Every Lidl helps in supermarket wars

Lidl argued that the Clubcard Prices branding is similar to their logo which is protected by various trade mark registrations, including for the word “Lidl” in a yellow circle on a blue background (the “logo mark”) and the same logo without the word (the “circle mark”). 

The main points of Lidl’s trade mark infringement claim were that: 

Tesco was piggy-backing off the goodwill in the Lidl brand and the reputation it had built up for low prices in order to give shoppers the impression that the Clubcard Prices scheme offered similarly low prices,  

Tesco’s use of the Clubcard Prices branding was damaging to the function of Lidl’s trade marks by diluting their distinctive character, implying that Tesco’s prices were equivalent to Lidl’s prices. 

On passing off, Lidl argued that the use of the Clubcard Prices branding gave the impression that Tesco’s products were equivalent in price or had been price-matched to Lidl. 

The copyright infringement claim was that the Clubcard Prices branding reproduced a substantial part of the Lidl trade marks which were original artistic works. 

Tesco counter-claimed that the circle mark lacked sufficient distinctiveness to function as a trade mark, that it had been registered in bad faith, since Lidl had no intention of using it, and that it should therefore be declared invalid or revoked for non-use for more than five years.  Tesco also highlighted Lidl’s “ever-greening” of the circle mark, i.e. re-registering it every five years to avoid having to prove use when enforcing it.

The Court agreed that the average consumer would consider both the logo mark and the circle mark and the Clubcard Prices sign to be similar. The evidence showed that concerns had been raised during the development of the Clubcard Prices branding about its similarity to the logo mark. Lidl also demonstrated that there had been consumer confusion. Spontaneous reaction evidence from consumers on social media seems to have had a persuasive effect in determining whether the marks were considered by the average consumer to be similar. Even Tesco’s own impact assessment surveys revealed that some consumers thought that the campaign was a Lidl campaign.

The Court accepted that Lidl had built up a reputation under its logo for value products and found that Tesco was using the Clubcard Prices branding to give the impression of value goods and to influence the economic behaviour of the consumer.  There was a riding on the coat tails of the Lidl trade mark which would have assisted Tesco to increase the attraction of its products. It also caused damage to Lidl. The Clubcard Prices campaign was successful in slowing the switching from Tesco to Lidl and Lidl had felt obliged to engage in corrective advertising promoting its lower prices compared to Clubcard prices.  
On this point, the Court of Appeal Judges said that whilst the Judge’s conclusions on the price-matching allegation might seem surprising, the Judge had found that the circle mark had become distinctive of Lidl through use of the logo mark, that the Clubcard Prices branding would call the logo mark to mind and that it was common ground that Lidl had a reputation for low prices.  

The Court did not agree with Tesco’s argument that the circle mark lacked distinctiveness. There was evidence that consumers associated the simple but striking and memorable logo with Lidl and that it therefore served to denote the origin of Lidl’s products. However, it upheld Tesco’s counter-claim that the circle mark had been registered in bad faith. Lidl was unable to persuade the Court that its intention in registering the circle mark was not to provide it with a wider scope of protection than the logo mark without any intention of using it and the Court of Appeal upheld the Judge’s decision on this point.  

On the passing off claim, the Court accepted Lidl's price-matching confusion argument which was that a substantial number of consumers had been deceived into thinking that Tesco's Clubcard price was the same or lower than Lidl’s price for equivalent goods. That caused damage to Lidl because price-sensitive shoppers would purchase goods in Tesco rather than Lidl if they thought that they were cheaper in Tesco.  

Finally, on the copyright infringement claim. The Court agreed that the logo mark was original in its combination of text, colours and shapes and that its creation had involved skill and labour. However, the Court of Appeal accepted Tesco's argument that it had not reproduced a substantial part of that copyright work, having only copied the visual concept of a blue square surrounding a yellow circle.  

This case highlights the importance of gathering evidence of an infringement since the price-matching confusion allegations would probably not have succeeded on their own.