In a recent case, the High Court has ruled that Tesco’s use of its Clubcard logo constituted trademark infringement, copyright infringement and passing off. Tesco filed a counterclaim in response in which they alleged some of the Lidl trademarks were registered in bad faith and are therefore liable to be declared invalid.
You may or may not have noticed that the Tesco Clubcard logo has a resemblance to Lidl’s own logo. Lidl certainly thought so, having originally filed a lawsuit which said that Tesco’s use of the yellow circle on a blue background was an example of the supermarket trying to ride on Lidl’s coat-tails to promote its “Clubcard Prices” discount scheme due to Lidl’s reputation as a discount supermarket.
Lidl’s claim relies on trademarks relating to two versions of the Lidl logo. One is a logo which includes the word “Lidl”, while the other is a logo without the word Lidl. These are known throughout the case as “the Mark with Text” (MWT) and “the Mark without Text” (MWOT). The latter is a graphic made up of a blue background behind a yellow circle which is bordered by a thin red line.
Although the High Court is set to order an injunction against Tesco’s use of the Clubcard logo, Tesco is likely to ask the court to postpone requirements to change its logo until they have heard Tesco’s appeal. The injunction is likely to have a costly impact on the country’s largest supermarket by market share, with its Clubcard logo prominently featured throughout its marketing.
Keep reading to learn more about why the court came to the decision they did in relation to trademark infringement, passing off, and Copyright infringement.
Trademark infringement and passing off
When looking at whether the mark with text (Lidl’s main logo) was similar to Tesco’s Clubcard logo, the judge came to the conclusion that it was. The judge found that the presence within the logos of the brands “Lidl” and “Clubcard” respectively did not undermine this. Lidl brought its claims to the court on the basis of an infringement of Section 10 (3) of the Trade Marks Act.
The requirements for a successful claim mean that a claimant must shows a total of 9 criteria. These include the following:
i. the trade mark has sufficient reputation in the UK,
ii. the defendant is using its sign in the UK,
iii. that use must be in the course of trade,
iv. the use is without the consent of trade mark owner,
v. the defendant’s sign must be identical with or similar to the trade mark,
vi. the use is in relation to goods or services,
vii. the use of the sign must give rise to a link between the sign and the trade mark in the mind of the average consumer,
viii. this has to lead to at least one of the following consequences:
(a) detriment to the distinctive character of the mark (“dilution”), or
(b) detriment to the repute of the mark (“tarnishing”), or
(c) unfair advantage being taken of the distinctive character or repute of the mark (“free riding”),
ix. the use of the sign must be without due cause.
While most of the criteria were successful in the eyes of the judge, there were a few contentious issues which had to be decided.
Evidence for the similarity within criteria (v) included discussions inside Tesco itself, where internal communications saw concerns raised during the development of the Tesco Clubcard signs regarding the closeness in appearance between Lidl’s Mark with Text and Tesco’s Signs.
There were also several other criteria within Section 10 (3) of the Trade Marks Act which the judge assessed in order to decide whether Lidl’s trademark claims were successful.
A key question for the Judge was the question of whether the use of the Tesco Signs meant that the consumer linked them with Lidl’s Mark With Text (vii). In investigating this, the Judge found that consumers believed that the Tesco Signs meant that Tesco was matching their prices with Lidl’s prices. Tesco’s own research carried out in the form of customer surveys also provided support for the idea that the Tesco Signs led the consumer to link them with Lidl. Indeed, in these surveys, some believed that the Tesco Signs were in fact a Lidl campaign. Once again, this was further evidenced by Tesco’s own internal communications.
All of this led to requirement viii, which asks whether it has given rise to one of three possible forms of injury: (a) detriment to the distinctive character of the trademark, (b) detriment to the repute of the trademark, or (c) unfair advantage being taken of the distinctive character or repute of the trademark. These are also sometimes also known as dilution, tarnishing and free riding. The judge found that two consequences were suffered by Lidl: dilution and free riding.
For detriment, it was determined to be very difficult to prove that customers had changed their behaviour as a result of the Tesco signs. Nevertheless, the introduction of said Tesco signs necessitated a campaign by Lidl to address any perceived similarities between the two described as “reasonably expensive” in the form of half-page newspaper adverts.
The unfair advantage requirement was deemed to be fulfilled by Tesco’s benefit from the use of the Tesco signs. The Judge determined that due to the resemblance between the Tesco Clubcard Signs and Lidl Marks, Tesco was able to take advantage of Lidl’s “distinctive” reputation for low prices. It also conveyed the message that Tesco offered quality goods at the same or even lower prices than Lidl.
While it was found that the Mark with Text had been infringed by Tesco, the Mark without Text had also been found to be infringed and was a stronger claim due to the absence of the word “Lidl”.
Lidl also won for the passing off claim it had brought to court. Their claim relied on the notion that by using the Tesco Signs, Tesco were alleging that their products shared the same attributes as Lidl’s of being good quality at low prices. Passing off claims usually succeed on the basis that one party tries to deceive the consumer into believing a good or service actually belongs to another party, however this was not quite the case in this instance.
Instead, the passing off claim relates to the consumers being deceived into believing that the defendant’s products are of an quality or price to the claimant’s.
When it came to the claim for copyright infringement, Lidl also won. Tesco’s access to the Mark With Text and all of the prior evidence uncovered during the case was deemed to have been proof that Tesco had copied it when arriving at the destination of their design for the Tesco Signs.
The Judge found that the incorporation of the yellow circle within a blue square meant that the Tesco Signs consisted of a substantial element of the Mark With Text.
Tesco’s evidence was undermined by the fact that they had inaccurately explained how the Tesco Sign had come into being during cross-examination. The agency which had been involved in creating the logo was not called upon by Tesco to give evidence. The judge therefore inferred that the agency’s provision of evidence would have damaged Tesco’s case on the development of the signs.
The judge also evaluated the evidence regarding communications between Tesco and the agency, leading them to conclude that the agency copied the Mark With Text’s blue background and yellow circle concept in the development of the Tesco Signs.
As a result, the Judge concluded that Tesco had infringed the Mark With Text.
Despite losing on trademark infringement and copyright infringement, Tesco did have partial success when it came to the counterclaim.
While Tesco failed to have the four trademark registrations for the MWOT, they did succeed in having the four trademark registrations invalidated.
The reason for their success is that while Lidl applied for a trademark for the mark without text (MWOT) in 1995, and on four further occasions, the Judge decided that Lidl failed to provide positive evidence of an intention to use the MWOT. Nevertheless, the Judge ruled found that the trademark application in 2021 was not filed in bad faith, partly because it had been 11 years since the last registration. Despite the invalidation of the four previous trademark applications, as a result of the latest one, Lidl will continue to have a registration for the MWOT.
Tesco has since said that it plans to appeal, however it seems unlikely to succeed. Permission for such an appeal would need to be granted by either the Judge or the Court of Appeal.
The case itself offers an important lesson when it comes to trademark law and copyright law. It is distinct from many other cases because its focus was not on whether customers themselves were confused between the two brands, but whether Tesco exploited the reputation Lidl had for low prices by using a similar logo for its new Clubcard scheme.
It remains to be seen what will happen in the event that Tesco does decide to appeal, or the consequence it will have in terms of opening up the door to similar cases. Nevertheless, it is likely to have a significant impact on Tesco by forcing them to change their branding for their Clubcard range.
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