Lidl v Tesco: wordless logos suit speaks volumes
A picture may paint a thousand words, but what effect does a wordless logo have on the minds of busy consumers working on autopilot during a cost of living crisis?
This question is at the heart of a trademark infringement dispute between UK retailer Tesco and German discounter Lidl.
In the case heard at the High Court of England and Wales this week, Lidl alleged that Tesco’s use of its clubcard prices logo was an attempt to “ride on the coattails’ of Lidl’s reputation as a discount retailer”.
Lidl launched legal action against rival Tesco last year over the alleged infringement of its yellow, red and blue logo, which is protected by several UK trademark registrations.
This “wordless logo” consists of a yellow circle with a red rim positioned on a blue background, while Tesco’s logo comprises a yellow circle containing the words “clubcard prices” on a blue background.
‘A departure from the norm’
According to Carl Steele, partner at law firm Ashfords, the “interesting” case marks a departure from the norm in litigation battles involving discount retailers.
“Historically, it's been the other way around where we have seen brand owners accuse discount supermarkets of infringing in this way,” he explains.
“It's an interesting move,” he notes, pointing to the impact of the current cost of living crisis. “Obviously, Lidl believes that it's amid a very cutthroat market at the moment, and is concerned about the way Tesco has allegedly tried to associate its brand with its prices.”
On Monday, the court heard how the legal costs for both parties had been estimated at approximately £1.2 million. “The multi-million pound combined legal costs appear to be a reflection of how key this brand dispute is to both parties,” says Justice Joanna Smith.
Lidl also accused Tesco of misrepresenting its products by intimating that they share the qualities of those of Lidl’s low-cost products, and of infringing the copyright of an artwork.
A figment of the imagination
Tania Clark, partner and chartered trademark attorney at Withers & Rogers, agrees that the case marked a seachange.
It’s a sign of “just how contentious the world of supermarket retailing has become in recent times,” she explains.
“Tesco’s logo is used in stores and online to flag discounted prices to members of its loyalty scheme. In this case, Lidl is accusing Tesco of using a logo that is confusingly similar to its own and taking advantage of Lidl’s reputation,” says Clark.
“Who would have thought that one of the UK’s best-known discount retailers would be accusing the UK’s biggest supermarket, Tesco, of infringing its trademark registrations and riding on the ‘coattails’ of its reputation?”
In response, Tesco filed a counter cancellation claim against Lidl’s UK trademark registrations in an attempt to undermine its position.
The supermarket dismissed the validity of the disputed wordless mark as “a figment of Lidl’s legal imagination” and a product of its trademark filing strategy, which “does not exist in the real world”.
“The fact that Lidl has illegitimately obtained registered trademark protection…means that it should be expunged from the register on grounds of Lidl’s bad faith and/or the lack of distinctiveness of the mark…” the retailer argued.
Mental shortcuts
In Steele's view, the central argument comes down to heuristics—mental shortcuts that can facilitate problem-solving and probability judgments. But while these are effective for making immediate judgments, he explains that they often result in inaccurate conclusions.
“Consumers use shortcuts. And we don't even know sometimes we're using them when looking for things that we want. Our minds are taking in so much information that it's almost like we're on autopilot when we buy things,” he says.
“Lidl has claimed that its logo—even without a wording—and its colouring is so well known that consumers won’t need to see a word in this instance; they'll simply associate Tesco's image with Lidl.”
In a blow for Tesco, the court on Monday struck out its bad faith allegations that contended that Lidl’s wordless marks are “liable to be declared invalid because they were applied for in bad faith”.
Justice Smith found that Tesco has pleaded no particulars to explain what it is about the individual re-registrations or the mere existence of the mark with text that “raises the spectre of bad faith”.
“Tesco’s bad faith allegation does not get off the ground, given the need fully and properly to plead the charge of bad faith. A mere allegation of duplication of “various goods and services” does not appear to me to be sufficient,” she noted.
The court, meanwhile, also allowed Lidl to produce consumer survey evidence, finding that considerations of the case justified the additional expenditure that would be incurred.
Lidl’s ‘uphill battle’
But while Steele described the move to dismiss Tesco’s “ambitious claims” of bad faith as unsurprising, he predicted that Lidl would face an “uphill battle” in proving its argument.
“Fundamentally the question is whether Lidl will be able to convince the court that its wordless logo is seen as a trademark by consumers they rely upon,” he explains.
“And second, if they do, will it be able to prove that consumers make that heuristic link when they see the Tesco mark, and associate Tesco with the low prices, etc? And if so, is that unfair? It’s not impossible for Lidl to win this argument, but it will be a difficult one to prove.”
“Who would have thought that one of the UK’s best-known discount retailers would be accusing the UK’s biggest supermarket, Tesco, of infringing its trademark registrations and riding on the ‘coattails’ of its reputation?” - Tania Clark, Withers & Rogers
“It seems likely that the case will rest on how distinctive Lidl’s logo is and the extent, if any, of the wordless logo’s reputation,” concurs Clark.
“With the cost of living crisis impacting many households across the country, retail brand owners are even more protective of their value for money proposition,” she adds.
The case, she urges, further highlights the importance of registering different elements of a company’s branding, including both verbal and non-verbal elements.
“It is key to register verbal elements such as trading names and product names, but registering non-verbal elements such as the design of the product and logo minus any words, will strengthen a brand owner’s position in protecting it against competitors who sail too close to the wind.”
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