Lidl Great Britain Ltd v Tesco Stores Ltd [2024] EWCA Civ 262

Lidl sued Tesco over its blue-square/yellow-circle Clubcard Prices signs. The Court of Appeal upheld findings of trade mark infringement (s.10(3)) and passing off based on a price-matching misrepresentation, allowed Tesco's appeal on copyright, and upheld the bad-faith invalidation of Lidl's 'Wordless Mark' registrations.

Facts

The Claimants (“Lidl”) are a German discount supermarket group and its UK subsidiary. Since about 1987 Lidl have used a logo consisting of the word LIDL within a yellow circle edged in red on a blue square background. Lidl own registrations both of the logo with the word LIDL (“the Mark with Text”) and of the logo without the word (“the Wordless Mark”). Lidl have never used the Wordless Mark in the form registered.

From September 2020 the Defendants (“Tesco”) used signs comprising a yellow circle on a blue square or rectangular background (“the CCP Signs”) in their Clubcard Prices promotion, under which Clubcard holders pay lower prices. The CCP Signs always incorporated the words “Clubcard Prices” or “Clubcard Price” with a price, and were used extensively in stores, print, online, on social media and in out-of-home (“OOH”) advertising, sometimes in cropped form. The blue shade was part of Tesco’s existing corporate livery.

Lidl claimed infringement under section 10(3) of the Trade Marks Act 1994 (extended protection for marks with a reputation), passing off, and copyright infringement in the logo as an artistic work. Tesco counterclaimed for a declaration that the Wordless Mark registrations were invalid (bad faith), alternatively revocation for non-use.

Joanna Smith J ([2023] EWHC 873 (Ch)) upheld Lidl’s claims for trade mark infringement (both detriment to distinctive character and unfair advantage), passing off, and copyright infringement, but upheld Tesco’s counterclaim that the 1995, 2002, 2005 and 2007 registrations of the Wordless Mark were applied for in bad faith and therefore invalid. In a supplemental judgment ([2023] EWHC 1517 (Ch)) she held that a copyright injunction would be granted even if the trade mark and passing off claims ultimately failed. Both sides appealed.

Issues

The Court of Appeal had to decide:

• Whether the judge was entitled to find that the CCP Signs conveyed to a substantial number of consumers the message that Tesco’s Clubcard prices were “price matched” with (i.e. the same as or lower than) Lidl’s prices, contrary to fact — the foundation of both the unfair advantage claim and the passing off claim.
• Whether the judge erred in her treatment of the evidence relied on by Lidl (two individual consumers, spontaneous consumer messages known as “the Lidl Vox Populi”, and a pre-launch survey commissioned by Tesco from an agency called The Source).
• Whether there had been a change in the economic behaviour of the average consumer sufficient to establish detriment to distinctive character, including if the price-matching allegation failed.
• Whether Tesco’s use of the CCP Signs was with “due cause”.
• Whether the judge was right to find that the Wordless Mark registrations were applied for in bad faith, including as to the burden of proof and the evidential position at each application date.
• Whether copyright subsisted in the “Stage 3 Work” (the blue square version of the logo) as original over the earlier “Stage 2 Work”, and, if so, whether the CCP Signs reproduced a substantial part of it.

Arguments

Tesco

Tesco’s principal ground was that the judge was wrong to find that the average consumer would understand the CCP Signs as conveying a price-matching message. They argued that the judge should have decided the point using her own common sense and experience (or at least formed a provisional view before turning to the evidence); that the evidence of Messrs Berridge and Paulson and the Lidl Vox Populi could not stand as representative of ordinary consumers; that The Source survey should not have been taken into account without a finding of statistical significance; and that, properly analysed, the evidence did not support deception. Tesco relied on evidence from Mr Hing suggesting that references to price matching were explicable by confusion between Lidl and Aldi (Tesco having run a genuine “Aldi Price Match” campaign, whose logo often appeared next to the CCP Signs).

Tesco further argued there was no change in economic behaviour absent the price-matching finding; that they had due cause, since yellow, circles and squares were commonplace in the sector and blue was part of their livery; and that the judge had wrongly adopted Kitchin J’s “relatively stringent” formulation from Julius Sämann Ltd v Tetrosyl Ltd [2006] EWHC 529 (Ch), [2006] FSR 42. On copyright, Tesco denied originality in the Stage 3 Work over the Stage 2 Work (relying on the principle derived from Dicks v Brooks (1880) 15 Ch D 22 that a derivative author cannot complain of copying only what was original to the earlier author), and argued in the alternative that they had not copied a substantial part.

Lidl

Lidl relied on the pleaded case that the CCP Signs suggested price equivalence contrary to fact, and that use of the signs diluted the Marks and altered consumers’ economic behaviour, including by forcing Lidl to undertake corrective advertising. On the bad faith appeal Lidl advanced twelve grounds, contending in particular that the judge had wrongly reversed the burden of proof, had ignored evidence of intention (the section 32(3) statement of intention to use and an undertaking given to Osmiroid International Ltd), had wrongly required direct witness testimony, and had imposed an unrealistic evidential burden given the passage of time since 1995.

Judgment

Arnold LJ gave the lead judgment. Birss LJ and Lewison LJ agreed with the outcome, with qualifications noted below.

Approach on appeal and the role of evidence

Arnold LJ reiterated that findings of fact can be disturbed only if rationally insupportable (Volpi v Volpi [2022] EWCA Civ 464, [2022] 4 WLR 48) and multi-factorial evaluations only if the judge erred in law or principle. He took the opportunity to explain the role of consumer evidence, noting that trade mark and passing off disputes can often be decided without evidence, but that:

“The fact that evidence is often unnecessary does not, however, mean that evidence, where it is available, is of no value.”

He rejected the suggestion that evidence from individual consumers is irrelevant because no real consumer can stand proxy for the average consumer: such evidence is relevant because it “may assist the court to gauge the perceptions of the average consumer or ordinary consumers”, need not be statistically significant, must be evaluated with caution, and must not be treated as determinative. Permission is not needed to adduce surveys carried out for non-litigious business purposes.

Price matching, misrepresentation and passing off

Arnold LJ rejected Tesco’s submission that the judge should have ignored the evidence or formed a prior provisional view: since Tesco had not objected to admissibility, it would have been an error of principle to ignore the evidence. He accepted, however, that because the judge relied exclusively on the evidence without expressing her own independent view, “her decision can only stand if it was one which was open to her on that evidence”.

Examining the three strands relied on — Messrs Berridge and Paulson, the Lidl Vox Populi, and The Source survey (Test 1) — he found a “small flaw” in the judge’s reasoning: Mr Berridge’s evidence went only to Tesco emulating Lidl’s low prices, not to price matching, and he had a connection with Lidl’s lawyers warranting particular caution. That did not undermine the rest of the reasoning. Mr Paulson’s evidence did support a price-matching perception; the Vox Populi messages were spontaneous and the judge was entitled to reject Mr Hing’s Aldi-confusion explanation; and the judge properly treated The Source survey as qualitatively, not quantitatively, significant, avoiding “the trap” of treating it as having quantitative significance.

Acknowledging that “[a]t first sight, the judge’s finding … is a somewhat surprising one”, Arnold LJ nonetheless concluded that it was not rationally insupportable, emphasising 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 passing off appeal was therefore dismissed.

Unfair advantage, detriment and due cause

Unfair advantage stood or fell with price matching and therefore survived. On detriment, Arnold LJ held that, even assuming the price-matching allegation failed, the judge’s finding of a change in economic behaviour was sustainable: it rested on the unchallenged finding that the campaign slowed customer switching, and on Ms Farrant’s evidence that Lidl felt compelled to undertake corrective advertising. That reflected Lidl’s pleaded case at paragraph 25(b)–(d), which was “in principle capable of sustaining a finding of a change in economic behaviour if made good on the evidence”.

On due cause, the court applied the balancing exercise derived from Leidseplein Beheer BV v Red Bull GmbH (Case C-65/12) [EU:C:2014:49]. Arnold LJ held there was no error in the judge’s use of the “relatively stringent” formulation, which she understood merely as meaning innocent adoption is not enough: “Tesco could easily have used a different sign to promote Clubcard Prices.”

Bad faith

Lidl’s twelve grounds were rejected. Arnold LJ observed that “[t]he multiplicity of grounds suggests that Lidl are unable to identify any serious flaw in the judge’s reasoning”. A person is presumed to act in good faith, but where the objective circumstances raise a prima facie case of bad faith the evidential burden shifts. Given the admissions that Lidl had never used the Wordless Mark as registered and had registered it to obtain wider protection than the Mark with Text, the inferences of no intention to use and of registration as a legal weapon were properly drawn.

The statement of intention to use under section 32(3) carried no weight: taken at face value it was untrue, and at best showed an intention to contend that use of the Mark with Text constituted use of the Wordless Mark, not a belief on any tenable basis that it did. The Osmiroid undertaking (over two years later) was similarly of no weight. The judge’s finding that use of the Mark with Text amounted to use of the Wordless Mark was not determinative of intention in 1995, being based on evidence including a 2021 YouGov survey. Nor was the evidential burden unrealistic: Lidl were best placed to explain their intentions, and having claimed privilege they could not assert that no relevant documents survived. Statements to the USPTO were properly given no weight. The findings as to the 2002, 2005 and 2007 registrations followed; it was unnecessary to decide the evergreening grounds.

Copyright

Tesco’s appeal succeeded here. Arnold LJ held the judge was wrong to invoke Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273, which “is not relevant to the question of whether a derivative work is original over an antecedent work”, but she was right that simplicity and lack of artistic merit do not preclude originality and she applied the correct “author’s own intellectual creation” test (Infopaq International A/S v Danske Dagblades Forening (Case C-5/08) [2009] ECR I-6569).

Rejecting Tesco’s Caravaggio analogy, Arnold LJ held the Stage 3 Work was original: the author chose the shade of blue, the central positioning and the distance between the circle and the square edges, and “[a]ny painter will confirm that placing one colour against another changes the viewer’s perception of both”. The creativity was low but not purely mechanical.

However, low originality means a narrow scope of protection, so that only a close copy will infringe (following THJ Systems Ltd v Sheridan [2023] EWCA Civ 1354, [2024] ECDR 4 at [27]). Tesco used their own shade of blue and a different (and varying) spacing; Lidl could not complain of the yellow circle, which was original to the Stage 2 Work. Tesco had copied only “the visual concept of a blue square surrounding (among other material) a yellow circle”, and in the cropped and rectangular forms not even that. No substantial part was reproduced, so there was no copyright infringement, and the appeal against the copyright injunction became moot.

Birss LJ

Birss LJ agreed with the outcome but differed on one point. In his view the price-matching finding was crucial: absent it, there could be no unfair advantage and no passing off, and a detriment case would become “very hard to distinguish from one based on pure dilution”. He observed: “Trade mark law has never gone that far and I would not wish to encourage it.” Since the price-matching finding stood, the point made no difference. He also shared Lewison LJ’s difficulty with the notion of an advantage being unfair yet taken with due cause, but preferred to leave that question for a case where it was decisive.

Lewison LJ

Lewison LJ found the trade mark and passing off claims “very difficult, at the outer boundaries of trade mark protection and passing off”. He doubted the judge’s sequential treatment of unfair advantage and due cause at [73](26), commenting: “I would interpret that as meaning that if the sign is used with due cause, any resulting advantage is not unfair.” He noted tension between Leidseplein and Interflora Inc v Marks & Spencer plc (Case C-323/09) [2012] ETMR 1, and disagreed with the analysis of Mr Daniel Alexander QC in PlanetArt LLC v Photobox Ltd [2020] EWHC 713 (Ch), [2020] ETMR 35 at [43]. He emphasised that a general message that Tesco offers good value “is anything other than fair competition” could not suffice, and that the obvious comparator for the discount message was Tesco’s own non-Clubcard prices. Nonetheless he accepted the finding of fact could not be overturned, echoing Lord Bridge in the Jif Lemon case and concluding: “With undisguised reluctance I agree … that the appeal should be dismissed.”

Implications

The decision is significant principally for its treatment of evidence in trade mark and passing off cases. Arnold LJ’s analysis confirms that spontaneous consumer reactions, internal business surveys not designed for litigation, and evidence from individual consumers are admissible and may properly be weighed, notwithstanding that they are not statistically significant and cannot stand as proxies for the average consumer. The caveats are important: such evidence must be evaluated with caution, discounted where consumers appear idiosyncratic, and never treated as determinative. Judges are not obliged to form a provisional view before considering admitted evidence, but where a judge relies exclusively on evidence without expressing an independent view, the conclusion must be one open on that evidence.

The case also underlines the practical difficulty of appealing findings of misrepresentation and consumer perception, which remain questions of fact reviewable only on the Volpi standard. Both Lewison LJ and Arnold LJ described the outcome as surprising, illustrating the limited scope for appellate intervention even where the appellate judges might have decided differently.

On bad faith, the decision reinforces that registering a mark with no genuine intention to use it, in order to secure a wider monopoly than the marks actually used, may amount to bad faith. Once objective indicia raise a prima facie case, the evidential burden shifts, and proprietors who cannot explain historic filings — particularly where privilege is maintained — may be unable to discharge it. A statutory statement of intention to use under section 32(3) will carry little weight where its truth depends on the very proposition in issue. Brand owners with legacy “defensive” registrations should note the practical importance of retaining contemporaneous records of filing rationale.

On copyright, the case applies THJ: a simple logo may be original, but where creativity is low the protection is correspondingly narrow and only a close copy will infringe. Reproducing the general visual concept, while altering colour shade and proportions, may fall outside the copyright even where it founds trade mark liability. That divergence between the trade mark/passing off outcome and the copyright outcome is itself instructive for practitioners pleading parallel claims.

Several points remain unresolved. Birss LJ’s doubt as to whether detriment absent a price-matching misrepresentation could sustain a section 10(3) claim was expressly not decided, and Lewison LJ’s and Birss LJ’s reservations about whether unfair advantage can coexist with due cause were deliberately left open for a case in which the point is decisive. The judgment therefore should not be read as settling those questions. The decision is also closely tied to its facts: the finding turned on a specific pleaded price-matching representation, the strength of Lidl’s discounter reputation, and the particular evidential record.

Verdict: The Court of Appeal dismissed Tesco’s appeal against the findings of trade mark infringement (under section 10(3) of the Trade Marks Act 1994) and passing off; allowed Tesco’s appeal against the finding of copyright infringement, holding that the CCP Signs did not reproduce a substantial part of the Stage 3 Work; and dismissed Lidl’s appeal against the finding that the 1995, 2002, 2005 and 2007 registrations of the Wordless Mark were invalid as having been applied for in bad faith. Tesco’s appeal against the copyright injunction was accordingly moot. Birss LJ and Lewison LJ agreed with the result, with the qualifications expressed in their judgments.

Source: Lidl Great Britain Ltd v Tesco Stores Ltd [2024] EWCA Civ 262