31 May 2023
Brands Update - May 2023 – 2 of 9 Insights
The case illustrates the importance of keeping records of why a trade mark application was filed and how logo and figurative marks were created. It also illustrates the potential scope of passing off and copyright infringement claims.
The case concerned Tesco's use of a yellow circle in a blue square for its loyalty scheme, Clubcard Prices, which Lidl claimed infringed its trade marks, and constituted passing off and copyright infringement. The Lidl logo also consists of a yellow circle (but with a red outline) in a blue square. It is registered as several trade marks in the UK, including with the word Lidl (called the mark with text), and without the word Lidl (called the wordless mark).
Passing off is not always as to trade origin. It can also be as to equivalence or false endorsement. It is a potentially wide tort that can sometimes go beyond a traditional trade mark infringement claim. This risk should be factored into the trade mark clearance process.
Copyright can subsist in what some might view as banal logos. Brand owners should keep detailed records as to the genesis of any logo or figurative element of a brand to corroborate lack of copying. The risk of a copyright infringement claim should also be factored into the trade mark clearance process.
Lidl sued Tesco for trade mark infringement relying on a reputation-based claim under section 10(3) of the Trade Marks Act 1994.
Lidl was able to provide substantial evidence that its marks had a significant reputation for supermarket services in the UK.
The court considered Tesco's logos to be similar to both Lidl's wordless mark and its mark with text. This was despite the fact that Tesco's logos were nearly always used with words. The court held that visual similarity was key, the logos all being primarily viewed visually by supermarket shoppers. Any differences in word elements did not extinguish the strong similarity conveyed by the logos' backgrounds. Supermarket shoppers would be likely to focus on those backgrounds (the word elements largely comprising of promotional statements or the words Tesco or Lidl). This conclusion was reached by virtue of external reports and customer feedback put forward by Lidl.
Although confusion was not an element to be proved, there was clear evidence of both origin and price match confusion/association, together with evidence that Tesco's employees also appreciated the potential for confusion, which fortified the findings of similarity.
Lidl submitted strong evidence (eg surveys and witness statements of consumers) as to the link in consumers' minds between the Tesco logos and the Lidl marks.
The court concluded that the use of the Tesco logos takes unfair advantage of the fame of the Lidl logos, as Tesco benefits from the value proposition conveyed by the Lidl logos. Such use was also detrimental to the distinctive character of Lidl's logos as it would dilute the latter's uniqueness (as evidenced by the fact that Lidl was compelled to undertake corrective advertising).
Accordingly, trade mark infringement was established.
By way of counterclaim, Tesco sought a declaration of invalidity against a number of registrations for Lidl's wordless mark, on the grounds of non-use, non-distinctiveness and/or bad faith.
The Court dismissed the non-use arguments, finding that the wordless mark had been put to genuine used by virtue of the mark with text, as consumers would (at least in the last few years) consider both iterations as originating from Lidl (applying the case of Specsavers v Asda).
The Court also dismissed the non-distinctiveness argument as the evidence showed that the specific combination of simple geometric shapes and primary contrasting colours was memorable and distinctive of trade origin for Lidl's logo.
Tesco counterclaimed that Lidl had no genuine intention to use its wordless mark registrations and that they had therefore been applied for in bad faith, on the basis that:
Importantly, at an earlier hearing, the Court of Appeal had held that the objective circumstances raised by Tesco were sufficient to create a rebuttable presumption of lack of good faith by Lidl such that it was now for Lidl to provide a plausible explanation of its objectives and commercial logic. Those circumstances were the combination of:
Lidl was not able to explain the rationale for the repeat filings (except for a 2021 registration which therefore survived). The court therefore had no option but to find bad faith and invalidate the registrations. Key findings of the court were as follows:
The case is consistent with previous rulings on bad faith including the EU General Court's Monopoly ruling (see our article here). What is interesting is that the burden of proof shifted to Lidl to prove good faith. That was fatal to Lidl and might well be to others who have no records to justify why a particular trade mark application was filed.
This raises the question of how much evidence the other side must produce for the burden to shift in this way. Clearly, this case was somewhat unusual in that Lidl's wordless logo is a component part of another mark (just as the Specsavers logo and the Levi's red tab). Proving an intention to use it (or proving that Lidl thought that use of the word with text also constituted use of the wordless logo) was always going to be difficult, absent any records.
Whether the burden of proof would have shifted to Lidl without that factor (ie just on the basis of lack of use and repeat filings or even just one of these) is unclear. Either way, trade mark owners are advised to create and maintain detailed records as to why particular trade mark applications have been filed to help fend off any bad faith allegations. These will be particularly important should the burden of proving no bad faith shift to them.
The case also illustrates that brand owners should not assume that they will be deemed to have filed an application in good faith just because they have subsequently used the mark in question. Where there was no genuine intention to use a particular mark initially (or there is no evidence as to that intention), then refiling for a mark might be appropriate if there is now a desire to put that mark into use. The subsequent application should be deemed to have been filed in good faith even if the earlier one(s) was/were not.
Lidl's claim of passing off was as to equivalence (price and value) rather than trade origin. The Court relied on its findings and evaluation of evidence from the trade mark claim. Specifically, goodwill was found because a UK public would recognise Lidl's marks, evincing its reputation as a discount supermarket.
Lidl was able to successfully argue that a substantial number of customers would be misled to believe that the Tesco Clubcard Price was the same/lower than the Lidl price for the equivalent goods. That mistaken belief would deceive consumers and cause damage to Lidl because price sensitive shoppers would switch from Lidl to Tesco.
The decision shows the potential scope of a passing off claim.
Lidl's mark with text was considered an artistic work, capable of copyright protection under sections 1 and 4 of the Copyright, Designs and Patents Act 1988. It was treated as a graphic work, which is protected "irrespective of artistic quality" and the Court emphasised that the scope of protection is a question of fact, not degree.
Lidl's mark was also found to be original, as the act of bringing together the Lidl text with the yellow circle and the blue background was deemed to involve the exercise of intellectual creation, involving the expression of free choice. Indeed, Tesco's own evidence as to the various combinations of apparently basic shapes and colours considered by its own designers demonstrated the creative freedoms in relation to the sign.
Given the degree of similarity between the signs and the fact that Tesco had access to the Lidl logos, the burden of proof on showing there was no copying passed to Tesco. Unable to discharge that burden, having also failed to obtain evidence from the external design agency which helped create the Clubcard Prices logo, Tesco was found to have copied a substantial part of Lidl’s mark with text, and thus infringed Lidl’s copyright.
This is an important reminder that copyright can subsist in seemingly banal logos and of the importance of having detailed records as to the genesis of any logo or figurative element of a trade mark to corroborate lack of copying.
This article was co-authored by Kachenka Pribanova.
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31 May 2023
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