Battle of the brands: Tesco forced to rebrand Clubcard logo after Lidl's legal triumph

In the most recent case involving supermarket rivalry and intellectual property rights, the Court of Appeal of England and Wales has backed the High Court's verdict against Tesco. The judgment (which can be found here) affirms Tesco's breach of Lidl’s trade mark and its liability for passing off in relation to Tesco's use of its "Clubcard Prices" logo.

How it all started

Since Lidl first launched in the UK in 1994, it has used the same logo (pictured below) to distinguish its products from other large retailers. Lidl is the owner of several trade marks in the UK, including 1. Lidl’s logo with the word “LIDL” inside a yellow circle on a blue background and 2. Lidl's logo without text.

Although Tesco’s Clubcard scheme has been around since 1995, in 2020, Tesco started using a logo in stores, consisting of a yellow circle with a blue square background to promote its “Clubcard Prices” initiative (also pictured below). This logo represented a new way to promote the scheme where Clubcard members receive discounted prices on specific items. As a result, Lidl claimed that Tesco’s Clubcard logo copied Lidl's logo, causing confusion among consumers. Lidl argued that it conveyed a false price-matching message, subsequently damaging Lidl’s brand.

The High Court case (2023)

Lidl brought a claim against Tesco for infringement of copyright, trade marks and passing off of Lidl's logo and wordless logo (pictured above). Unsurprisingly, Tesco issued a counterclaim, alleging that Lidl’s trade mark registration of its wordless logo was registered “in bad faith” as they had no genuine intention to use the wordless mark and it lacked distinctiveness.

In April 2023, supported by a large amount of evidence consisting of consumer surveys and feedback, the High Court found that Tesco’s Clubcard logo had infringed both of Lidl’s trade marks and copyright. Additionally, it was ruled that Tesco was liable for passing off, as its Clubcard Prices sign misled consumers into equating Tesco’s discounted prices with Lidl’s.

The High Court also found, however, that Lidl's wordless mark was invalid as Lidl had continued to register the wordless mark (except for the latest registration) in bad faith - implementing a strategy known in IP law as "evergreening". Nevertheless, it was ruled that Tesco was still liable for trademark and copyright infringement, and passing off.

After the judgment was passed down, both parties sought to appeal against the High Court's judgment at the Court of Appeal.

Types of IP

If you’re not familiar with the types of IP rights that were disputed in this case, or if you need a refresher, we’ll briefly summarise each of them for you:

Copyright 

Copyright grants creators exclusive rights to their original works, such as literary, artistic, musical, and dramatic creations. Unlike trademarks, copyright protection arises automatically upon the creation of a work and does not require registration. Copyright infringement occurs when someone reproduces, distributes, or displays copyright protected material without authorisation, potentially depriving the creator of rightful recognition and financial benefits.

Trade marks

Trade marks are distinctive signs, symbols, or logos used by businesses to distinguish their products or services from those of others in the marketplace. Registering a trademark provides legal protection against unauthorised use by competitors and allows businesses to safeguard their brand identity and reputation. Trademark infringement occurs when a party uses a mark that is identical or similar to a registered trademark, leading to consumer confusion or dilution of the original brand's distinctiveness.

Passing off

Passing off occurs when a business uses branding, such as a logo or name that is sufficiently similar to another brand that “rides the coattails” of the established brand’s reputation, leading to confusion among consumers. In the UK, passing off law protects unregistered intellectual property rights. This means that even if your business, logo, or name have not been registered as trade marks, if another party attempts to use them or something closely resembling them to deceive consumers into thinking they are purchasing your products or services, you can still bring a claim for a breach of your IP rights.

The appeal (2024)

Although Tesco succeeded in overturning Lidl’s claim of copyright infringement, in March 2024, the Court of Appeal upheld the previous ruling that Tesco had infringed Lidl’s trade marks and was liable for passing off.

The Court of Appeal found that Tesco's Clubcard logo had diluted Lidl's reputation as a discount supermarket. Heavily supported by substantial evidence from consumers, the judgment stated that the Clubcard logo confused consumers into thinking that the products promoted under the Clubcard scheme were price-matched with Lidl.

As a result, Tesco can no longer use its yellow and blue "Clubcard Prices" logo, and faces the daunting prospect of having to invest millions of pounds in rebranding their Clubcard scheme.

Practical tips for businesses

The Lidl v Tesco case offers several critical takeaways for business owners navigating the intricacies of IP protection, such as: 

1. Be diligent when making branding decisions

Tesco's costly rebranding process that it must now undergo highlights the importance of conducting thorough due diligence before adopting new logos or trade marks. Any resemblance to existing brands can lead to protracted legal battles and substantial financial losses, so it's important that companies carefully assess the likelihood of confusion to consumers when using designs that may be similar to those of another brand.

2. Protect your intellectual property and actively monitor it

Businesses should take proactive steps to register their trademarks and enforce their rights to prevent unauthorised use by competitors. Additionally, it is important to actively monitor the marketplace for potential infringements and take prompt action to address any unauthorised use of intellectual property.

By protecting and maintaining intellectual property rights, businesses can safeguard their brand reputation and prevent others from exploiting their hard-earned goodwill and reputation.

3. Only register trade marks if you intend to use them

The Court of Appeal agreed with Tesco's argument that Lidl’s wordless mark was filed in “bad faith” as they had no genuine intention to use their logo without the word “LIDL” in the middle of the yellow circle.

Businesses should ensure that they genuinely intend to use all marks that they seek to register. It’s also important to document the continued use of the trade mark to mitigate the risk of bad faith allegations and strengthen legal defences should it be necessary in future. 

4. Regularly conduct surveys and keep records

This case relied heavily on robust evidence demonstrating that Tesco had taken unfair advantage of Lidl's reputation in connection with their logo, as a business with low-value prices by using a similar mark to its own.

Consumer behaviour, market perception, and historical usage patterns played pivotal roles in determining liability in this case. The evidence supported Lidl’s argument that the average consumer thought the Clubprice logo represented price matches with Lidl. Therefore, retaining comprehensive data relating to your business is imperative to gauge how consumers perceive your branding, and if it may cause confusion.

Conclusion

This case serves as a cautionary tale for businesses operating in a competitive marketplace when it comes to intellectual property and how it can affect consumer perception. By adhering to best practices in IP protection, including thorough research, pro-active IP protection, data documentation, and a genuine intention to use their registered trade marks, companies can mitigate the risks of costly legal disputes and safeguard their valuable intellectual assets.