Expensive Clubcard Giveaway? Tesco Loses Appeal Against Lidl Over Clubcard Logo

Lidl has emerged victorious at the UK Court of Appeal (CoA) in its long-running battle with supermarket giant Tesco. The proceedings related to Tesco’s “Clubcard Prices” logo, which was alleged to infringe Lidl’s trade mark rights and copyright. Whilst Tesco had not infringed Lidl’s copyright and successfully invalidated several of Lidl’s trade mark registrations, the overall finding for Lidl has resulted in a multimillion pound rebranding project for Tesco.

The variety of intellectual property issues explored in this decision are of key importance to brand owners.  

Background

In 2020, Lidl brought infringement proceedings against Tesco for using a sign comprising of a yellow circle on a blue background for its Clubcard Prices promotion (“the Clubcard Sign”). Lidl’s trade mark registrations include the word LIDL (“the Mark with Text”) and the wordless version of the logo (“the Wordless Mark”), the latter of which had never been used by Lidl.

Lidl claimed that Tesco infringed both of its marks by taking unfair advantage of its reputation as a “discounter supermarket known for the provision of value”. Lidl also claimed that Tesco’s use of the Clubcard Sign diluted the distinctive character of Lidl’s marks.  

Through using the Clubcard Sign, Lidl argued that Tesco misrepresented that their products were of the same standard as Lidl products, at an equivalently low price, or that Tesco had “price-matched” Lidl.

Additionally, Lidl claimed that Tesco infringed Lidl’s copyright by copying a substantial part of the Mark with Text in its Clubcard Sign.

Tesco counterclaimed for revocation of Lidl’s Wordless Mark on the ground of bad faith in that the mark had been registered by Lidl without any intention to use it.

The High Court judgment issued in 2023 held that Tesco’s Clubcard Sign infringed Lidl’s marks and its copyright in the marks, and committed passing off. The High Court did however agree with Tesco that most of Lidl’s Wordless Mark registrations should be invalidated, as Lidl failed to prove that they filed the applications in good faith.

Following the High Court decision, Tesco appealed against the findings of trade mark infringement, passing off and copyright infringement. Lidl appealed against the finding that the registrations of the Wordless Mark are invalid.

The Appeal

Tesco’s trade mark infringement and passing off

The High Court decision that a substantial number of consumers would be misled by the Clubcard Sign into thinking that Tesco’s Clubcard Prices were the same as or lower than Lidl’s prices for equivalent goods is arguably a “surprising one” – a point that was reiterated in the CoA.

However, misrepresentation in passing off cases is a question of fact and such a decision can only be overturned at appeal if it is rationally insupportable. The High Court found that the Wordless Mark had become distinctive of Lidl through use of the Word with Text, that the Clubcard Sign would call the Mark with Text to mind and that it is common ground that Lidl have a reputation for low prices.

The CoA therefore held that the High Court judge was entitled to come to their conclusions based on the evidence presented to them, including evidence from consumers who perceived the Club Card Prices logo to indicate matching of Lidl prices by Tesco. Subsequently, Tesco’s appeal on the findings of passing off and trade mark infringement based on unfair advantage was dismissed.

The CoA also addressed Tesco’s appeal on the first instance finding of trade mark infringement based on detriment caused to the distinctive character of Lidl’s earlier marks. As Tesco’s use of its Clubcard Sign had slowed down the switch of its customers to Lidl and that Lidl had resultantly had to change its advertising strategies, the CoA held that the Judge was entitled to find that these suggested a change in the customers’ economic behaviour consequential to Tesco’s use, and therefore the distinctive character of Lidl’s earlier marks.    

Invalidity of Lidl’s Wordless Marks

The burden was on Lidl to prove the contrary to the High Court’s finding that certain trade mark applications were made in bad faith. The earliest application had been made in 1995 and Lidl was unable to adduce evidence as to its intentions at that time. Further, Lidl did not present any evidence to show that anything had changed between the first application of the Wordless Mark and the subsequent applications in 2002, 2005 and 2007.

The CoA therefore upheld the finding that the registrations were invalid due to bad faith.

Tesco’s copyright infringement

Tesco appealed against the judge’s findings on subsistence and on substantial reproduction – the CoA upheld the first point but overturned the latter.

The CoA upheld the decision that copyright had subsisted in the mark, as it was a piece of work which involved the author’s own intellectual creation, even though the degree of creativity involved in the creation of the mark may have been low.

Given the evidence showed that the blue colouring in the Tesco sign had been used previously by Tesco as part of its corporate branding, and that Tesco had previously used yellow circles in their signage, all Tesco had copied was the visual concept of a blue square surrounding a yellow circle. As Tesco had not copied at least two of the elements that made the work original, the CoA ultimately ruled that Tesco had not copied a substantial part of Lidl’s design and had not infringed its copyright. The low degree of creativity meant that the scope of copyright protection for the mark was narrow.

Key takeaways

• Gather consumer evidence probative on the key issues (e.g. origin confusion or association)
• Allegations of bad faith can be used strategically to provide a defence in infringement proceedings by attacking the registrations on which the proceedings are based.
• Brand owners should make and keep records of the reasons behind a trade mark application.
• Brand owners may be able to rely on relatively simplistic logos as copyright works, although copyright protection for such simplistic logos may only capture close copies.
• Brand owners should keep detailed records around the process by which a logo is designed.