High Court refuses Tesco’s request to award damages instead of an injunction for copyright infringement

21st June 2023

In April 2023, as reported here: Lidl claims long-awaited victory over Tesco with Clubcard logo (brandwrites.law), the High Court found[1] that Tesco’s use of its Clubcard logo infringed Lidl’s trade mark rights in the Lidl logo, constituted passing off and found that the Clubcard logo had been copied from Lidl’s logo, thereby infringing Lidl’s copyright.

At the consequential hearing in May 2023 between the parties to decide the form of order to be granted following the trial judgment, it was common ground that, subject to the outcome of any appeal[2], Lidl would be entitled to an injunction in respect of the findings of trade mark infringement and passing off. Tesco however argued that, in respect of the copyright infringement finding, Lidl should not be entitled to an injunction, but only damages.

In a judgment handed down on 21 June 2023, Judge Joanna Smith rejected Tesco’s argument.

Relevant factors

The Judge found that whilst the Court has a wide discretion to award damages instead of an injunction, the prima facie position is that an injunction should be granted and the burden was on Tesco, as the defendant, to show why it should not. Following the leading case of Shelfer[3], the factors to be considered were:

1. Was the injury to Lidl’s rights arising from the copyright infringement small?;
2. Was it capable of being estimated in money?;
3. Was it one which could be adequately compensated by a small money (i.e. damages) payment?; and
4. Is the case one in which it would be oppressive to the defendant to grant an injunction?

1. Injury to Lidl’s rights?

The Judge found that whether the damage suffered by Lidl as a result of Tesco’s copyright infringement was assessed on the user principle (i.e. on a reasonable royalty basis) or by reference to the valuation of internal licenses, the injury caused to Lidl was very likely to be “substantial” given the scale of Tesco’s business and Tesco’s purpose of using the work. The Judge had previously found in the trial judgment that this purpose was Tesco’s strong desire to stop the switching away of financially squeezed customers and to convey the message of ‘value’ embodied by the Lidl logo. That purpose would plainly be relevant to the hypothetical negotiation of a reasonable royalty between the parties.  

2. Capable of being estimated in money?

With regard to whether the damage was capable of being estimated in money, the Judge accepted that assessing damages for past infringement will require the court to estimate how effective the unfair advantage obtained by Tesco had been in (i) preventing switching of consumers to Lidl; (ii) encouraging switching of consumers away from Lidl; and (iii) how long that benefit has or will last.  That assessment would not be easy and the result inevitably imperfect, but that would only be exacerbated by permitting Tesco’s use to continue (i.e. if an injunction were not ordered).

3. Compensation by a small payment?

As to whether Lidl could be compensated by a small payment, the Judge again noted the sheer scale, duration and extent of Tesco’s infringing use of the logo and the success of its Clubcard Prices promotion. She concluded that it was difficult to see how the compensation due to Lidl could be “anything other than substantial”. 

4. Oppressive to Tesco?

As to whether it would be oppressive to Tesco to grant an injunction, the Judge recognised that Tesco would have to incur significant costs in removing the logo to comply with any injunction, but that did not outweigh Lidl’s legitimate interest in obtaining it given the extent of damage that Tesco’s use of the logo had and would continue to cause unless stopped. The Judge noted here that Lidl had made a number of settlement offers to Tesco throughout the action giving Tesco the opportunity to change the logo on reasonable timescales without making any damages payment, all of which Tesco had refused. The Judge noted that it would not be oppressive to grant an injunction in circumstances where Tesco refused to cease use of the logo, but on the contrary had continued its roll out whilst ignoring reasonable offers from Lidl. Tesco was aware of the risks attached to so doing and yet it chose to persist in the unlawful use.

Comment

The judgment demonstrates the considerable hurdles which a defendant would have to overcome to persuade the Court not to grant an injunction following a finding of infringement. Whilst there may be cases where damages in lieu of an injunction would be appropriate, they are likely to be very few and far between.

Bird & Bird  (Ewan Grist, Tristan Sherliker, Emma Green and Bryony Gold) acted for Lidl.

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[1] [2023] EWHC 873 (Ch)

[2] Both Tesco and Lidl are currently seeking permission to appeal certain aspects of the trial judgment from the Court of Appeal

[3] Shelfer v City of London Electric Lighting Company [1895] 1 Ch 287