A decision of the English High Court of Justice raises some interesting trademark and branding issues. Lidl Great Britain Ltd v Tesco Stores Ltd  EWHC 873 (Ch)
The Facts The dispute was between two well-known supermarket chains. Lidl Great Britain Limited ("Lidl") is a mid-tier supermarket chain and discounter. Its business is set up, so it won't be beaten on price. Lidl has worked hard to reframe its perception as a mere discounter and instead to communicate a business model which enables it to offer value: quality products at affordable prices, a concept conveyed by the slogan "Big on Quality, Lidl on price". Lidl has succeeded with this approach and rapidly increased its market share and the number of stores it operates.
Lidl relied on its trademark rights in relation to two versions of the Lidl logo: a logo which includes the word "Lidl" ("the Mark with Text") and a logo without that word ("the Wordless Mark"). Lidl owns U.K. registrations for both of these marks which include colour claims. The Lidl Marks are reproduced below with an example:
Tesco Stores Limited is the biggest supermarket operator in the UK. Tesco Clubcard launched in 1995 and was created as a loyalty program to reward customers for shopping at Tesco. The Program has been successful and is well known. The Clubcard Prices promotion, about which Lidl complains, is a discrete advertising strategy which launched in September 2020. It promoted the Tesco Clubcard in a new way, by providing discounts to clubcard holders at the point of sale on selected goods. Under the Clubcard Prices initiative, Tesco uses its trademark, which uses the same colours as the Lidl logo in various ways, always with text overlaid and always as a signifier of its Clubcard Prices promotion. The Tesco mark and samples of use are shown below.
Lidl asserted that Tesco was infringing its registered trademark rights, passing off and infringing copyright. Lidl's complaint derives from the presence of the common element, in all the uses made by Tesco. Lidl points out that, in common with the Lidl Logo, the Tesco mark has a blue square containing a centred yellow circle extending towards the edge of that blue square. In the case of the Mark with Text, Lidl points to a further similarity, namely the presence of wording across the middle of the yellow circle. Although the words differ, the uses made by Tesco of the background elements are of a kind where attention to the detail of the wording is often absent or limited. The consequence, says Lidl, is that many customers are being deceived; some as to origin, but many because they see the background elements, link them to Lidl's brand and reputation and believe that Tesco's prices are comparable to Lidl's (low) prices and/or that they are price matched to Lidl.
Lidl's action was based on a section of the UK Trade Marks Act which provides that a person infringes a registered trade mark if they use in trade, in relation to goods and services, a sign identical with or similar to the trade mark, where the trade mark has a reputation in the United Kingdom and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
To succeed under the section Lidl had to show that these requirements were satisfied: (i) the registered trademark must have a reputation in the relevant territory; (ii) there must be use of a sign by a third party in the relevant territory; (iii) the use must be in trade; (iv) it must be without the consent of the proprietor; (v) it must be of a sign identical with or similar to the trade mark; (vi) it must be in relation to goods or services; (vii) it must give rise to a link between the sign and the trade mark in the mind of the average consumer; (viii) it must give rise to one of three types of injury: (a) detriment to the distinctive character of the trade mark, (b) detriment to the repute of the trade mark, or (c) unfair advantage being taken of the distinctive character or repute of the trade mark; and (ix) it must be without due cause.
In particular Lidl established the necessary "link". There was clear evidence of both origin and price match confusion/association together with evidence that Tesco appreciated the potential for confusion. The average reasonably observant consumer encountering the Tesco marks in the real world at the date of the launch of the Clubcard Price campaign would draw a link between that use and the Lidl Mark with text.
In a detailed decision the Judge concluded that Lidl should succeed on this claim. The court was also convinced that Lidl should succeed based on passing off and copyright infringement.
The Canadian Position
Section 22 of the Canadian Trademarks Act makes a further statutory right available to the owner of a registered trademark in addition to a claim for infringement. The section provides that no person shall use a trademark registered by any person in a manner likely to have the effect of depreciating the value of the goodwill attaching thereto. A claim under section 22 is subject to a discretionary power vested in the court to decline to order the recovery of damages or profits and permit the defendant to continue to sell goods marked with the trademark in issue that were in its possession or under its control when notice was given to it that the owner of the registered trademark complained of the use of the trademark.
The value of the goodwill attaching to a registered mark may be depreciated if the following occur:
(a) reduction of the esteem in which the goods or services are held,
(b) direct persuasion and enticing of customers otherwise expected to buy or continue to buy goods bearing the trademark,
(c) disparagement of the mark, or
(d) the dilution of the distinctiveness or unique characteristics of a mark.
These circumstances are not exhaustive, as the courts have not yet considered the limits of the application of the section.
A mental association between the two marks does not necessarily give rise to a likelihood of depreciation. There must be evidence of a "likelihood" of depreciation. This is a matter of evidence, not speculation.
Section 22 does not require a demonstration that use of both marks in the same geographic area would likely lead to confusion. However, it requires the plaintiff to show that the defendant has used a mark sufficiently similar to the plaintiff's mark to evoke in the relevant universe of consumers a mental association of the marks likely to depreciate the value of the goodwill attached to the plaintiff's mark. The test is the likelihood of depreciating the value of the goodwill attached to a trademark.
A claim under section 22 differs greatly from a claim for infringement. To succeed with a claim under the section, these elements must be shown:
(a) The plaintiff's registered trademark or at least its distinguishing feature was used by the defendant with goods or services, whether or not such goods or services are competitive with those of the claimant.
(b) The plaintiff's registered trademark is sufficiently well known to have significant goodwill attached to it. The mark need not be well known or famous, but goodwill must exist.
(c) The plaintiff's mark was used in a manner likely to have an effect on that goodwill (this is called linkage). Linkage requires a mental association in the mind of a reasonable buyer between the two parties and the mark. The likelihood of such a linkage is a matter of evidence, not speculation.
(d) The likely effect would be to depreciate the value of the goodwill (damage). Depreciation includes lowering the value of the goodwill and disparagement or tarnishing the trademark.
Subsequent decisions have confirmed that section 22 addresses circumstances where a casual observer would recognize the mark used by the defendant as the mark of the claimant (as would be the case if Kleenex were spelled Klenex), or where a defendant has used a mark sufficiently similar to evoke in a relevant universe of consumers a mental association between the two marks likely to depreciate the value of the goodwill attaching to the claimant's mark.
There seem to be an increasing number of decisions involving section 22 and the detailed analysis of the Lidl decision may be helpful in future cases.
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