The supermarket wars continued on Wednesday 19 April, with Mrs Justice J. Smith handing down her judgment in the High Court in favour of Lidl.
For context and a summary of the previous decision in this matter, see our previous article here.
At 102 pages, this latest judgment is not for the faint hearted. If you wish to peruse it yourself, then you can find it here. However, in summary, Smith J found in favour of Lidl on “its claims of trade mark infringement in respect of the Mark with Text, passing off and copyright infringement”. There are several aspects to this judgment, which we will break down separately below.
TRADE MARK INFRINGEMENT
Lidl only claimed trade mark infringement under s10(3). However, the Judge did find consumer confusion as to origin. Under s10(3) and Jack Wills, Smith J found that although Tesco had not “intentionally evo[ked]” the Lidl marks, they had taken unfair advantage through the “insidious image transfer” to Tesco of Lidl’s marks’ connotations of good quality goods at low prices.
Considering that direct evidence of change to consumer’s behaviour can be difficult to obtain, Smith J instead read into “the fact that [Lidl] has found it necessary to take evasive action in the form of corrective advertising” as evidence of such a change in consumer behaviour.
COUNTERCLAIMS TO TRADE MARK INFRINGEMENT
Tesco’s counterclaim that Lidl’s Wordless Mark should be revoked for non-use failed in part. Interestingly, Smith J found that the Wordless Mark had been used whenever the Mark with Text was used. She applied the test as set out by Kitchin LJ in Specsavers, namely that “if the mark as registered (here the Wordless logo mark) is used only as part of a composite mark… the use must be such that the mark as registered is itself perceived as indicative of the origin of the goods or services” - to support her finding that use of the Mark with Text was equivalent to use of the Wordless Mark. Nevertheless, Lidl’s use of the Wordless Mark did not extend to all of the goods and services covered by the registrations, and so partial revocation was found.
In considering whether the Wordless Mark had distinctive character, the Judge determined that evidence of consumer confusion between Tesco’s and Lidl’s signs demonstrated that the Wordless Mark was perceived as indicative of the origin of Lidl’s goods and services and was, therefore, distinctive and validly registered.
The Judge also dismissed Tesco’s counterclaim for invalidity that was based on bad faith. The first of the Wordless Marks was filed in 1995 with further applications filed in 2002, 2005 and 2007 - the timing of which indicated ‘evergreening’ (where applications are regularly made to avoid the genuine use requirement). A decision on the bad faith issues was eagerly anticipated, following recent case law indicating that a proprietor’s commercial strategy at the time of filing might be a relevant consideration in determining whether they filed the application in bad faith. In fact, due to the passage of time, Lidl was unable to demonstrate that it had an intention to use the mark at the time of filing, and so invalidity was found for the Wordless Mark. The most recent 2021 application was not found to be filed in bad faith, since its filing some 11 years after the previous registration did not appear to be a countermeasure to avoid the use requirement and its scope was substantially different to those of earlier registrations.
The main misrepresentation claimed in this case was that Tesco had ‘price matched’ its products with the equivalent products of Lidl. Lidl said this had led to them suffering losses as, if not for this misrepresentation, price aware consumers would have purchased similar goods from Lidl rather than Tesco.
Smith J found that Lidl’s logo did evoke lower prices in the minds of consumers and a substantial number of the relevant public falsely believed that Tesco had price matched with Lidl. The Judge also found that “under the Clubcard Prices Scheme (at least) some of the Tesco prices are not as good as Lidl prices”. Therefore, she established damage, and thus also passing off.
Smith J rejected Tesco’s argument that Lidl’s logo was neither sufficiently complex nor involving sufficient skill to qualify as an original work and therefore attract copyright protection.
Smith J also determined that although the authorship of the work had been “lost in the mists of time”, Lidl had carried out a reasonable authorship search and therefore Lidl held the copyright in the work, following s. 104(5) CDPA 1988.
Although Smith J found that there was no subjective intention to take advantage in respect of the trade mark claim, she determined that, regardless, Tesco’s signs were copies of Lidl’s logo. The Judge observed that both Tesco and its design agency (of which Tesco appears to have tried to disguise their use) had access to Lidl’s logo.
Smith J then found that the similarities of Tesco’s signs with those of Lidl’s Marks were “sufficiently close that they are more likely to be the result of copying than mere coincidence” and therefore, the inference of copying arose. Tesco needed to rebut this inference.
The Judge determined that Tesco’s internal evidence presented on the development of design of their sign was “inaccurate evidence which appears to have been designed only to obscure [the design agency’s] involvement”. Justice Smith went on to draw an adverse inference from the fact that Tesco did not call anyone from their design agency to give evidence of independent design. This concluded with Justice Smith finding that Tesco’s design agency did copy the Lidl logo “as part of their exploratory work commission by Tesco and thereafter adopted by Tesco”.
The outcome of this case was heavily dependent on the facts and evidence before the court. Tesco has already indicated that it will seek to appeal the decision. If permission is granted, it seems likely to result in cross-appeal by Lidl on the issues around validity and bad faith. Nevertheless, several points were instructive for the future protection and enforcement of logo marks:
Obtaining broad protection: Somewhat surprisingly, Lidl’s success was equally based on the Wordless Marks and the Mark with Text, with use of the latter being sufficient to support use of the former. This judgment seems to emphasise the importance of the colour and appearance of a brand as opposed to its name when establishing infringement. The concerns in this market over brand ‘misappropriation’ highlighted in the evidence also showed that wider brand associations beyond merely the retailer’s name would be hugely relevant and may be even more so where ‘lookalikes’ feature.
Retention of commercial records from time of filing: The finding of invalidity of Lidl’s marks highlights the difficulty of supporting enforcement of long-standing rights, which may have been obtained for good reason, but where records were not created or were since lost. Lidl’s inability to provide the background rationale for filing the first Wordless Mark in 1995, and subsequent refilings led the court to presume that the applications were made in bad faith, purely to gain a legal weapon for the purpose of enforcement. This is particularly surprising given that the court had also found that there was genuine use of the Wordless Mark - it therefore appears that the presence of genuine use does not necessarily cure any absence of intention to use (or absence of evidence of such intention) at the time of filing.
Revival of Confusion as a relevant factor: The decision refers to a significant volume of evidence showing customer confusion. Trade mark infringement under s10(2) (being the relevant provision requiring a likelihood of confusion) had not been pleaded. Despite this, evidence of confusion was referred to in establishing passing-off, the ‘link’ under s10(3) and in supporting the finding of genuine use of the Wordless Mark. An absence of customer confusion in previous lookalikes cases had suggested that claims under s10(2) and passing off might not be appropriate in these types of cases. However, the availability of such evidence here, and the weight placed on it, suggests that it is important and relevant in supporting several of Lidl’s claims.