Lidl claims long-awaited victory in battle with Tesco over Clubcard logo

20th April 2023

On 19 April 2023, UK High Court Judge Joanna Smith handed down the long-awaited judgment in the battle between the two supermarket retailers concerning Tesco’s adoption of its Clubcard logo which bore a distinct similarity to Lidl’s well known logo. Lidl has now prevailed, with the judge holding that Tesco has infringed both Lidl’s trade mark and copyright and passed itself off.

Given how well known both parties are to the general public in the UK, and the fact that the dispute relates to logos which will be familiar to all supermarket shoppers, this case has inevitably attracted considerable public interest. However, it has also touched upon a wide range of hot topics in intellectual property (IP). These include the value of survey evidence in trade mark cases, whether use of a mark with text overlaid constitutes use of the mark without text, the ever-developing law on bad faith trade mark filings, adverse inferences about missing witnesses and statutory ownership presumptions for old copyright works.

Background

Lidl is a ‘discounter’ supermarket retailer, established in Germany in 1973, which opened its first store in the UK in 1994.  As one of the two ‘discounter’ supermarket retailers in the UK along with Aldi, Lidl’s business is based on giving its customers the best value possible – i.e. quality products at affordable prices, a concept conveyed by Lidl’s slogan “Big on Quality, Lidl on Price”. 

Lidl has proven to be very popular amongst shoppers in the UK and has grown rapidly. In 2015, its market share was about 3.5% in the UK with just over 600 stores. By 2022, that market share had risen to 7.2%, with around 920 stores. 

Tesco is the single biggest supermarket retailer in the UK, with a market share in the region of 26% in 2022.

There is intense competition between supermarkets in the UK to win market share. All supermarkets seek to encourage customers to switch from competitors and loyalty amongst their own customers. Importantly, price comparison advertising and price matching with other supermarkets are key weapons in this battle.

The dispute

Since being founded, Lidl has continuously used the logo (shown below) throughout its stores, advertising and on its products.

Lidl is the owner of UK trade mark registrations in two versions of the Lidl logo: the logo above which includes the word “LIDL” (the “Mark with Text”) and a version without that word as shown below (the “Wordless Mark”). 

Tesco’s Clubcard scheme was first launched in 1995 and was created as a loyalty scheme to reward customers for shopping at Tesco.  In September 2020, Tesco launched its ‘Clubcard Prices’ promotion to promote Clubcard in a new way by providing discounts to Clubcard holders at the point of sale on selected goods.

The sign adopted by Tesco for this scheme featured a yellow circle set within a blue square containing text including the word “Clubcard” (the “CCP Signs”), examples of which are shown below. Tesco started to use the CCP Signs extremely widely from then on throughout its stores, signage and advertising.

Lidl’s concerns over the CCP Signs

Lidl’s concerns regarding Tesco’s use of the CCP Signs were (i) its effect on the Lidl brand, in particular the extent to which it would be diluting the Lidl brand; (ii) the implied message to Tesco customers that Tesco’s prices are at the same level as Lidl’s prices, such that customers are likely to believe that the prices shown on the CCP Sign are price matched to Lidl (an impression that is likely to be reinforced by the use of the Aldi Price Match logo in close proximity to the CCP Signs, and the scope for customers to confuse Aldi with Lidl, given that both are German discounters); (iii) the potential for a subconscious association with Lidl, even where there is no conscious belief that Tesco is price matching to Lidl; and (iv) the possibility that consumers may form the impression that Lidl’s prices are not as affordable as they in fact are, because they will see Tesco’s higher prices and assume that Lidl’s prices are the same. 

The legal issues in dispute

In December 2020, Lidl issued proceedings against Tesco and asserted that Tesco’s use of the CCP Signs constituted:

1. Trade mark infringement both of its Mark with Text and the Wordless Marks;
2. Passing off; and
3. Copyright infringement.

Tesco denied these allegations, additionally counterclaiming that the Wordless Marks were liable to be declared invalid or should be revoked for lack of distinctive character, non-use and bad faith.

The trial took place in February 2023.

High Court’s judgment: key rulings

The court’s key findings were that:

1. Tesco’s use of its CCP Signs infringed Lidl’s trade mark rights in the Lidl logo by taking unfair advantage of Lidl’s reputation for value and being detrimental to the distinctive character of the Lidl logo.
2. Tesco was passing off by deceiving a substantial number of consumers into believing that Tesco’s prices represented the same value as Lidl’s prices when that was not the case.
3. Tesco’s Clubcard logo had been copied from Lidl’s logo and Tesco had therefore infringed Lidl’s copyright. 

Judge Joanna Smith’s judgment, linked here, is substantial at 102 pages long, but some of the key findings are summarised below.

Trade mark infringement of the Mark with Text

Lidl’s alleged infringement under section 10(3) Trade Marks Act 1994 (TMA) only, namely that the CCP Signs were similar to the Mark With Text, which had a reputation in the UK and the use of the CCP Signs, being without due cause, took unfair advantage of, or was detrimental to the distinctive character of the Mark with Text.

Similarity of the CCP Signs to the Mark with Text

The judge noted that on a visual comparison both the Lidl mark and the CCP Signs involve background components made up of a yellow circle set within a blue square.  Both have writing in the centre of the blue circle.  The main difference was the word(s) used on the CCP Signs (often “Clubcard Price”) and the graphically stylised “LIDL” on the Mark with Text. But, she was satisfied that the average consumer perceiving these signs as a whole would regard them as similar, notwithstanding the different words. 

The judge took considerable support for this view from the evidence including (i) a ‘Vox Populi’ showing a comments from a significant number of shoppers encountering the Clubcard logo in real life made the connection to Lidl and/or had assumed Tesco was price matching; (ii) evidence from two shoppers who came to the trial to explain their reaction directly to the Judge; (iii) Tesco’s own disclosure that Tesco itself recognised the similarity and the resulting risk of confusion.

Establishing a link

The judge noted that whilst evidence of confusion is not needed to show the requisite link, there was in fact evidence of both origin confusion and price comparison confusion by the public (see above), together with internal recognition by Tesco of the potential for that confusion. She attached “significant weight” to the Lidl Vox Populi describing this as the ‘tip of the iceberg’, given that there would be no reason for most people who had made the link and/or were confused to have come to either Lidl’s or Tesco’s attention.

As the judge put it, “the fact that so many members of the public sent unprompted messages to Tesco or Lidl following the launch of the CCP Signs identifying a perceived link between those signs and the Lidl Logo weighs strongly in favour of Lidl’s case”.

Consequently the judge concluded that a link had been established, saying “There is clear evidence of both origin and price match confusion/association together with evidence that Tesco appreciated the potential for confusion.  I consider that the average reasonably observant consumer encountering the CCP Signs in the real world at the date of the launch of the Clubcard Price campaign would draw a link between the Uses of the CCP Signs and the Mark with Text and that the available evidence amply bears out my conclusion.”

Detriment to distinctive character

The judge accepted Lidl’s evidence as to dilution of Lidl’s brand, which was unchallenged by Tesco. Lidl’s evidence was that until Tesco started using the CCP Signs, no other supermarket was using a logo that looked anything like the Lidl logo but that had now changed because Tesco has flooded the market with a similar logo, making prolific use of the CCP Signs in its stores and in all major marketing channels, spending many millions of pounds per month on advertising. The judge found that the evidence supported the proposition that Tesco’s campaign had been successful in slowing the “switching” away that was otherwise occurring.

In circumstances where it is difficult to evidence a change in economic behaviour, Lidl relied on having been forced to take responsive action to the extensive use of the CCP Signs by running a new national advertising campaign highlighting the higher prices of Tesco Clubcard products compared to those of Lidl. The judge found that Lidl had established detriment to the distinctive character of its Mark, evidenced by the fact that it had found it necessary to take this evasive action in the form of corrective advertising.

Taking unfair advantage

Despite the judge finding that there was no subjective intention by Tesco to evoke Lidl, she observed that  Lidl’s claim was really that the use of the CCP Signs resulted in a subtle but insidious transfer of image from Lidl’s Marks to Tesco’s in the minds of some consumers, whether that was Tesco’s intention or not.  

The judge considered that due to the resemblance between the CCP Signs and the Lidl Marks, Tesco had taken unfair advantage of the distinctive reputation which resides in the Lidl Marks for low price value.  This was the objective effect of the creation of the link between the CCP Signs and Lidl’s reputation, even without a subjective intention to achieve that end.

Conclusion on infringement of the Mark with Text

On the basis of the above reasons, and having found that Tesco did not have due cause to use the CCP Signs, the judge found that Lidl’s Mark with Text was infringed under section 10(3) by Tesco’s use of the CCP Signs.

Trade mark infringement of the Wordless Mark

In light of her ruling that the Mark with Text was infringed, the judge noted that the infringement claim in respect of the Wordless Mark appeared to take matters no further. But, the position as to infringement would be the same, subject to the validity of the Wordless Mark. Here, Tesco had counterclaimed that the Wordless Mark was invalid for lack of distinctive character and should be revoked for non-use and/or bad faith.

Distinctive character

In finding that the Wordless Marks had distinctive character, the judge relied heavily on a survey carried out by YouGov at Lidl’s request. In that survey, a panel of 1,252 UK grocery shoppers were show an image of the Wordless Mark and asked “please take a look at the image below before answering the question that follows.  What do you think this image is?” 75% of responses mentioned Lidl.

She concluded that the YouGov Survey provided strong evidence that the Wordless Mark, used on its own, had acquired the ability to demonstrate exclusive origin and was perceived by a significant proportion of the relevant class of consumers to indicate the goods and services of Lidl. 

Use of the Wordless Mark

Under section 46 of the TMA, a trade mark may be revoked if it has not been used for a period of 5 years. It was not disputed that the Wordless Mark had not been used as such by Lidl – it had only been used with the word LIDL on it in the form of the Mark with Text. Lidl’s position however was that such use of the Mark with Text constituted use of the Wordless Mark, in accordance with section 46(2) TMA:

“… use of a trade mark includes use in a form (the “variant form”) differing in elements which do not alter the distinctive character of the mark in the form in which it was registered…”.

The judge agreed that the facts of this case and the available evidence were in many respects similar to “the unusual circumstances” in the Specsavers v Asda case.  She accepted Lidl’s submission that the evidence supported the proposition that consumers (both Lidl’s and Tesco’s) had understood the Wordless Mark element of the Mark with Text in various of its uses as distinctive of Lidl, not merely as decorative background, but rather as a “logo” or “brand”. I.e. as indicative of origin of the goods and services offered by Lidl.

The judge also concluded that the distinguishing character of the Wordless Mark derived from the very particular combination of colours and shapes: the yellow central circle surrounded by a thin red ring, both centred within a blue square, and that these elements were not altered by the presence of the word Lidl in the yellow circle (even though the word ‘LIDL’ obviously had distinctive significance, as had the word ‘SPECSAVERS’).

Consequently, the judge found that the Wordless Mark was distinctive and had been used by Lidl.

Bad faith

Lidl had filed registrations for the Wordless Marks in 1995, 2002, 2005, 2007, with a further pending application filed in 2021.

The judge took the view that in light of Tesco’s pleaded case, the onus fell on Lidl to prove its subjective intentions at each the relevant filing dates. If it could not do so, “then a finding of bad faith must inexorably follow”. Perhaps unsurprisingly given how much time had passed, Lidl was unable to provide contemporaneous evidence of the subjective intentions/views of those who actually made these filings.  Whilst Lidl had given evidence of its current approach to filing the Wordless Mark, the judge did not consider that this shed any light on what may have been the case many years previously. Absent any evidence of its subjective intentions at the time of these filings, the judge felt bound to conclude the Wordless Mark registrations were made in bad faith and must therefore be revoked, despite also having found that Lidl had made extensive use of the Wordless Mark and that it was distinctive of Lidl.

The judge did not consider the 2021 filing to have been made in bad faith however.

Passing off

For many of the same reasons identified by the judge in relation to trade mark infringement, the judge also concluded that a substantial number of customers would be deceived by the CCP Signs into believing that Tesco was offering the same value as Lidl or that it was price matching. This amounted to passing off.

Copyright infringement

Finally, Lidl also argued that it was the owner of copyright in original artistic works consisting of the Mark with Text and the Wordless Mark which had been infringed by Tesco copying a substantial part in the design for the CCP Signs.

It was common ground that Tesco was well aware of, and had access to, Lidl’s marks.  A visual comparison of the CCP Signs and the Mark with Text indicated that the similarities were sufficiently close that they are more likely to be the result of copying than mere coincidence. The judge found that, considering the question quantitively rather than qualitatively, the blue background with the yellow circle plainly forms a substantial part of the Mark with Text.  Consequently it was for Tesco to provide an explanation for that similarity.  

The judge was extremely critical of Tesco’s evidence of how the CCP Signs were created.  She described Tesco’s evidence as “inaccurate” and appeared to have been designed only to obscure the involvement of Tesco’s external design agency, who Tesco could have, but did not, call to give evidence.

She went on to note “… this is not a case where the position on copying is marginal on the evidence and ultimately, I consider that the copying was a function of the strong desire on the part of Tesco (as evidenced in its internal documents) to stop the switching away of financially squeezed customers looking for [Every Day Low Prices] and to convey the message of “value”, a message which Lidl’s Logo already conveyed so effectively…..

The judge found therefore that Tesco had infringed Lidl’s copyright

Comment

This lengthy judgment is likely to be the most high profile trade mark decision of 2023 in the UK. This is not just because of the prominence of parties involved, but also because it touches on so many hot topics in IP law, particularly in trade mark disputes. 

From the outset this was not a typical trade mark infringement claim.  It was not Lidl’s pleaded case that customers were being confused between Lidl and Tesco (although as the case progressed it became apparent that was some evidence of origin confusion). Rather, Tesco’s use of the Clubcard logo took insidious unfair advantage of Lidl’s reputation for great value (i.e. an infringement claim under s.10(3)): customers were seeing the Clubcard logo and, because of its similarity to the Lidl logo, were thinking that Tesco was price matching against Lidl.

Proving this was heavily dependent on the evidence that Lidl could obtain, and the Judge carried out a detailed analysis of it all in her 102 page judgment. To succeed on section 10(3), as well as on passing off and copyright infringement, a considerable string of separate elements needed to be proved, including the similarity of the marks, that consumers are making a link between them, that unfair advantage is being taken, that detriment to the distinctiveness of the mark is caused, that there was deception, that there was copying, etc.

Through the survey (supported, as it was, by robust expert evidence), Lidl was able to satisfy the judge that a large proportion of supermarket shoppers seeing a yellow circle within a blue square (i.e. the Wordless Mark) would recognise it as the Lidl brand, even without the word LIDL. Absent such direct evidence of this, it may have been harder for the judge to be persuaded that this was the case.

Lidl’s Vox Populi was another important evidential strand, because it showed that a significant number of shoppers encountering the CCP Sign in real life were, unprompted, making the connection to Lidl and/or had assumed that Tesco was price matching against Lidl. Helpfully, the judge also heard directly from two shoppers who gave evidence to this effect on Lidl’s behalf during the trial itself.

That this deception was taking place was also re-enforced by the contents of Tesco’s disclosure which revealed that Tesco employees involved in the CCP Sign launch were fully aware of this risk prior to launch, including from Tesco’s own market research. The judge felt able to conclude, therefore that, the specific instances of deception which had come to the parties’ attention during the case were merely only the tip of the iceberg.

The one disappointment for Lidl, although immaterial to the overall outcome of the case, will be the judge’s conclusions on bad faith in respect of its earlier filings for Wordless Mark registrations between 1995 and 2007.  Absent any evidence of its subjective intentions for filings made in the 1990s and 2000s, the judge felt bound to conclude the Wordless Mark registrations were made in bad faith and must therefore be revoked, a particularly peculiar outcome given the judge’s findings that Lidl had been using the Wordless Mark throughout that period and that it was highly distinctive of Lidl. If the judge’s approach to this issue is correct, it could now be very challenging for owners of trade marks filed many years ago (where those involved will have likely left the business) to defend such filings against allegations of bad faith.

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