UK Court of Appeal finds Tesco infringes Lidl’s trade mark but not copyright

First instance decision

Lidl Great Britain Limited (“Lidl”), the ‘discount’ supermarket, sued Tesco Stores Ltd (“Tesco”), a major UK supermarket operator, for trade mark infringement, passing off and copyright infringement. Lidl’s registered marks included registrations for the standard LIDL logo (the "Text Mark") as well as a registration for the same design without any text (the "Wordless Mark")

Lidl argued that Tesco’s adoption of a logo for its Clubcard Prices promotion, which resembled Lidl’s logo (the “Clubcard Mark”), created confusion among consumers and damaged Lidl’s brand. The court, in its decision, determined that Tesco's Clubcard Mark infringed Lidl's registered trade marks and also constituted passing off and copyright infringement. Despite the dissimilarity between the words "Clubcard" and "Lidl" in the text mark, the average consumer was found to perceive a connection between the two signs. This led to confusion over origin and price match confusion/association (a key issue later on appeal), causing damage to Lidl's distinctive character and reputation.

Additionally, the court recognized Lidl's logo as an original artistic work protected by copyright. It found that Tesco's Clubcard Mark copied a substantial part of Lidl's logo, and the absence of intention by Tesco did not absolve it of copyright infringement. Tesco's use of the logo was seen as an attempt to enhance the perceived value of its Clubcard Prices, further supporting the finding of infringement.

Tesco, on the other hand, launched a counterclaim to revoke Lidl's trade mark registrations for the Wordless Mark, citing non-use. The court rejected this counterclaim, stating that the use of the Text Mark also constituted use of the Wordless Mark. However, several registrations for the Wordless Mark were deemed invalid due to being applied for in bad faith. The court concluded that these registrations were sought not for genuine use but as a legal strategy to protect Lidl's rights by “evergreening” its trade marks.

Appeal

Tesco appealed against findings of trade mark infringement, passing off and copyright infringement and the grant of an injunction to restrain copyright infringement, which had been granted in a supplemental judgment dated 22 May 2023, but which was stayed pending the appeal. Lidl also appealed against the finding that the Wordless Mark had been registered in bad faith.

Trade mark infringement and passing off

The crux of Tesco’s appeal was that the trial judge was wrong to find that the average consumer, on seeing the Clubcard Mark, would be led to believe that Tesco was offering prices that were “price-matched” with Lidl’s prices. Tesco said the judge should have come to her own view from her own common sense and experience, not based on the evidence that Lidl relied on. The Court of Appeal disagreed. Given that Tesco had not objected to the admission of the evidence relied by Lidl, it was open to the judge to rely on it.

Although the Court of Appeal found the judge’s conclusion that the Clubcard Mark conveyed a price-matching message was surprising, the issue for the Court of Appeal was not whether, if the price-matching message was conveyed, it was false, but whether the judge was entitled to find that consumers were led to believe that Tesco’s prices were matched with Lidl’s, or lower, for equivalent goods. The Court of Appeal could only overturn the findings if they were “rationally insupportable”. Since there was clear evidence that a substantial numbers of customers thought there was a price-matching message, the trial judge’s conclusion was not “rationally insupportable”.

The Court of Appeal found that the trial judge had made no error of law in finding that the burden of proof had shifted to Lidl to prove good faith in making the applications for the Wordless Mark. Lidl’s appeal in relation to the Wordless Marks was therefore dismissed.

Copyright infringement

Tesco’s appeal in relation to findings of copyright infringement was two-fold. First, Tesco appealed the judge’s finding that copyright subsisted in Lidl’s logo (i.e. Lidl’s logo featuring the yellow circle with a thin red line border within a blue square, with the word “Lidl” written across the yellow circle). Tesco argued that the judge was wrong to find that applying an existing work (the yellow circle with a red line border) to a square blue background was sufficient to pass the threshold for “originality”. And secondly, Tesco appealed the finding that Tesco had infringed by copying a substantial part of the logo.

The Court of Appeal held that the judge was correct to find that the logo was protectable by copyright: the creation of the logo had involved free and creative choices and therefore met the test for originality. Lord Justice Arnold said that, although the degree of creativity was low, the result was not dictated by any constraints that left no room for creative freedom: choices had been made about the shade of blue; the positioning of the work centrally within a square; the distance between the edge of the yellow circle and the edge of the blue square.

The Court of Appeal did however agree with Tesco that Tesco had not infringed the copyright in Lidl’s logo because Tesco had not copied a substantial part of what was original about Lidl’s logo. Lord Justice Arnold said that, although Lidl’s logo was sufficiently original to be protected, the scope of protection was narrow. Due to the creative process for the logo over the years, what was original about the Lidl logo was limited to the changes made by combining an existing work (the yellow circle with a red border) with a blue square. The Court of Appeal said Tesco had not copied the details that made this logo original: namely the shade of blue and the distance between the circle and the square. All Tesco was found to have copied was the visual concept of a yellow circle in a blue square which is not, in itself, protectable.

Remedies

Whilst Tesco will be disappointed that the findings of trade mark infringement and passing off have been upheld, it will be pleased that the Court of Appeal has allowed its appeal in relation to copyright infringement. Following the consequentials hearing in May 2023 and the supplemental judgment, Tesco had been facing both an injunction against trade mark infringement and passing off and an injunction against copyright infringement, all of which had been stayed pending the outcome of the appeal.

Tesco had argued that the main case was predominantly a trade mark dispute and an injunction in relation to the copyright claim (which is typically ordered upon finding of infringement) was disproportionate and oppressive. Instead, it argued that it should pay damages in lieu of an injunction, not least because the cost of removing all the offending materials to avoid breaching that injunction would be prohibitive, exceeding £7 million. Tesco argued damages of a low amount would be a suitable remedy in place of the injunction, submitting that Lidl’s goodwill and reputation in Lidl’s logo should be stripped out when considering the value of the copyright work. Therefore, in a hypothetical negotiation to set the damages, the logo should be treated as having little artistic worth. The Court disagreed, however, and said that in cases where the copyright work was also a registered trade mark, the purpose of Tesco’s use of the logo – for commercial use in stores and in marketing in competition with Lidl - should be taken into account in assessing the value of the logo to Tesco (and the damage to Lidl). A final injunction against copyright infringement, rather than damages, was therefore found to be proportionate.

Following the Court of Appeal judgment, Tesco will now have to comply with the terms of the injunction order in relation to trade mark infringement and passing off. Although Tesco has said that it will probably now rebrand completely, it is in a much better position now it no longer faces the copyright injunction as well as the trade mark and passing off injunction. A final copyright injunction would have involved Tesco removing every instance of use of the infringing logo, in all stores and all marketing materials, within a short time frame, at substantial cost to Tesco. In contrast, the injunction against trade mark infringement and passing off will allow Tesco more flexibility if it wishes to retain use of its current logo in some form. Not every use of the logo by Tesco is likely to amount to trade mark infringement. For example, it might be open to Tesco to add wording to the marketing materials, to make it clear that there is no price-matching message and that they originate from Tesco. Similarly, use of the logo in a decorative way might not infringe.

Comment

The decision highlights the differences in the tests between copyright infringement and trade mark infringement and the practical consequences that will follow in cases involving lookalike logos. Whilst copyright infringement can be avoided by making even very small differences to the logo design, if a logo is similar enough to bring to mind a trade mark owner’s mark, including everything that mark represents (e.g. low prices) there may be trade mark infringement and/or passing off but no copyright infringement. Although copyright claims in relation to simple logo designs are generally more difficult to succeed on than trade mark claims, brand owners should nevertheless consider including claims for copyright infringement when seeking to prevent third parties from using similar get-up and logos, because even the threat of a copyright claim, which brings with it additional disclosure requirements in relation to the design process and the ownership of the copyright work, together with the more burdensome requirements of a copyright injunction, can help to put pressure on infringers to settle or change their allegedly infringing use.

The Court of Appeal was also at pains to emphasise that, although some of its bench might have reached different conclusions on certain aspects of the case, the findings of fact that the trial judge had made were “rationally supportable”. As Arnold LJ said, “information is preferable to intuition” and this case emphasises – above all - that success in cases of this type will turn on the evidence presented and the conclusions that can be drawn from it.

Authored by Penelope Thornton.