Reaction: Tesco’s loss could cost ‘millions’ after justices 'reluctantly' dismiss logo appeal
In the supermarket battle, Lidl proved that enough consumers think Tesco’s Clubcard logo held a price-matching message. WIPR gauges reaction from lawyers—including counsel for both parties.
The Court of Appeal of England and Wales has today delivered a verdict that will see the UK’s biggest supermarket having to drop its distinctive blue-and-yellow ‘Clubcard’ logo.
Following a three-day hearing last month, justices decided to dismiss Tesco’s appeal against a UK High Court judgment, handed down in April 2023, which found in favour of German ‘discounter’ chain Lidl.
Back then, Justice Joanna Smith ruled that Tesco’s Clubcard Promotion (CCP) signs infringed Lidl’s trademarks and amounted to passing off, and that the signs had been copied from the Lidl logo, thereby also infringing Lidl’s copyright.
But in the justices’ decision, published today, March 19, there is notable reluctance in their reasoning—owing partly to Justice Smith’s seemingly watertight ‘findings of fact’.
Justice Lewison concluded in the judgment: “I find myself in the position of Lord Bridge of Harwich in the Jif Lemon case at 495: ‘If I could find a way of avoiding this result, I would. But the difficulty is that the trial judge’s findings of fact, however surprising they may seem, are not open to challenge. Given those findings, I am constrained…to accept that the judge's conclusion cannot be faulted in law.
“‘With undisguised reluctance I agree…that the appeal should be dismissed.’”
WIPR gathers reaction from trademark lawyers on today’s decision, including from the counsel representing each party.
Ewan Grist, IP partner at Bird & Bird and lead counsel for Lidl: “Unlike most trademark cases…Lidl never suggested that customers were confused between Tesco and Lidl.”
“It's a well-established principle that absent any obvious error in law or principle in a trial judgment, or rationally insupportable conclusion, the Court of Appeal should not interfere with trial judgment because the trial judge is best placed to consider the evidence in the case.
“With the exception of one argument with regard to copyright infringement (which was not pressed before the trial judge), the Court of Appeal has therefore left the trial judgment largely undisturbed.
“Having succeeded on trademark infringement and passing off, Lidl therefore emerges as the clear winner. Tesco will now need to rebrand away from the CCP signs to comply with the resulting injunction and, given Tesco’s extensive use of the CCP signs over a period of four years, Lidl will likely be due substantial damages.
“This case was not straightforward for Lidl however. Unlike most trademark cases—which normally turn on whether there is a likelihood of confusion between the claimant’s mark and the defendant’s sign—Lidl never suggested that customers were confused between Tesco and Lidl.
“Rather, Lidl’s main case was that, even where customers were not confused between Tesco and Lidl, Tesco’s CCP sign conveyed a false price-matching message to some customers that Tesco’s prices were as good as Lidl’s.
“Lidl was ultimately successful because of comprehensive evidence that it was able to show to the trial judge to allow her to understand the true effects of Tesco’s use of the CCP signs in the unique environment of supermarkets’ battle to win and retain customers.”
Richard Kempner, a partner at Haseltine Lake Kempner (HLK) who acted for Tesco: “Most IP lawyers that we know didn’t think this was a case of trademark infringement and passing off.”
‘It’s obviously a disappointing result. The judge in the first instance case had got the law [of passing off and trademarks] right, which meant that Tesco’s only recourse was to try and overturn her findings of fact.
“Findings of fact are notoriously difficult to overturn on appeal. The threshold is an extremely high one. It’s necessary to show that the judge’s findings were ‘rationally insupportable’. So a first instance judge can make findings that others wouldn’t necessarily agree with (as here, where the court voiced its surprise at those findings)—but that is not enough to have those findings overturned.
“Most IP lawyers that we know didn’t think this was a case of trademark infringement and passing off. After all, it’s an unusual finding that even though Tesco clearly set out to differentiate itself from its competitors, which the court confirmed, it can still be trademark infringement and passing off.
“It was only possible given the factual findings that the first instance judge decided that Tesco’s use of its CCP sign would lead a substantial number of people / the average consumer to believe that Tesco [was] price matching against Lidl, even though the majority of people wouldn’t necessarily think that and even if it was unintended.”
(Richard Kempner's comments were published in a brief commentary published by HLK shortly after the judgment was published.)
Richard May, IP partner at Osborne Clarke: “The Court of Appeal has basically said, ‘If we could find a way of avoiding this result, we would’.”
"It's a fascinating battle between two supermarket giants and a real insight into how much value they place on brands and logos.
“The general consensus after the first instance decision is that Lidl was very fortunate to succeed and that seems to be the subtext of the Court of Appeal's decision. The Court of Appeal has basically said, ‘If we could find a way of avoiding this result, we would’.
"However, the Court of Appeal is only dealing with whether the first instance decision is ‘rationally insupportable’ and they found that it wasn't, largely because Lidl's evidence was impressive.
“The next and final appeal is to the Supreme Court, but Tesco will need to seek specific permission from the Supreme Court's Appeals Committee for that—and it's unlikely that will be granted as there's no major point of legal principle at stake. This case has simply turned on its specific facts.
“Overall, the evidence backed up Lidl's claim that enough consumers think the Clubcard logo conveys a price-matching message, ie Tesco's Clubcard prices were either lower or equal to Lidl's prices.
“Since this was a false message, this took unfair advantage of Lidl's logo and Tesco lost overall.
"The irony is that Lidl has developed a possible blueprint on how to successfully stop lookalike brands. If you can show that your trademark or get-up conveys a particularly specific message, for example around value, that has been shown to be protectable.
“Although I'm not convinced this litigation strategy can be deployed widely—as one of the Court of Appeal judge's made it clear—this type of claim is at the ‘outer boundaries of trademark protection’.
"The consequential hearing was last May, where the judge ordered that Tesco must remove all the infringing Clubcard logos within nine weeks of this case coming to an end. This timeframe will kick in if Tesco doesn't lodge a further appeal.
"If Tesco doesn’t appeal, the parties' attention will move on to the amount of damages Lidl is entitled to. If the parties don’t agree on damages, a further hearing will have to take place. Given the size of Tesco's market share, Lidl can expect damages to be in the millions of pounds.
“In Tesco's own estimation, a rebrand could cost them around £7.8 million. Added to that, Tesco will have to cover a significant portion of Lidl’s legal fees and pay Lidl damages.”
Charlotte Duly, head of brand protection at Charles Russell Speechlys: “The ruling highlights the importance of trademark protection and brand clearance in the retail industry.”
“Lidl remains victorious in its legal battle against Tesco following the Court of Appeal judgment, despite a pyrrhic victory for Tesco in terms of both copyright infringement and several of Lidl’s registrations being invalidated.
“On appeal, it has been confirmed that Tesco's use of a yellow circle on a blue background in its Clubcard Prices scheme infringes Lidl's trademark rights in their distinctive brand identity.
“Tesco was found not to have infringed the copyright in the Lidl logo, but considering the findings of trademark infringement and passing off, this provides little comfort and does not change the fact [that] Tesco will need to amend their Clubcard Prices logo.
“Whilst the Court of Appeal found elements of the initial decision surprising, it was not ‘rationally insupportable’, and demonstrates how finely balanced such issues can be.
“Lord Justice Lewison commented that he ‘found the trademark claim and the passing off claim very difficult, at the outer boundaries of trademark protection and passing off’.
“The Court of Appeal’s ruling highlights the importance of trademark protection and brand clearance in the retail industry, underscoring the fine line between inspiration and infringement. The case is a reminder of the value attributed to unique branding elements and their protection under intellectual property law.
“Corporations must navigate brand identities with caution to avoid legal pitfalls, especially within the fiercely competitive retail sector.”
Anneka Dalton, a partner at Taylor Wessing's Technology, IP and Information team: “The court has stopped short of providing any further guidance on if and when the burden of proof should be reversed…”
“On Tesco’s win on copyright infringement, the court accepted Lidl’s addition of a blue square to an existing yellow circle was sufficiently original to attract copyright, which is an important affirmation for owners of simple logos.
"However, the court found that Tesco had not copied at least two of the elements, making the copyright work (ie the blue square addition) original, ‘namely the shade of blue and the distance between the circle and the square’. This was not enough to find copyright infringement, and so the High Court’s ruling was overturned.
[Meanwhile, Lidl lost its bid to overturn the invalidation of its past logo registrations]. “The court confirmed that later genuine use of a mark is not evidence of intention to use at the time of filing it. For brand owners, this confirms the need to keep good records of commercial intentions at the time of filing a trademark (later-use arguments will not be enough).
“The court also confirmed that the evidential burden for (dis)proving bad faith should shift to the trademark applicant if ‘the objective circumstances relied on by the party challenging the validity of the registration give rise to a prima facie case of bad faith’.
“This is not particularly surprising, since it was the Court of Appeal that first held (on an earlier strike-out application) that Tesco’s pleaded case of invalidity was enough to shift the burden onto Lidl.
“But the court has stopped short of providing any further guidance on if and when the burden of proof should be reversed—likely in anticipation of the Supreme Court’s impending decision on bad faith issues in Skykick.
“So brand owners must still wait for that decision for further clarity on what amounts to bad faith in trademark applications.”
Bird & Bird acted for Lidl in this case. The team was led by IP partner, Ewan Grist, supported by solicitor-advocate Tristan Sherliker, partner Emma Green and associates Bryony Gold and Sam Peterson.
Haseltine Lake Kempner acted for Tesco, led by Richard Kempner, partner, and Brian Whitehead, a consultant solicitor.
Already registered?
Login to your account
If you don't have a login or your access has expired, you will need to purchase a subscription to gain access to this article, including all our online content.
For more information on individual annual subscriptions for full paid access and corporate subscription options please contact us.
To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.
For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Adrian Tapping at atapping@newtonmedia.co.uk