Battle of the supermarket giants
The ongoing debate about where the line is drawn between misrepresentation and inspiration continues, following a high-profile judgment in a dispute between two supermarket giants.
Lidl-v-Tesco
In 2020, Lidl launched a claim against Tesco alleging infringement of registered trade marks and copyright and for passing off. In bringing action against the UK’s largest supermarket, Lidl relied upon its own trade mark rights in relation to two version of the Lidl logo – the logo which includes the word LIDL (as shown below), and a logo without the word. It also stated that its reputation and the goodwill generated amongst consumers comes from being known as a ‘discounted’ supermarket that offers value and quality goods at low prices.
In response, Tesco alleged that the Lidl Wordless Mark should be cancelled for non-use (because it was only ever used with the word LIDL) or because it was applied for in bad faith.
Central to Lidl’s case was Tesco’s use of an ‘identifier’ (as below), as part of its Clubcard prices promotion and advertising strategy to promote the Tesco Clubcard, which offers discounts to Clubcard holders at the point of sale on selected goods.
Sometimes the logo in question would appear with a price figure as shown below.
Lidl argued that consumers would link the Tesco logos to Lidl’s brand and, as a result, believe the Tesco prices were being compared to Lidl’s low prices or that they were being price matched to Lidl. As such, Tesco was deliberately seeking to ride on the coattails of Lidl’s reputation as a discounted supermarket.
Similarity of Tesco’s logos to Lidl’s registered trade marks
The first step for the court was to undertake a comparison between the Lidl marks and the Tesco logos. The court held that in terms of a visual comparison, both involve background components made up of a yellow circle set within a blue square. Both have writing in the centre of the blue circle. However, the Tesco logos do not have the thin red rim around the edge of the yellow circle. Also the words used in the Tesco logos, such as the Clubcard price, are different from the graphically stylised word LIDL, which always appears in the Lidl logos. As for the conceptual comparison, neither party suggested that there is a conceptual comparison with real significance one way or the other.
Tesco argued that the word “Clubcard” dominates the Tesco logos and this has its own brand recognition. Similarly, the made-up word LIDL enjoys a substantial reputation and is clearly the most dominant and distinctive element of the Lidl marks. In addition, it argued that elements, such as the colour yellow, is conceptually commonplace and is “drowned out“ by the text.
The court was nonetheless satisfied that the average consumer would consider the marks and the logos as being similar, their visual similarity being the significant feature. The court was fortified in this view by the evidence from members of Tesco's internal team during the development phase of the Tesco logos, who recognised that the logos were similar to Lidl's marks.
The judge also observed that the goods and services for which Lidl's marks were registered and the use of the Tesco signs were identical. The judge stated that the Lidl marks have a strong reputation and enhanced distinctiveness, which in itself provides scope for a greater likelihood of confusion or a connection being made between the two brands.
The likelihood of confusion or of a link being made
Importantly, there was evidence of actual confusion on the part of the public, together with internal recognition by Tesco of the potential for confusion. An external research agency commissioned by Tesco to evaluate the Clubcard prices promotions in November 2020 reported that 276 consumers who saw the Tesco advert thought it was for Lidl. Evidence in the form of social media posts found on Twitter, customer contact records extracted from Lidl’s database of consumer feedback, as well as Tesco's customer communications database included evidence of members of the public sending unprompted messages to Tesco or Lidl following the launch of Tesco's campaign identifying a perceived link between the two brands. This weighed strongly in Lidl's favour.
Lidl also relied upon various internal warnings within the Tesco team by individuals concerned at the decision to use the Tesco logos and that the potential for misattribution. The court held that at the very least there was clear evidence that the average reasonable observing consumer who encountered the Tesco logos in the real world at the date of the launch of the Clubcard price campaign would draw a link with the Lidl logos.
The judge concluded that there was not a deliberate subjective intention on the part of Tesco to ride on Lidl's coattails. However, one of the main objectives of Tesco's campaign was to improve its value perception and therefore to influence the economic behaviour of supermarket shoppers. It aimed to cause a subtle but insidious transfer of image from Lidl's trade marks to its logos in the minds of some consumers, thereby increasing the attraction of its prices.
Tesco argued that all supermarkets use yellow and basic geometric shapes and that the colour blue is its own livery colour. Therefore it had proper commercial reasons for using yellow in its logos. The judge held that the issue was not whether there was due cause for use of the elements of Tesco's logos, but whether there was cause to use this particular combination of elements used in the logo as a whole. The judge accepted that the colour blue has long been associated with Tesco and that yellow has been recognised as having the best impact in point of sale material. He also accepted that other supermarkets use yellow, including yellow circles, to indicate value propositions to customers and that the yellow value roundel was already a part of Tesco's messaging arsenal. However, none of this evidence explained why there was purportedly cause for Tesco to extend the use of the yellow value roundel by superimposing it on a blue background.
Accordingly, the court held that there was infringement of Lidl's trade mark with text by Tesco.
Invalid Lidl marks – registered in bad faith
Although somewhat a pyrrhic victory, Tesco did succeed in securing an order from the court that Lidl’s wordless trade mark should be cancelled because it was applied for in bad faith. It argued that the wordless mark was designed as a legal weapon when Lidl already had a registered mark with text, given that it was not intending to use the wordless mark independent of any text. The court agreed that this amounted to bad faith.
The court also held that a number of Lidl’s wordless trade marks were designed in part to ‘evergreen’ (i.e. be periodically re-registered for goods and services in respect of which they were already registered) so as to avoid sanctions for non-use (an abuse of the trade mark system) and so that the marks could be used as a legal weapon. This was also held by the court to be bad faith and so these marks were declared invalid.
Passing off
In terms of the other claims brought by Lidl, the court held that the passing off claim had succeeded, as a substantial proportion of people were confused as to the origin of Tesco’s logos.
Copyright infringement
Tesco argued that the simplicity of Lidl’s “kindergarten” design and low level of artistic quality meant its word logo was not original and did not attract copyright protection. The court held that even the act of combining the yellow circle and blue background involved skill and labour and so was protectable.
Given the similarities between the Lidl marks and the Tesco logos, and given that Tesco had access to Lidl’s marks, the judge held that the burden was on Tesco’s design team to provide an explanation for the similarities. Tesco maintained that the similarities were purely coincidental. Tesco did not satisfy the court that the design of its logo was an independent creation. It failed to produce evidence from the external design agency with whom the logos were created, the court concluded deliberately.
The judge held that the evidence showed that the third-party design agency appeared to have been exploring how Tesco could be emotive about price by reformulating the Lidl slogan onto a similar colour scheme used by Lidl, and that the agency and Tesco were looking at what competitors were doing. The court accordingly held that the agency copied the background to the Lidl logo and that Tesco adopted that for its logos. Tesco was therefore held liable also for copyright infringement, even though there was no evidence of direct copying.
Has Lidl won the battle but not the war?
Tesco has indicated that it will appeal this decision. The findings of the judge, as regards basic combinations of colour, shape and words that potentially give brand owners a wide range of protection, may be one that the Court of Appeal believes should be examined further. The wind nonetheless certainly appears to be blowing in favour of brand and rights owners at the moment, with recent court decisions going in favour of the claimants. This means businesses may need to be more cautious about taking risks in terms of product, packaging or brand designs which may arguably come too close to that of a competitor.
If you’d like to discuss any of these issues or have questions about the article, please contact Melanie McGuirk in the Dispute Resolution team.
Melanie McGuirk
Partner, Dispute Resolution
T: +44 (0) 161 393 9040 M: +44 (0) 7790 882567
Melanie specialises in the resolution of disputes relating to intellectual property, reputation management and trade libel. Her focus is on the enforcement and protection of intellectual property and reputations, brand strategy and management, with particular experience in the retail, fashion and manufacturing industries. She is a named leader in the field of IP in the North West by both Chambers & Partners and the Legal 500.
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