E&W Court of Appeal upholds TM/passing-off judgment in Lidl v Tesco

In last week's eagerly anticipated judgment, the Court of Appeal of England and Wales (the Court) upheld the High Court's findings of trademark infringement and passing off against Tesco in respect of its "Clubcard Prices" signs, which were found to have conveyed the message to consumers that it was price-matching Lidl.

Background

The IPKat previously reported on the decision of the High Court that Tesco had infringed Lidl’s copyright, trade mark, and rights in passing off vesting in Lidl’s blue-and-yellow logo (the Mark with Text), resulting in a final injunction being granted against Tesco in respect of the same:

The High Court had, however, also found that Lidl had applied to register its figurative wordless mark (the Wordless Mark) in bad faith:

Both parties appealed to the Court. Tesco's principal ground of appeal against the findings of trade mark infringement and passing off was that the High Court had been wrong to find that the average consumer seeing their "Clubcard Prices" signs (the CCP Signs) would be led to believe that the price being advertised had been "price-matched" by Tesco with the equivalent Lidl price, so that it was the same or a lower price.  

Tesco also advanced grounds of appeal challenging the High Court's conclusions on detriment, unfair advantage and due cause in respect of the trade mark infringement claim, and against the finding of copyright infringement. 

Lidl, on the other hand, appealed the High Court's finding of bad faith in respect of the Wordless Mark.

The Court’s judgment

Price-matching allegation 

The two main criticisms put forward by Tesco in respect of the High Court's findings in respect of Lidl's price-matching allegation were: 

1. that the High Court judge should have reached a conclusion purely from her own common sense and experience and should have ignored the evidence relied upon by Lidl, or alternatively, formed a provisional view based on her own common sense and experience and only then considered whether the evidence relied upon by Lidl confirmed or contradicted that provisional view; and
2. that the High Court judge was wrong to conclude that the evidence presented by Lidl supported a finding of deception. 

In respect of the first criticism, this was dealt with in short order by the Court, on the basis that, given that Tesco had not objected to the admission of the evidence in question, it would have been an error of principle to simply ignore it. Instead, the judge had carefully evaluated the evidence and decided what assistance, if any, to derive from it, as she was required to do.

As for the second, the Court noted that it was necessary for it to consider the evidence the judge relied upon, not to determine whether it agreed with her finding (i.e. that a substantial number of consumers had been led by the CCP Signs to believe that Tesco's Clubcard prices were the same or lower than Lidl's for equivalent goods) but whether the evidence entitled her to reach that finding. 

In the Court's view, the best description of the correct approach for a judge to assess evidence in trade mark infringement and passing off cases is found in Mr Justice Jacob's judgment in Neutrogena v Golden [1996] RPC 473: "The judge must consider the evidence adduced and use his own common sense and his own opinion as to the likelihood of deception. It is an overall 'jury' assessment [...] And even if one's own opinion is that deception is unlikely though possible, convincing evidence of deception will carry the day."

The Court proceeded to assess the evidence upon which the High Court judge had based her finding, namely: 

1. the witness evidence of two customers, Mr Berridge and Mr Paulson, who were said to have been confused by the CCP Signs; 
2. the so-called "Lidl Vox Populi", which consisted of messages from 141 consumers which Lidl had selected from social media searches and the parties' disclosure. Lidl relied on the Lidl Vox Populi as showing both: (a) consumers noticing the similarity between the CCP Signs and the Mark with Text; and (b) consumers thought that the CCP Signs were conveying the message that Tesco were matching Lidl prices; and 
3. consumer surveys carried out by The Source, on Tesco's instruction, to enable Tesco to understand whether its planned design for the CCP Signs was likely to be successful in communicating the associated offer message when compared to existing signage (the Source Survey). 

The Court reiterated that both the witness evidence and the Lidl Vox Populi constituted admissible evidence, as evidence of this kind has frequently been admitted in passing off proceedings, and consequently had to be taken into account. As for the Source Survey, the High Court judge had correctly concluded that it was designed to have qualitative, rather than quantitative significance, and did not make the mistake of treating it as determinative of any issue. Rather, she treated it as one piece of evidence among a number of others which assisted her to gauge the perceptions of ordinary consumers, including their subconscious reactions.

Therefore, although the Court accepted that the High Court's finding (i.e. that a substantial number of consumers would be misled by the CCP Signs into thinking that Tesco's Clubcard Prices were the same as or lower than Lidl's prices for equivalent goods, despite making no reference to Lidl or price-matching) was a "somewhat surprising" one, this finding was based upon the three strands of evidence above, and the judge was not only entitled to place some weight on each of those strands, but also to regard each of the three as reinforcing the other two. 

The Court found that there had been one small flaw in the High Court judge's reasoning, in that she had described the evidence of Mr Berridge and Mr Paulson as being "consistent", despite the fact that Mr Berridge's evidence did not go as far as that of Mr Paulson, who had interpreted the CCP Sign as conveying a price-matching message, but rather considered it a message that Tesco were emulating Lidl in offering low prices. Despite placing more weight than appropriate on Mr Berridge's evidence, the Court was not persuaded that the High Court's finding was "rationally insupportable", and Tesco's appeal against the finding of passing off was dismissed accordingly.      

Kat only eats kibble from M&S... 

Unfair advantage, detriment and due cause

The other issues raised by Tesco in respect of trade mark infringement also failed: 

1. Tesco's challenge to the High Court's finding of unfair advantage fell with the question of price-matching, as this constituted evidence of a change in the economic behaviour of consumers; 
2. As for detriment, the Court found that the High Court judge's finding was based on the facts that: (a) Tesco's Clubcard Prices campaign had been deterring customers switching from Tesco to Lidl (and Aldi); and (b) Lidl had felt obliged to engage in corrective advertising to promote its lower prices. These facts were borne from evidence which the High Court was entitled to accept; and
3. On due cause, the Court found (with some difficulty) that there was no error of law or principle in the High Court judge applying Julius Sämann Ltd v Tetrosyl Ltd [2006] EWHC 529 (Ch), in which Kitchin J had observed that the test for showing due cause is "relatively stringent" - in other words it is not enough to show that a sign has been innocently adopted, there must be something more to justify its use. In the present case there was nothing more, as Tesco could easily have used a different sign to promote Clubcard Prices.

Wordless Mark

Lidl appealed against the judge's findings of bad faith on no less than 12 grounds, which this Kat will not set out in detail here for brevity. In short, the Court upheld the High Court's finding, largely on the basis that it was correct to find that, where objective circumstances give rise to a prima facie case of bad faith (e.g. because there had been no use of the Wordless Mark, and it had been applied for in order to obtain a wider scope of protection than that conferred to the Mark with Text), the evidential burden of proof shifts to the applicant. Lidl had been unable to produce sufficient evidence to displace the presumption of bad faith in this case. 

Copyright

Finally, Tesco had appealed against the High Court's finding of copyright infringement on two grounds, namely the High Court had been wrong to find that the Mark with Text was original for copyright purposes, or alternatively that the CCP Signs reproduced a substantial part of the Mark with Text. 

One of Tesco's more interesting arguments was that the contribution of the author(s) to the Mark with Text (i.e. from its previous iteration) was analogous to adding a blue background to Caravaggio's Medusa: 

The Court found that the author in this case had not only chosen to surround the earlier work within a blue square, but had also made other choices including the shade of blue and the precise positioning of the inner design. The degree of creativity may have been low but it was not purely mechanical or dictated solely by technical considerations. 

However, on the issue of substantial copying, the Court agreed with Tesco that although the Mark with Text was sufficiently original, the scope of the copyright protection conferred was narrow, and Tesco had not copied at least two of the elements which made the Mark with Text original, namely the shade of blue and the distance between the circle and the square. All Tesco had copied was the visual concept. The Court therefore found that they had not infringed copyright. 

Comment

It is obvious from the Court judges' remarks in this case that they found the High Court's findings of fact "surprising", and that the case was one "on the outer boundaries" of trade mark protection and passing off, but ultimately could not say that the High Court judge's findings were not rationally supportable. 

This is but the latest (and certainly not the last) in a long string of cases which highlight the uneasy role of evidence in trade mark proceedings.  What does appear certain is that where one party adduces evidence, which the judge admits, the oft-engaged strategy (as employed by Tesco here) of refusing to properly engage with such evidence (or adduce rebuttal evidence), hoping that it will be declared inadmissible or irrelevant, is unlikely to be successful. 

The Court's judgment will however provide some relief to practitioners in the copyright space, who might have been concerned by the High Court's finding of copyright infringement in respect of a rudimentary logo which is at the lower limits of what can be construed as an original work. The Court's confirmation that where the degree of creativity is low, the scope of protection conferred is also narrow, appears to be a sensible one.