17 April 2023

Lidl v Tesco: What’s next in the landmark case?

The dispute began in 2022 when Lidl launched proceedings against Tesco, alleging that Tesco’s use of its ‘Clubcard Prices’ sign (Fig. 1 – yellow circle in a blue square with the words “Clubcard Prices” in the middle) amounted to trade mark and copyright infringement of its own Lidl mark (Fig. 1 – yellow circle, surrounded by a red ring in a blue square containing the word “Lidl” ) as well as its registration for the same design but without any text (the wordless mark).

Figure 1.

Both marks comprise a yellow circle on a blue square, used by Tesco since September 2020 to advertise its Clubcard Prices loyalty discount scheme and indicate which products are eligible, and by Lidl in its main logo.

Lidl alleged that Tesco’s use of the yellow circle against a blue square was intended to deliberately take advantage of Lidl’s reputation as a discount supermarket and that consumers are likely to believe that Tesco’s mark is Lidl’s. Essentially, Tesco is “seeking deliberately to ride on the coat tails of Lidl’s reputation as a ‘discounter’ supermarket known for the provision of value.”

Tesco filed a counterclaim, arguing that:

  1. Lidl has never made genuine use if its wordless mark and that the registration should be revoked or declared invalid based on non-use.
  2. Lidl’s application to register the mark was filed in bad faith.

Drawing on arguments from Sky v SkyKick, Tesco alleged that the wordless mark was registered by Lidl as a legal weapon, a product of its trade mark filing strategy. There was, Tesco claimed, no intention by Lidl to use the mark in commerce, only to widen its legal monopoly right.

Tesco also accused Lidl of ‘evergreening’ by filing successive trade mark applications periodically for the wordless mark in 2002, 2005, 2007 and 2021 in order to refresh the grace period and avoid having to prove genuine use, drawing arguments from Hasbro Inc v EUIPO.

Lidl made an interim application to the Court to strike out Tesco’s counterclaim that some of Lidl’s registrations should be invalidated for bad faith and for permission to rely at trial on survey evidence in relation to the distinctiveness of its trade marks. The High Court agreed with Lidl on both counts and claimed that Tesco had not produced sufficient evidence to rebut the presumption that Lidl’s application had been made in good faith. The court held that mere lack of intention to use the trade mark did not constitute bad faith and struck out Tesco’s bad faith counterclaims. Tesco appealed.

Tesco’s grounds of appeal

Tesco argued that the High Court had:

  1. Failed to apply the correct test to the striking out application under rule 3.4(2)(a) of the Civil Procedure Rules, and that it had also failed to consider that bad faith is a developing area of the law.
  2. Failed to consider all of the alleged facts and inferences in its bad faith counterclaims in the context of Lidl’s infringement case, considering that no disclosure had yet been given by Lidl as to its intentions when registering the wordless mark.

 On this premise, the Court of Appeal granted the appeal.

Court of Appeal decision

While disagreeing with Tesco’s argument that the judge had applied the incorrect test, the Court of Appeal did agree that Smith J had neglected to consider bad faith as growing field of law and failed to properly consider the pleaded facts.

Tesco’s first claim alleged that the wordless mark (first registered in 1995) was applied for without any intention of using the mark, but instead as a way of securing a wider legal monopoly than afforded by the mark used by Lidl since 1987 and registered in 2011 as a mark with text. The Court relied on Ferrero SpA’s Trade Marks [2004] RPC 29 and Target Ventures Group Ltd v EUIPO case T-273/19. In both cases, the proprietors’ registrations of new marks, which were not intended to be used in the course of trade but instead designed solely to extend the scope of existing registrations amounted to bad faith. The Court of Appeal held that it was wrong for the High Court judge to say that Tesco’s allegations were “no more than assertion”, as all allegations must be assumed to be true unless shown to be manifestly unsustainable. Lidl could have presented evidence to show that this allegation was unsustainable but had not done so.

On Tesco’s second claim that the re-filing of the wordless mark amounted to ‘evergreening’ and should be declared invalid, it relied upon Hasbro Inc v EUIPO Case T-663/19, in which the General Court found that Hasbro had acted in bad faith by re-filing its ‘MONOPOLY’ mark to avoid having to provide proof of use. Tesco alleged that Lidl’s re-filing activity supported the bad faith claim.

The Court of Appeal reversed the High Court’s decision to strike out Tesco’s bad faith counterclaims and held that Tesco had raised “sufficient objective indicia to give rise to a real prospect of the presumption of good faith being overcome so as to shift the evidential burden to the applicant for registration to explain its intentions.” Tesco had substantiated its pleadings sufficiently.

Where are we now: back in the High Court and going round in circles

In addition to providing a reminder of the legislative and judicial context for the concept of bad faith, the Court of Appeal’s decision provides useful insight into two specific types of activity that may result in a finding of bad faith: filing for ‘defensive’ marks and ‘evergreening’ marks, as well as highlighting that the concept of bad faith is a developing area of UK law.

We return full circle and on 7 February, the trial began at the High Court which will now reconsider Lidl’s initial claims of trade mark infringement and Tesco’s counterclaims of non-use and bad faith. The case will provide further guidance on various issues, such as the threshold needed to be met in satisfying the bad faith criteria, the process of ‘evergreening’, and what is meant by lack of intention to use a mark. We may also expect guidance on the use of wordless marks as well as the relevance of survey evidence in establishing the distinctiveness of trade marks.

Given the highly anticipated Sky v SkyKick appeal to the Supreme Court in June this year, which will further investigate the notion of bad faith, we can expect to see additional clarity in this area of law and an opportunity to define the rules.

Just like its own mark, Lidl seems to be going round in circles; a discount retailer, well known for invoking recognised supermarket brands with its lookalikes, is now ironically claiming that consumers will think of Lidl when using their Tesco Clubcard. In the meantime, we will keep an eye on both cases as we anticipate the judgements.

Tanya Rahman
Trainee Trade Mark Attorney