Every Lidl helps (or not) - UK Appeal court confirms yellow and blue signs take unfair advantage

In a widely-reported decision which may at first glance seem surprising, the UK Court of Appeal has this week reluctantly upheld the decision of the UK High Court that Lidl can prevent Tesco’s use of a yellow circle on a blue background on the grounds of passing off and trade mark infringement. As a result, Tesco are expected to change their Clubcard Prices logo in the coming weeks.

Lidl's marks:

Tesco's signs:

It may seem strange that Lidl can claim a monopoly in a yellow circle on a blue background. However, Lidl provided evidence to successfully persuade the trial judge that Tesco’s Clubcard Prices signs erroneously conveyed the message of “price matching”, by incorrectly implying that the prices being advertised had been “price-matched” by Tesco with the equivalent Lidl price, resulting in the same or a lower price. Lidl were able to provide examples of customers who had made a connection between the two brands and had been confused into thinking that Tesco was matching Lidl’s prices. The judge considered that one of the intentions of Tesco’s Clubcard Prices promotion was to improve Tesco’s “value perception” so as to win back customers, and that achieving that aim had been easier and more effective because of the connection with the Lidl logo, which enjoyed a reputation for low price value. As a result, Tesco were deemed to be taking unfair advantage of the “reputation for great value” that Lidl had built up in their logo.

Lidl had also tried to rely on copyright infringement to prevent Tesco’s use of their yellow circle signs. The Appeal Court found that whilst Lidl’s logo was entitled to be protected by copyright, that protection was narrow, and Tesco’s activities did not infringe that copyright. This is interesting to IP lawyers, but doesn’t change the ultimate commercial outcome of the case, which will probably mean a change of logo for Tesco.

Interestingly, the judges sitting in the Court of Appeal all expressed their surprise that the trial judge had found trade mark infringement and passing off from the evidence filed, and some doubted they would have reached the same conclusion. However, Appeal judges cannot simply substitute their own reasoning for that of the trial judge, and the legal test was whether the trial judge’s finding was “rationally insupportable”. They concluded that the trial judge was entitled to have reached her conclusion on trade mark infringement and passing off, and accordingly they upheld the original decision.

Overall, this is an important win for Lidl, and is likely to give rise to a costly rebrand for Tesco. The decision is tied very tightly to the particular facts of the matter, but is a reminder not to sail too close to the brands of your competitors if you want to stay out of court. On the upside for Tesco, the decision has meant that both parties have once again had their names in the news and Tesco have had the opportunity to remind consumers about their Clubcard Prices promotion. And given the cut-throat world of UK grocery retailers, it is not likely to be too long before we see another battle between supermarket brands. Anyone fancy a slice of caterpillar cake while we wait for the next one?!

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