UK appeals court green lights ‘bad faith’ claim in supermarket showdown

Court of Appeal says UK supermarket’s claim has a “real chance of success” | German discounter says Tesco’s Clubcard Prices logo ‘infringes’ its logo | Haseltine Lake Kempner | Bird & Bird

Tesco will be allowed to argue at trial that a wordless version of Lidl's logo was periodically filed and refiled by Lidl in bad faith, the Court of Appeal of England and Wales has said.

The judgment handed down yesterday, November 2, reverses an earlier decision delivered by the High Court.

The case which emerged in June, saw  poacher turned gamekeeper Lidl file an infringement claim against the UK supermarket chain.

The dispute centred on Tesco’s Clubcard Prices loyalty discount scheme, which offers point-of-sale discounts on selected items to Clubcard members.

Lidl contended that the sign used by Tesco for the scheme—a yellow circle on a blue square with the words ‘Clubcard Prices’—constitutes an infringement of Lidl's IP rights.

Evergreening allegations

The German discounter argued that the mark was allegedly similar to the background of Lidl’s logo, which uses a blue square and yellow circle with a thin red border around it.

Tesco denied the allegation and filed a counterclaim for invalidity and revocation of Lidl's registrations of its wordless background, which has never been used in the UK in the form in which it was registered, on a number of grounds including bad faith trademark filing.

Richard Kempner, partner at  Haseltine Lake Kempner, who represented Tesco, outlined the retailer’s two principal arguments underpinning its allegations of Lidl’s bad faith filing.

“Lidl had never used, in the UK, the wordless mark in the form in which it was registered, 27 years since they had first applied for it.

“Secondly, the retailer argued that Lidl, in order to avoid the ‘non-use’ provisions (a rule that says that marks that haven’t been used for five years can be revoked), had kept reapplying for the mark periodically since then—an allegation of ‘evergreening’.”

‘A real prospect of success’

Tesco alleged that the mark was on the register purely to extend Lidl's monopoly right beyond the mark it actually used, so as to use the extended right against third parties as a weapon in legal proceedings.

“Lidl argued that there were a number of entirely legitimate reasons why it might have applied for the wordless marks, and that Tesco had not provided a sufficient basis for its claim of bad faith to justify requiring Lidl to explain its actual reason(s) for applying for the wordless mark registrations, whether by providing disclosure and evidence in relation to its filing strategy, or otherwise,” noted Kempner.

The Court of Appeal, however, decided that Tesco's claim had “a real prospect of success”.

Commenting on the decision, a spokesperson for Tesco said: “We are pleased with today’s decision. We continue to deny and strongly defend this claim, and remain very confident of our position for the trial next year.”

Also responding to the ruling, Lidl told WIPR:

“This appeal is only a small procedural aspect of the case and we remain confident in the outcome of the trial in 2023. Our survey, which has been accepted as evidence by the High Court shows that well over 70% of UK grocery shoppers recognise our distinctive Lidl logo even without the word LIDL on it. It’s important that customers are not being misled on value by Tesco through their use of a sign which is strikingly similar to our logo.”

Haseltine Lake Kempner acted for Tesco and instructed Simon Malynicz KC and Daniel Selmi. Bird & Bird acted for Lidl. The trial of the action between Lidl and Tesco, where the matter will be finally resolved, is due to take place in February 2023.

WIPR has approached Bird & Bird for comment.