Trade Marks - The Appeal in Lidl v Tesco

 

Jane Lambert

Court of Appeal (Lord Justices Lewison, Arnold and Birss) Lidl Great Britain Ltd and Another v Tesco Stores Ltd and Another (Rev1) [2024] EWCA Civ 262 (19 March 2024)

In Lidl Great Britain Limited and another v Tesco Stores Ltd and another [2023] EWHC 873 (Ch) (19 April 2023), Mrs Justice Joanna Smith held that Tesco Stores Ltd and Tesco Plc ("Tesco") were liable to  Lidl Great Britain Ltd and Lidl Stiftung & Co KG ("Lidl") for trade mark and copyright infringement and passing off. She also found for Tesco on part of their counterclaim for invalidation of several of Lidl's marks.  I discussed that judgment in Trade Marks - Lidl v Tesco on 1 May 2023 and a further judgment in Discretion in Awarding Final Injunctions- Lidl v Tesco on 29 June 2023.

The Appeal

Tesco appealed against the finding of trade mark and copyright infringement and passing off and Lidl against the invalidation of their marks,  The appeal was heard by Lord Justices Lewison, Arnold and Birss between 19 and 21 Feb 2024.  The hearing was filmed and readers can watch the parties' arguments on YouTube.  Links to those videos are on the case index page of 23 Feb 2024.  Their lordships delivered judgment on 19 March 2024 (see Lidl Great Britain Ltd and another v Tesco Stores Ltd and another (Rev1) [2024] EWCA Civ 262).  They allowed the Tesco companies' appeal on copyright but dismissed their appeal on trade mark infringement and passing off.  The Court of Appeal also dismissed the Lidl companies' appeal against invalidation of their marks.  Lord Justice Arnold delivered the lead judgment (para [1] to para [196]).  Short reasoned judgments were given by Lord Justice Birss (para [197] to [199]) and Lord Justice Lewison (para [200] to [222]). 

Tesco's Grounds of Appeal

According to para [122] of Lord Justice Arnold's judgment, Tesco's first and main ground of appeal against the finding of trade mark infringement and passing off was that the trial judge had been wrong to find that the average consumer would have been led by the Clubcard Prices ("CCP") sign to believe that Tesco had matched their Clubcard prices to the prices of the same products at Lidl so that the Clubcard prices would be the same as at Lidl or lower. Tesco argued that had the judge not made such a finding, there would have been no basis for a finding of either trade mark infringement or passing off.  They also challenged the judge's conclusions on detriment, unfair advantage and due cause in the context of the trade mark infringement claim.

At para [188] Lord Justice Arnold noted that Tesco had also appealed against the finding of copyright infringement on the ground that the logo in the form of a blue square with the yellow circular logo and stylized Lidl text superimposed on it was not a work in which copyright could subsist.  Alternatively, if copyright did subsist in that work the CCP sign had not reproduced a substantial part of the logo.

Price Matching Misrepresentation

Mrs Justice Joanna Smith's finding that the average consumer would be led to believe that the CCP sign indicated that there had been price-matching was a finding of fact.  After referring to para [2] of Lord Justice Lewison's judgment in Volpi v Volpi [2022] EWCA Civ 464, [2022] 4 WLR 48, Lord Justice Arnold noted at para [110] of his judgment that it was common ground that, in so far as the appeals challenge findings of fact made by the judge, the Court of Appeal could intervene only if those findings were rationally insupportable. Referring to para [24] of Lord Neuberger's judgment in Magmatic Ltd v PMS International Group plc [2016] UKSC 12, [2016] Bus LR 371, paras [78] to [81] of Lord Hodge's in Actavis Group PTC EHF v ICOS Corp [2019] UKSC 15, [2019] Bus LR 1318, paras [72] to [78] of the Court of Appeal's in Re Sprintroom Ltd [2019] EWCA Civ 932, [2019] BCC 1031  and para [49] of Lord Briggs and Lord Kitchin's in Lifestyle Equities CV v Amazon UK Services Ltd [2024] UKSC 8, he said that it was also common ground that in so far as an appeal challenges the judge's multi-factorial evaluations, the Court is entitled to intervene only if the judge had erred in law or principle. The Supreme Court had approved the following extract from para ]114] of Lord Justice Lewison's judgment in Fage UK Ltd v Chobani Ltd [2014] EWCA Civ 5, [2014] FSR 29:

"iv. In making his decisions the trial judge will have regard to the whole of the sea of evidence presented to him, whereas an appellate court will only be island hopping
v. The atmosphere of the courtroom cannot, in any event, be recreated by reference to documents (including transcripts of evidence).
vi. Thus even if it were possible to duplicate the role of the trial judge, it cannot in practice be done."

His lordship reminded himself of that guidance in para [127] before addressing Tesco's criticism of Mts Justice Joanne Smith's finding.

Tesco contended that the judge should have used her common sense and experience and ignored the evidence relied upon by Lidl. Alternatively, she should have formed a provisional view based on her own common sense and experience and only then considered whether the evidence relied upon by Lidl confirmed or contradicted that provisional view.  Lord Justice Arnold rejected that contention.  As Tesco had not objected to the admission of the evidence at trial, it would have been an error of principle to have ignored it.  Secondly, Tesco argued that the judge should have disregarded the evidence of two witnesses and social media comments left by consumers as it was not representative or indicative of the response of the average consumer.  Again, his lordship observed that no objection to the evidence had been made at trial.  Thirdly, Tesco complained about the admission of market survey evidence even though Tesco had not previously challenged that evidence. 

The criticism that Lord Justice Arnold considered most important was that the judge had been wrong to find that the evidence supported a finding of deception on the ground that the evidence did not support such a conclusion if properly analysed. That submission required the Court of Appeal to consider the evidence that the judge had relied upon, bearing in mind that the question for their lordships was not whether they would have reached the same conclusion, but whether there was evidence that entitled the trial judge to make that finding.

Lord Justice Arnold reviewed such evidence between [135] and [159].  He observed at [160] that the finding that a substantial number of consumers would be misled by the CCP signs into thinking that Tesco's Clubcard Prices were the same as or lower than Lidl's prices for equivalent goods was a somewhat surprising one at first sight.  The CPP signs had made no reference either to Lidl or to price-matching. They were part of a promotion concerning Tesco's own prices for Clubcard holders and were quite different from the contemporaneous "Aldi Price Match" signs. 

However, his lordship observed that it was not unknown for judges hearing passing off cases to make findings of deception that seem surprising to lawyers and judges. The judge's finding had been based on the oral testimony, special media comments and market survey mentioned above. In his view, those strands of evidence reinforced each other. While the judge should not have placed as much reliance on the evidence of one witness as she did, Lord Justice Arnold did not think it undermined her reasoning as a whole.  Standing back, he was not persuaded that her finding was rationally insupportable. It followed that the appeal against the finding of passing off had to be dismissed.

Lord Justice Lewison also found the trial judge's finding of fact surprising.  He doubted that he would have come to the same conclusion as the judge but it was not open to the Lord Justices to substitute their own evaluation.  The question was whether Mrs Justice Joanna Smith's decision was rationally unsupportable, He did not think that it was. He said at [222] that he found himself 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."

Unfair Advantage 

Tesco contended that the judge had been wrong to find that there had been a change in the economic behaviour of consumers.  They conceded that if Lidl's price matching case were to be made out then there would be evidence of a change of economic behaviour by consumers. Lidl admitted that their case on unfair advantage depended on a finding of price matching.  As the Court of Appeal had upheld the trial judge's finding on the point Tesco's challenge to the judge's unfair advantage finding also failed.

Detriment

Again, Tesco argued that the judge had been wrong to find a change in economic behaviour by consumers. Lord Justice Arnold considered that argument on the assumption that the price-matching allegation had not been made out. Lidl had contended that the use of the CCP signs had diluted the distinctiveness of the mark with text. Tesco had replied that such dilution was not sufficient for a finding of detriment without a change in the economic behaviour of consumers.  The trial judge did not reach her conclusion on the point by relying on price matching.  Instead, she relied on a slowing down of customers from Tesco to Lidl and the need for corrective advertising.  Tesco submitted that Lidl could succeed only if it could make out a case on price matching,  Lord Justice Arnold did not agree,  The judge had evidence for her finding and Lord Justice Arnold held that such a finding was rationally supportable.

Lord Justice Birss took a different view from Lord Justice Arnold on whether there could be detriment without price matching,   In his judgment, there could be no basis for such a conclusion in the absence of such a finding.  Without a finding of price-matching all that would be left of the trade mark infringement claim would be dilution.  Trade mark law had never gone that far and he would not wish to encourage it.

Due Cause

Lord Justice Arnold thought it difficult to see how the use of a sign that takes unfair advantage of the reputation of a trade mark could ever be with due cause.  He found it easier to contemplate a situation where such use was merely detrimental to the distinctive character of a trade mark.  He observed that the Court of Justice of the European Union had set an evaluative test as to whether the use of a sign was without due cause in ase C‑65/12 Leidseplein Beheer BV v Red Bull GmbH  EU: C:2014:49, [2014] ETMR 24, [2014] EUECJ C-65/12, [2014] WLR(D) 48, [2014] Bus LR 280, ECLI:EU: C:2014:49 which the trial judge had applied, Because it was an evaluative test the Court of Appeal could interfere only if the trial judge had erred in law or principle.

Tesco argued that the judge had erred by relying on the observation of Mr Justice Kitchin (as he then was) in Julius Sämann Ltd v Tetrosyl Ltd [2006] EWHC 529 (Ch), [2006] FSR 42 at [84] that the due cause test was "relatively stringent"  Lord Justice Arnold did not agree.  The judge had understood Mr Justice Kitchin to mean that it was not enough to show that a sign had been adopted innocently.  There had to be something more and in this case, there was nothing more.  Tesco could have promoted its Clubcard Prices discounting in another way but had failed to do so. There had been no error of law or principle.  The judge was entitled to reach the conclusion that she had reached 

Trade Mark Infringement

The upshot was that the appeal against trade mark infringement under s.10 (3) of the Trade Marks Act 1994 had to be dismissed even if the price-matching misrepresentation point was wrong.

Lord Justice Lewison found the trade mark claim very difficult in that it was at the very boundaries of the protection afforded by that intellectual property right.  He said that s.10 (3) 10 (3) expands the scope of trade mark protection beyond the traditional functions of guaranteeing trade origins and quality. In applying that sub-section it was important to remember that it was in the interests of consumers that there be competition between providers of goods and services. His lordship did not consider that the message that Tesco offered good value in its CCP signs was anything other than fair competition.

He criticized the judge's finding that if detriment or unfair advantage is established then it is for the proprietor of the later sign to establish that there is due cause for the use of the later mark.  He would interpret the words "the use of the sign, being without due cause, takes unfair advantage of" the mark as meaning that if a sign is used with due cause, then any resulting advantage cannot be unfair.

Copyright

Tesco appealed against the judge's findings that copyright subsisted in the artwork for the mark that she had called the "mark with text" and/or that they had reproduced a substantial part of that work. it argued that the judge had been wrong to reject its submission that copyright did not subsist in modifications of that artwork that had been created over 20 years as they involved negligible skill and labour as incompatible with the House of Lords's decision in Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273. Lord Justice Arnold agreed with Tesco's submission that Ladbrooke was not relevant to the question of whether a derivative work was original over an antecedent work. On the other hand, she had been correct to say that the simplicity of a design does not necessarily preclude originality and that artistic merit was not required. Furthermore, the test the judge applied at [289] was the correct test.  The judge had observed at para [289] of her judgment that:

"Someone in the employ of Lidl took the Lidl text and the yellow circle with the red border and superimposed them on a blue background to create the Mark with Text. On balance, I consider that this is likely to have involved time, labour and creative freedom (even if the artistic quality involved is not "high"). Tesco's own evidence as to the various combinations of apparently basic shapes and colours considered by its own designers in arriving at a decision as to the CCP Signs tends, in my judgment, to bear this out."

Lord Justice Arnold thought that that was the correct test and as the judge had applied that test he considered that Mrs Justice Joanna Smith had reached a conclusion that had been open to her.

Tesco had argued that Lidl's work was analogous to adding a blue background to Caravaggio's Medusa.

In Lord Justice Arnold's view, the analogy illustrated his point. He said at [191]:

"In my view this illustration does not demonstrate the absence of any creativity on the part of the author(s) of the Stage 3 Work, but the converse. Although all that has been added to the Stage 2 Work by the author(s) of the Stage 3 Work is the square framing and the blue background, these elements interact with the elements which were already present. Any painter will confirm that placing one colour against another changes the viewer's perception of both. So too does placing one shape within another. Furthermore, as counsel for Lidl pointed out, the author(s) of the Stage 3 Work did not merely choose to surround the Stage 2 Work with a blue square, but also made other choices, namely (i) the precise shade of blue, (ii) the positioning of the Stage 2 Work centrally within the square and (iii) the distance between the edge of the Stage 2 Work and the edges of the square. The degree of creativity involved in the creation of the Stage 3 Work 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."

Tesco's alternative argument was that if the artwork for the mark with text was original, it had not reproduced a substantial part of that work because it had not copied what was original to the author(s) of that work. It was not disputed that 

(i) the shade of blue that Tesco used in the CCP signs was a shade which Tesco had previously used as part of their corporate livery, 

(ii) Tesco had previously used yellow circles in their signage and 

(iii) the distance between the yellow circle and the edges of the blue square in the CCP signs was different to the distance between the edge of the previous artwork and the edges of the square in the artwork in which copyright was alleged to subsist.
Tesco argued that all that had been copied from that artwork was the idea of a yellow circle in a blue square.

Although that argument had not been raised at trial, Lord Justice Arnold allowed Tesco to rely on it because it had been developed in answer to Lidl's case on originality.   

Lord Justice Arnold agreed with Tesco. Although the artwork for the mark with text was sufficiently original to attract copyright, the scope of protection conferred by that copyright was narrow. Tesco had not copied at least two of the elements that made the artwork original, namely the shade of blue and the distance between the circle and the square. Lidl accepted that they could not complain about the copying of the yellow circle in itself, because the yellow circle is original to the previous artwork and not the artwork for the mark with text. Although Tesco had copied the visual concept of a blue square surrounding (among other material) a yellow circle, that was all that they had done. In the case of the cropped and rectangular forms of the CCP signs, they had not even done that. Thus Lord Justice Arnold concluded that Tesco had not infringed the copyright in the artwork for the mark with text.  It followed that the copyright injunction had to go.

The Counterclaim

Lidl had appealed against the findings of bad faith on 12 grounds, 8 of which concerned its 1995 registration and 4 its 2002, 2005 and 2007 registrations. Lord Justice Arnold observed that the multiplicity of grounds suggested that Lidl were unable to identify any serious flaw in the trial judge's reasoning.  His lordship considered each of Lidl's arguments and dismissed them between paras [171] and [187].

Comment

Lord Justice Arnold's judgment comprises the following components:

• Introduction (paras [1] to [6])
• The trade marks in suit (paras [7] to [11])
• Trade mark infringement law (paras [12] to [26])
• Passing off law (paras [27] to [35]}
• The law on trade mark invalidity on the ground of bad faith (paras[36] and [37]) 
• The law on copyright subsistence and infringement (paras [38] to [44])
• Lidl's pleaded case on infringement and passing off {paras [45] to [49])
• The trial (para [50])
• The main judgment (paras [51] to [108])
• The supplemental judgment (para [109])
• The test on appeal (paras [110] and [111])
• Evidence in trade mark and passing off cases (paras [112] to [121])
• Tesco's appeal against the findings of trade mark infringement and passing off (paras [122] to [170])
• Lidl's appeal against the invalidity of "the wordless mark" registration (paras [171] to [187])
• Tesco's appeal against the finding of copyright infringement (paras [188] to [194])
• Tesco's appeal against the copyright injunction (para [195]) and
• The overall result (para [196]).

To make it easier to understand this appeal, I have focused on the introduction, the test on appeal, Tesco's appeal against the findings of passing off, trade mark infringement, passing off and copyright infringement and Lidl's appeal against the invalidity of "the wordless mark" registration.  Because appeal courts should not substitute their own findings for those of the trial judge in the absence of rationally insupportable findings or errors of law or principle these are the parts of the judgment that matter.  They set out the reasons for the disposal of the appeal.  Paras [7] to [109] and [112] to [121} are important and I shall discuss them in future articles because they contain guidance from our leading intellectual property judge but, unlike the paragraphs upon which  I did focus, they are obiter dicta rather than the ratio decidendi.

This is an important judgment and I am happy to discuss it over the phone during normal UK business hours or by email at other times.  Callers can dial +44 (0)20 7404 5252 or use my contact page,