Lidl v Tesco - key takeaways from the Court of Appeal's decision

Last month, the Court of Appeal handed down its judgment on the appeal against the first instance decision in respect of the Lidl v Tesco 'logos' case (Lidl Great Britain Limited & Anor v Tesco Stores Limited & Anor [2024] EWCA Civ 262).

Much has been written already in the legal press and commentary about the outcome of the appeal (in summary, Tesco lost overall). What this article will concentrate on is a couple of key lessons to take away from the Court of Appeal’s decision.

Facts of the case

Lidl owned UK registered trade marks for the following two marks:

Lidl objected to Tesco adopting, for its Clubcard Prices promotion, a similar graphical device, formed of a blue square background and a yellow circle, with text written across the middle. For example:

Lidl asserted registered trade mark infringement (in respect of both The Wordless Mark and The Mark with Text), passing-off and copyright infringement.

Lidl did not assert that there would be confusion as to origin (i.e. that average consumers seeing the Tesco Clubcard signs would be confused into thinking the goods/services in question came from Lidl); rather they asserted that a substantial number of customers would see the Tesco Clubcard signs, link them to Lidl’s trade marks and their reputation for low price (discounted) ‘value’ and thus believe that Tesco’s prices were comparable to Lidl’s prices/they price matched to Lidl. This would cause detriment to Lidl’s brand (i.e. dilution of Lidl’s reputation as a low-cost discounter, offering better value for money than other leading supermarkets, like Tesco) and would mean Tesco taking unfair advantage of (i.e. “freeriding” off) the reputation which resides in the Lidl marks.

What was decided at first instance?

The passing-off and copyright infringement claims succeeded.

Both registered trade mark infringement claims also succeeded, but (for reasons this article will not cover) The Wordless Mark was declared invalid.

In summary, the judge hearing the case concluded that some consumers who were aware of The Mark with Text, namely:

would, when coming across signs like the ones below, in Tesco’s stores, their advertisements and promotional materials,

associate and ‘link’ (i.e. bring to mind) the Tesco signs with Lidl’s The Mark with Text and (to the detriment of Lidl) there would be a “subtle but insidious” transfer of image (of ‘low price value’) from The Mark with Text to the Tesco’s signs in the minds of some consumers.

An unfair advantage would be obtained by Tesco, by reason of the connection with Lidl’s The Mark with Text. Tesco’s “value perception” would be unfairly improved and advantaged by the association with Lidl’s reputation for offering value (i.e. quality products at affordable prices), with some consumers thinking that Tesco was guaranteeing the same product prices as Lidl, when that was not (in fact) always the case. In other words, that Tesco was “price matching” Lidl’s prices.

What did the Court of Appeal decide?

The Court of Appeal upheld the findings of registered trade mark infringement and passing-off. The findings of fact, on which the first instance decision was based, were rationally supportable. Thus, the decision was not capable of being overturned on appeal – even if the appeal judges were surprised by the first instance decision.

Tesco did succeed in overturning the copyright infringement case, but this will have been of little consolation, due to Tesco being liable for registered trade mark infringement. That finding alone means that Tesco will have to cease using the Clubcard signs.

Key lessons to learn

• The trial of a case is not a dress rehearsal. Overcoming on appeal findings of fact made by the first instance judge will not be possible unless the findings are rationally insupportable. That is a high hurdle to overcome. Findings of fact may be surprising, but if, in light of the evidence filed, they are rationally supportable, the Court of Appeal will not overturn them.
• A brand owner bringing registered trade mark infringement proceedings, alleging that an infringer is taking unfair advantage of (i.e. “freeriding” off) the reputation of the brand owner’s trade mark, needs to present credible and representative evidence as to what ‘reputation’ the mark has amongst average consumers and how the infringer is taking unfair advantage of that reputation. In this case, the evidence filed supported the first instance Court’s factual findings that average consumers associated The Mark with Text with low price (discounted) value prices and, on seeing the Clubcard signs, they would believe that Tesco’s prices were the same as, or lower than, Lidl’s prices. In other words, they were ‘price-matching’ Lidl’s prices.
• Evidence as to the shopping habits of consumers of the relevant goods or services in issue and credible and statistically significant evidence as to what real life customers think does matter in registered trade mark infringement cases. The skill is to know where and how to find such evidence. In this case, the evidence carried the day for Lidl.
• Brand owners should regularly conduct and keep the results of market research surveys/similar exercises which they undertake to gauge how consumers perceive their brands. Such ‘pre-litigation’ evidence, obtained for non-litigious purposes, can prove extremely helpful and persuasive in subsequent trade mark infringement and passing-off proceedings.

For more information, please contact Carl Steele.