Facts

The well-known supermarket chain, Lidl, owns various UK and EU trade marks for the following logos (the Marks):

Lidl contends that Tesco is infringing its Marks pursuant to s 10(3) of the Trade Marks Act 1994 by using a new sign in its “Clubcard Prices” marketing as follows (the Sign):

Lidl also claims passing off and copyright infringement in respect of the artwork in the Marks.

Tesco disputes all Lidl’s claims, and counterclaims that the Wordless Mark should be declared invalid as it was applied for in bad faith. In the alternative, Tesco alleges that the Wordless Mark is devoid of distinctive character and has not been used so cannot have acquired distinctiveness through use. In the further alternative, Tesco argues that the Wordless Mark is liable to be revoked on the ground that it has not been used genuinely in the UK.

Lidl applied to have the bad faith part of Tesco’s counterclaim struck out. Lidl also applied to rely on a consumer survey in relation to the issue of distinctiveness to show that the average consumer perceives the Wordless Mark as associated with the business of Lidl and that it has a reputation.

Decision

Bad faith – strike out

Lidl said that the bad faith allegation should be struck out because it was bound to fail if Tesco’s claim for revocation for non-use would also fail. Further, Lidl said it was bad in law because the facts alleged did not come close to an arguable case of commercial dishonesty.

Tesco said that Lidl had never used the Wordless Mark. It inferred in its pleading that Lidl had applied for the Wordless Mark without any intention to use it and that Lidl’s true intention was to register the Wordless Mark as a legal weapon against others. Further, Tesco said that Lidl had sought subsequent registrations for identical marks in order to create new five-year periods of monopoly protection without the need to show use.

Lidl said that these inferences did not follow from Tesco’s case that Lidl had never used the Wordless Mark, which was in dispute. The existence of a disputed legal argument did not give rise to “objective, relevant and consistent indicia” showing bad faith Sky Ltd (formerly Sky PLC) v SkyKick UK Ltd [2021] EWCA Civ 1121).

In any event, Lidl said that it had used the Wordless Mark by using it in conjunction with the Mark with Text. It relied on Case C-252/12 Specsavers International Healthcare Ltd v Asda Stores Ltd [2013] ETMR 46, in which the CJEU had considered use of a trade mark in a form differing in elements that did not alter its distinctive character.

Mrs Justice Joanna Smith DBE said that the main issue was whether Tesco’s pleading raised sufficient objective circumstances to overcome the presumption of good faith, such that there was a case to answer at trial.

Smith J noted that even assuming that use of the Wordless Mark in conjunction with the Mark with Text was not use, not using a trade mark was not enough on its own to indicate bad faith. It was not (without more) inherently bad faith to register a mark without knowing precisely the use that would be made of it and it was not bad faith to register a trade mark and then not to use it.

As for intention to use the mark, that will depend on the evidence, Smith J said. However, even if there was no intention to use, SkyKick has established that a lack of intention to use a mark is not sufficient on its own to amount to bad faith per se. There will only be bad faith where the absence of intention to use is coupled with “objective, relevant and consistent indicia” of the additional positive intention of obtaining an exclusive right for purposes other than those falling within the functions of a trade mark.

Tesco relied on the “indicia” that the Wordless Mark was designed as a legal weapon. However, Smith J said, Tesco presented no evidence of “objective, relevant and consistent indicia” of a desire to obtain exclusive rights for a purpose other than those falling within the functions of a trade mark. Tesco’s allegation was therefore no more than assertion. It was not sufficient to “construct an edifice of inferences” based purely on an assumed/inferred lack of intention to use (which was not sufficient on its own to amount to bad faith in any event).

Tesco argued that the added ingredient to the lack of use and lack of any intention to use argument was the fact that, when it applied to register the Wordless Mark, Lidl already owned the Mark with Text registrations on which it relied to show use of the Wordless Mark. Lidl pointed to Specsavers, in which it was established that there was nothing inherently wrong with having overlapping registrations.

Smith J agreed with Lidl, finding that the mere existence of an overlapping mark was not enough, without more, to undermine the presumption of good faith such that the issue should go to trial.

Tesco also relied on the “indicia” of evergreening. Smith J rejected the contention that the mere act of re-registration/evergreening on its own was indicative of bad faith. Tesco argued that the re-registrations raised a question mark over their purpose given that their specifications overlapped with existing protection. Smith J dismissed this as little more than speculation flowing from Tesco’s case of non-use of the Wordless Mark. Even if Tesco was right that there had been no use of the Wordless Mark, the mere existence of overlapping filings was not enough on its own to give rise to a prima facie case of bad faith. Further, there was nothing in Tesco’s pleading to support the proposition that the re-registrations were bogus or made no commercial sense, much less to suggest that the re-registrations rebutted the presumption of good faith.

Overall, Smith J found that Tesco had not disclosed reasonable grounds for making the bad faith allegation. Tesco’s case ultimately boiled down to the proposition that if it were established that the Wordless Mark was not used, the mere existence of the Mark with Text combined with the pleaded examples of “evergreening” was enough to shift the burden to Lidl to provide a plausible explanation of the objectives and commercial logic pursued by its applications for the Wordless Mark. However, neither of these alleged indicia, whether viewed alone or in combination, was capable (without more) of shifting that burden. Neither was inconsistent with the presumption of good faith and neither came close to raising a prima facie case that Lidl’s sole objective was inconsistent with the essential functions of a trade mark. Accordingly, Lidl’s application succeeded and the bad faith claim was struck out.

Survey evidence

Lidl relied on a survey conducted by YouGov plc in which participants were asked three questions while looking at an image of the Wordless Mark (the Survey).

Broadly speaking, the responses overwhelmingly identified Lidl as connected with the image of the Wordless Mark, which Lidl said was consistent with the Wordless Mark being perceived as, and relied upon, as a distinctive identifier of Lidl’s business and goods.

Smith J noted that the rules for the conduct of a survey were set out in Imperial v Philip Morris [1984] RPC 293 at 302-303 by Whitford J and are known as “the Whitford Guidelines”. The Whitford Guidelines were subsequently endorsed by the Court of Appeal in Interflora v Marks & Spencer [2012] EWCA Civ 150, in which it was established that even if survey evidence is technically admissible, a judge should not let it in unless satisfied that: (i) it would be of real value; and (ii) the likely utility justifies the costs involved. The test is a cost-benefit test.

Tesco relied on an expert report by Philip Malivoire, described as “probably the most experienced English expert in this field”, in which he criticised the survey.

In Smith J’s view, contrary to what Mr Malivoire said, the context in which the participants had encountered the image of the Wordless Mark, on its own in isolation, and the fact that they had only encountered it as background, did not render the survey valueless. The question of whether this “background” mark had acquired distinctiveness lay at the heart of the issues in the case and it was difficult to see how that could be determined without being able to consider the reaction of consumers to sight of it on its own. In Smith J’s view, that reaction could provide the court with evidence as to whether familiarity with the Mark with Text (accepted by Tesco as an indicator of origin) had taught consumers to recognise and rely upon the Wordless Mark as also being an indicator of origin in its own right.

Mr Malivoire also said that the survey could only demonstrate mere recognition of the Wordless Mark following a prompt and was insufficient to demonstrate acquired distinctiveness. Smith J noted that Lidl’s pleading stated that it wished to rely on the survey to show that “consumers recognise the Wordless mark and the fact that the Wordless Mark has distinctive character and reputation”. Whilst “recognition” of a mark, when asserting acquired distinctiveness, was not sufficient to show that consumers associate it with the trade mark owner, Smith J said that it was plain that Tesco had understood Lidl’s case to include an assertion that the Wordless Mark was relied upon on its own as an indication that goods or services emanated exclusively from Lidl.

In Smith J’s view, the survey evidence would likely be of value to the court in assessing both recognition and whether participants understood the image shown as an identifier of origin. Smith J said that a judge might not necessarily feel able to determine the issue of distinctiveness in this case using just her own knowledge and experience. Whilst the court might, at trial, have additional evidence on the question of distinctiveness, Smith J did not have that evidence and the question was not whether the survey evidence would be of real value in addition to any other evidence.

Accordingly, Smith J considered that the survey satisfied the test of real value.

As to methodology and approach, Mr Malivoire’s primary criticism was that the survey asked questions that directed respondents into a field of speculation upon which they would never have embarked had the question not been put. However, Smith J said that the fact that a survey question might invite speculation did not automatically invalidate it (Enterprise Holdings Inc v Europcar Group UK Ltd [2014] EWHC 2498). In any event, Mr Malivoire’s criticisms would, in Smith J’s view, be best dealt with by the trial judge after full consideration of the evidence. She was not satisfied that his points diminished the value of the survey to such an extent that she should exclude it from evidence at this stage. Overall, Mr Malivoire’s points did not undermine the survey’s intrinsic value and Lidl should be entitled to rely on it.

Finally, Smith J found that it would not be disproportionate or unreasonable from a costs perspective to permit Lidl to rely on the survey evidence. The application was therefore allowed and Lidl was permitted to rely upon its survey evidence in support of its case. (Lidl Great Britain Ltd v Tesco Stores Ltd [2022] EWHC 1434 (Ch) (13 June 2022) — to read the judgment in full, click here).