The Court of Appeal has upheld Joanna Smith J’s first instance finding that Tesco’s Clubcard Prices campaign infringed Lidl’s registered trade mark for its logo inside a yellow circle within a blue square (pictured) and constituted passing off. The Court also agreed with Smith J's ruling that most of Lidl’s wordless trade marks were invalid for bad faith because they were not filed with a genuine intent to use and were a form of evergreening. However, it upheld Tesco’s appeal against a finding of copyright infringement.
We discussed Joanna Smith J’s judgment here. The three appeal judges seemed uncomfortable with some of her conclusions, but they decided that they were mostly not “rationally insupportable”.
The Lidl trade mark in practice
Price matching
Though the appeal encompassed a wide range of issues, it hinged on Tesco’s argument that the judge was wrong to find that the average consumer seeing its signs would be led to believe that the prices being advertised had been price matched by Tesco with the equivalent Lidl price. This finding led to the conclusions on trade mark infringement and passing off.
The judge’s finding on this point was based on an evaluation of the evidence presented at the trial, including oral evidence from two members of the public, messages collected through disclosure and social media by consumers and a consumer survey commissioned by Tesco before launching its campaign.
On appeal, Tesco argued that the evidence did not support a finding of unfair advantage (leading to trade mark infringement under section 10(3) of the Trade Marks Act) or misrepresentation (leading to passing off).
At the outer boundaries
In his judgment, Arnold LJ said that, at first sight, the finding that a substantial number of consumers would be misled by Tesco’s signs into thinking it was price-matching Lidl was “somewhat surprising” but he added that “it is not unknown for judges hearing passing off cases to make findings of deception that seem surprising to lawyers and judges who, unlike ordinary consumers, are aware of the issue and who have not heard the evidence”. He concluded:
“it has to be remembered that the judge had the advantage of being immersed in all of the evidence, whereas this Court has only been asked to consider selected parts of the written record. The judge took into account, as Tesco urged to her to do, the general problem of misattribution in the industry and Tesco's evidence that they intended to convey a clear message about Clubcard Prices, and she was entitled to conclude that neither point was a complete answer to Lidl's case. Standing back, I am not persuaded that her finding was rationally insupportable.”
The appeal against the finding of passing off therefore failed, as did the challenge to the judge’s finding of unfair advantage.
Arnold LJ also upheld the finding of detriment, based on the judge’s finding of a change in economic behaviour of consumers. In his judgment, however, Birss LJ said he differed on this point, though it did not affect the outcome of the appeal. Absent price matching, Birss LJ said the case on detriment:
“becomes very hard to distinguish from one based on pure dilution. Trade mark law has never gone that far and I would not wish to encourage it. I agree that Lidl pleaded a wider case but I am not convinced it was or even could be made out, absent price matching.”
Lewison LJ said he had found Lidl’s claims “very difficult, at the outer boundaries of trade mark protection and passing off”. His own view was that “the primary message that Tesco wanted to convey is that by joining Clubcard the consumer would achieve better prices at Tesco than a consumer who had not joined”.
Nevertheless, Lewison LJ accepted the judge’s finding as it was rationally supported based on the evidence she had seen. He quoted Lord Bridge of Harwich in the Jif Lemon case: “the difficulty is that the trial judge's findings of fact, however surprising they may seem, are not open to challenge … With undisguised reluctance I agree … that the appeal should be dismissed.”
Wordless mark registrations and copyright
Lidl appealed the judge’s findings of bad faith regarding four of its registrations for the wordless mark. But the Court said she was right to find that they had been made purely for use as a legal weapon.
Tesco challenged the finding of copyright infringement, arguing both that copyright did not subsist and that there was no infringement. It was unsuccessful on the first point, but successful on the second.
On subsistence of copyright, Arnold LJ said: “The degree of creativity involved … may have been low, but it was not a purely mechanical exercise, nor was the result dictated by technical considerations, rules or other constraints which left no room for creative freedom.” In other words, there is a low threshold for copyright protection. This is helpful clarification for rightsholders of fairly simple artistic works.
On infringement, Arnold LJ found that the scope of copyright protection was narrow and that Tesco had not copied at least two elements of the work: the shade of blue and the distance between the circle and the square. He said: “Although Tesco have copied the visual concept of a blue square surrounding (among other material) a yellow circle, that is all they have done.” In other words, if a simple work qualifies for copyright protection, the scope of protection for that work is limited.
What does this mean?
This is a very detailed judgment that touches on many aspects of trade mark, passing off and copyright law, and it will no doubt continue be analysed for many years to come. Its immediate consequence is that Tesco is going to rebrand its extensive Clubcard Prices marketing at a reported cost of millions of pounds.
The judgment highlights the extent to which all cases (even trade mark cases that are legally complex) hinge on the facts and evidence presented to the judge, and the Court of Appeal will not reverse the first instance findings unless there are identifiable errors. In this case, Arnold LJ described Joanna Smith J’s judgment as “an impressively careful and detailed analysis of the issues, evidence and arguments running to 317 paragraphs”. He made only one minor criticism of her trade mark/passing off assessment, and that was of no consequence.
To find out more about the issues raised in this blog contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - rosie.burbidge@gunnercooke.com