What the Lidl vs Tesco verdict means for businesses and their IP

Three long years after Tesco adopted a yellow circle in a blue square background as part of its advertisement campaign, the High Court ruled that Tesco had infringed Lidl’s trade mark and copyright, and was also found to be ‘passing off’ its business as that of Lidl.

The dispute centred around the iconic yellow circle in a blue square background (“the Wordless Mark”), and whether Tesco could use the Wordless Mark as part of its advertisement campaign. Historically, Lidl has used a yellow circle in a blue square background, with ‘Lidl’ written in the middle (“the Word Mark”). #cleveradmen was quick to spot this ‘uncanny similarity’ when the Tesco campaign went live. #cleveradmen, a frequent Lidl shopper, also provided evidence within these proceedings between Tesco and Lidl images.

In a nutshell, the case centred on two key elements:

1. Did Tesco infringe Lidl’s copyright and trade mark by using a yellow circle within a blue square?

2. Did Lidl register its wordless trade mark, the yellow circle in a blue square, in ‘bad faith’?

To get a full flavour of the thrust of the arguments put forward, it is important to understand the background:

1. Lidl has been using the Word Mark since the late 1980s and early 1990s.

2. In 1995, the Word Mark was registered by Lidl. During the same year, the Tesco Clubcard scheme launched.

3. In late 2016, Tesco started to review its brand, internally, and with the assistance of a design agency. The aim was to redefine its existing brand assets and to become recognised as a ‘value’ retailer.

4. Since 2017, Lidl’s slogan has been “Big on quality, Lidl on prices”, promoting itself as a “discounter” supermarket offering quality goods at low prices. Around a similar time, Tesco was reviewing its slogan behind the scenes, with a prospective change to “Big on Little Prices”.

5. In March 2019, Tesco internal documents are alleged to confirm that it was targeting “the discounters” (i.e. Lidl and Aldi) and was determined to ‘stop their growth’. Tesco’s strategy was geared towards the retention of customers. In a brief to an independent design agency, Tesco queried whether the colour yellow should be used as an indicator of ‘value’ to its customers, and requested the exploration of “blue and yellow options”.

6. In September 2020, Tesco released its promotion campaign using the Word Mark and Wordless Mark. During the same time, Tesco also launched a price matching campaign against Aldi prices.

7. In 2020, Lidl issued proceedings against Tesco.

8. In 2021, Lidl registered the Wordless Mark as a trade mark.

Various arguments were put forward by Lidl in the proceedings alleging trade mark and copyright infringement, and passing off. The Judge noted that Lidl had provided a wealth of evidence in support of its claims, and that key evidence appeared to be missing from Tesco’s defence - notably witness evidence from the independent design agency used by Tesco in its brand revamp.

During the proceedings, the Judge noted that “… implicit associations with competitors may be a key part of the design process”, but on a qualitative assessment of the similarities between Lidl’s and Tesco’s images, there were clear similarities. Lidl’s argument was that it was “inherently unlikely that anyone might have independently derived a design consisting of a yellow circle within a blue square”, using the national flag of Palau as an example. In essence, Tesco said the similarities were purely coincidental. Irrespective of Tesco’s proposition that there “was no deliberate intention positively to evoke Lidl”, it does not mean that the design was not copied. Tesco also ran the argument that the “kindergarten shapes” used by Lidl did not constitute sufficient labour and skill to warrant protection under copyright. The Judge did not agree, and Tesco were found to have infringed Lidl’s copyright and Word Mark.

As part of the claims, Lidl alleged that Tesco customers seeing prices appearing within the Wordless Mark were being led to believe that Tesco prices were matched with Lidl prices. Lidl alleged this was a misrepresentation, and that Tesco was trying to “ride on the coat tails of Lidl’s reputation as a “discounter” supermarket”. Lidl claimed that Tesco’s ‘deception’ was not accidental, and was purposely geared towards transferring Lidl’s reputation for good value, by using Lidl’s Marks. Lidl alleged that the outcome was a misrepresentation by Tesco, which created the illusion amongst its customers that its prices matched Lidl prices. The outcome was that Tesco was found to be ‘passing off’ Lidl’s brand as its own by using the Word and Wordless Marks.

Tesco went on to enter a counterclaim, alleging that Lidl had registered the Wordless trade mark in ‘bad faith’. A ‘bad faith’ registration results in the trade mark being struck off the register. Registering in ‘bad faith’ is effectively the attempt or registration of a trade mark intended to undermine the interests of a third party, for purposes “other than those falling within the functions of a trade mark”. Tesco won on this point, partly because Lidl had not previously used the Wordless Mark, but had sought to register the Wordless Mark across all classes. It had only done that after Tesco had started to use it in 2020.

Tesco has stated that it is going to appeal the decision; it is questionable on what grounds, particularly after considering the lack of credible evidence that it submitted in these proceedings.

In any event, this case is a cautionary tale for all businesses, across all industries. The message is clear: be very careful what you ask for … or at least, evidence exactly what you ask for (and hope that it doesn’t shoot you in the foot). Although intention is not the driving factor behind establishing infringement in these types of cases, it would appear Every Lidl Helps.