard to due cause, and was especially critical of Tesco failing to provide a witness from its external creative agency to give evidence as to the creation process for the CCP signs.[11]

Non-Use and Lack of Distinctive Character

Despite the fact that Lidl had never used the Wordless Mark on a stand-alone basis, Smith J. found that use of the Mark with Text was also use of the Wordless Mark. This followed the CJEU decision in Specsavers v Asda,[12] which found that the addition of the name of the trade mark owner did not alter the distinctive character of the mark without words.[13] Smith J. further relied on the YouGov Survey, which found that consumers associated the Wordless Mark with Lidl, even without reference to the word Lidl.[14]

Bad Faith

The one win that Tesco achieved was the finding that the Wordless Mark was registered in bad faith. The Court was bound by the Court of Appeal’s decision that Tesco had provided sufficient evidence of prima facie bad faith, that then the burden was on Lidl to overcome such.[15] This evidence pointed to the following facts:

  • Lidl had no intention to use the mark, which was just a legal weapon;
  • At the time the Wordless Mark was filed, Lidl already had the Mark with Text for all the same goods and services; and
  • Lidl had engaged in evergreening – i.e. periodically re-registering the mark, to benefit from the five year shield against revocation for non-use.

The judge does not appear to have been keen to side with Tesco on this, but her hands were tied by the Court of Appeal. As she explained:

“I am bound to find that in the absence of any evidence of the type I have already identified, Lidl has been unable to displace the prima facie inference raised by Tesco that, at the time of the 1995 Application, the Wordless Mark was registered in order to use it as a weapon to secure a wider legal monopoly than it was entitled to, with no genuine intention to use it. This is sufficient to amount to bad faith.[16]

However, given Smith J.’s findings on infringement of the Mark with Text, the finding of bad faith with regard to the Wordless Mark will make very little practical difference to the parties going forward.

Commentary

Lidl’s comprehensive success in this claim is owed to the sound evidence that it was able to supply in support of the claim. A large part of this was the YouGov Survey – a survey carried out by a polling organisation backed up with expert evidence. While lawyers in the past have had mixed opinions on the value of survey evidence, and the courts poured cold water on their use by making it expense to up suitable surveys, this case shows that where it is used effectively, survey evidence can have a very powerful impact.  It is important to have a large sample size (in this case the YouGov Survey had 1,252 panellists) and use non-leading questions which then produce statistically significant results. In the YouGov Survey, when shown the Wordless Mark and asked ‘What do you think this image is?,’ 73% of respondents mentioned Lidl, and a further 2.3% mentioned Lidl with another brand. Without leading, 75% of respondents linked the Wordless Mark to Lidl – that is compelling evidence, of which the Court duly took notice.

While the end result of invalidating the Wordless Mark did not assist Tesco in any significant way, the reasoning that the Judge used to decide that the Wordless Mark had been registered in bad faith will be useful to trade mark proprietors moving forward. To combat an allegation of bad faith, it is important to have contemporaneous documents that give a credible reason for registering a mark. Without such, it will be difficult to combat accusations of attempted evergreening.

[1] Lidl Great Britain Ltd & Anor v Tesco Stores Ltd & Anor [2023] EWHC 873 (Ch)

[2] Above n. 1 at 90.

[3] Ibid.

[4] See Comic Enterprises v Twentieth Century Fox Film Corp [2016] EWCA Civ 41 at 123.

[5] Above n. 1 at 91.

[6] Above n. 1 at 92.

[7] Above n. 1 at 155.

[8] 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

[9] Above n. 1 at 170.

[10] Above n. 1 at 176.

[11] Above n. 1 at 307(ii).

[12] Specsavers International Healthcare Ltd v Asda Stores [2013] ETMR 46

[13] Above n. 1 at 219.

[14] Above n. 1 at 221.

[15] Above n. 1 at 240.

[16] Above n. 1 at 249.