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Lidl v Tesco: Court of Appeal decision released

By Richard Kempner, Partner

Last year, the High Court decided that Tesco’s use of its Clubcard Prices logo (shown above) constituted trade mark infringement, passing off and copyright infringement of Lidl’s logo (also above) and that certain of Lidl’s trade marks for its exact same logo without the word Lidl had been filed by Lidl in bad faith. Both sides appealed to the Court of Appeal whose judgement came out this morning. The full judgement can be found here.

What did the court decide today?

The Court of Appeal upheld Tesco’s appeal that it had not infringed copyright, on the basis that Tesco had not taken enough of the relevant copyright work for it to constitute the taking of a substantial part of it (that being a requirement for infringement). The court also dismissed Lidl’s appeal on the validity of its wordless trade marks, upholding the judge’s finding that its wordless trade mark registrations had indeed been filed by it in bad faith. So far, so good for Tesco. But with some apparent reluctance, the court upheld the judge’s findings of fact that by virtue of its use of the blue square and yellow circle price signifier, enough consumers might be misled (even though the majority would not be) into believing that Tesco were offering a price match to Lidl by virtue of that use, as to constitute trade mark infringement and passing off. Whilst one appeal judge said that Lidl’s claim was at the outer boundaries of trade mark protection and passing off, Tesco will nevertheless now need to rebrand its Clubcard Price price signifier.

Why were the Court of Appeal apparently reluctant to uphold the earlier passing off/trade mark decision?

In upholding the first instance findings, the court articulated that they were “surprising” findings and “at the outer boundaries of trade mark protection and passing off”. Noting that he ‘doubted whether he would have come to the same conclusion’, Lewison LJ, the most senior judge on the panel, said “that is not the question on appeal. It is not open to us simply to substitute our own evaluation. The question is whether the judge’s finding was rationally insupportable” going on to say that, that being the threshold, he “did not think that we can say that [they were]”. “The upshot is that despite Tesco’s wish to differentiate itself from Lidl and to promote the value of its own very distinctive brand, it has found itself liable for trade mark infringement and passing off”.

Richard Kempner, who acted for Tesco on the case, said the following: ‘It’s obviously a disappointing result. The judge in the first instance case had got the law [of passing off and trade marks] 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’.

In conclusion, Lewison LJ likened his position to that of a previous Supreme Court judge in an unrelated case who had said that: ‘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 [on trade mark infringement and passing off] cannot be faulted in law. With undisguised reluctance I agree … that [Tesco’s] appeal should be dismissed’.

What are the implications of this decision?

First, copyright isn’t quite as straightforward as the first instance Judge had found it to be. IP specialists sitting on the Court of Appeal were able to address the complexity of the true legal position, and overturn what was a surprising decision in the first place.

Secondly, the Court of Appeal has clarified that absent good reason for filing and re-filing trade marks that are not in fact used, there is a very real risk that they will be deemed to have been filed in bad faith. (Although Lidl had successfully argued that their use of the mark with the word “Lidl” constituted use of the mark – in the background – of the Wordless Mark, that was not enough to override the bad faith finding). It remains to be seen whether the Supreme Court decision in Skykick which is due imminently, changes any of this, for other cases.

Thirdly, although the experienced IP specialists on the Court of Appeal, had they been trying the case at first instance, may not have come to the same factual conclusions, that is not the test on appeal. Arnold LJ praised the first instance judge for her careful and detailed analysis.

Richard Kempner said the following: ‘Most IP lawyers that we know didn’t think this was a case of trade mark 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 trade mark 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 were price matching against Lidl even though the majority of people wouldn’t necessarily think that and even if it was unintended’.

Finally, the case serves as a reminder that first instance findings of fact are extremely difficult to overturn. Where a careful and detailed analysis has been carried out at first instance, there will almost always be sufficient ‘rational support’ for the factual findings, and if there was any doubt about it before, we now know that the Court of Appeal will not lightly intervene to right any possible wrongs.

Richard Kempner and Brian Whitehead of Haseltine Lake Kempner LLP acted for Tesco on this case.

This is for general information only and does not constitute legal advice. Should you require advice on this or any other topic then please contact or your usual HLK advisor.

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