Background
Lidl, the well-known supermarket chain, is involved in ongoing proceedings against its commercial rival, Tesco, over Tesco’s adoption of a yellow logo for its ‘Clubcard Prices’. Lidl claims that this amounts to, among other things, trademark infringement. Lidl's trademark claim relies on two separate trademark registrations:
- one is a registration of its logo: a yellow circle with a red border, set in a blue square - the circle contains the text ‘Lidl’ in bold red text (the ‘version with text’); and
- the other mark is a registration for the exact same design, but without any text (the ‘wordless mark’).
In response, Tesco filed a defence and counterclaim - the counterclaim sought a declaration of invalidity of the wordless mark on two grounds of bad faith or, in the alternative, on the grounds that the mark lacks distinctiveness.
In the present interim hearing, Lidl applied to strike out the allegations of bad faith, and applied for permission to rely on evidence from a consumer survey (which it had already conducted) in order to respond to the issue of distinctiveness at trial.
Legal issues
The prevalent legal issues were as follows:
- Lidl had never used the wordless mark. The court considered whether this lack of use showed that the wordless mark had been filed only as a "legal weapon to deploy in proceedings", and had therefore been filed in order to gain a benefit beyond the intended functions of a trademark.
- The court considered whether the wordless mark had been filed by Lidl in order to ‘evergreen’ its portfolio (ie, where an identical version of an earlier mark is re-registered with the sole intention of circumventing the requirement to prove use of the earlier mark), and had therefore been filed in order to gain a benefit beyond the intended functions of a trademark.
- The court considered whether the survey evidence proposed by Lidl was likely to be of real value at trial and whether its potential value justified the cost of the survey. The court also considered whether, in any case, the survey should not be admitted because Lidl had conducted it prior to receiving the court’s permission.
Decision
The court granted both of Lidl’s applications.
The court held that both allegations of bad faith should be struck out because all trademark registrations are presumed to have been made in good faith, and Tesco had not demonstrated reasonable grounds to rebut this presumption. Whilst Lidl had not used the wordless mark by itself, and had only ever used the version with text, these factors alone did not constitute an objective basis to state that Lidl had intended the wordless mark to serve instead as a "legal weapon". Likewise, whilst the wordless mark did constitute a re-registration, this fact alone did not automatically suggest bad faith or evergreening, and Tesco had not pleaded any particulars to the contrary.
The court also held that Lidl could rely on the survey evidence at trial. The court rejected Tesco’s arguments that the survey questions were leading and therefore unreliable. Tesco also argued that the survey had been conducted under "artificial circumstances", given that it asked consumers their opinion of a mark which had never actually been used in practice. The court rejected this argument because the relevant question was whether the wordless mark had nonetheless acquired distinctiveness through Lidl's use of the version with text, and this question could not be determined without considering the reaction of consumers to seeing the wordless mark in isolation. The court held that the survey’s chief question - “What do you think this image [ie, the wordless mark] is?” - would help determine whether consumers view the wordless mark as an identifier of origin connected to Lidl.
The court held that the costs associated with the survey were proportionate and reasonable when compared to the wider costs of the litigation and the financial strength of both parties. The relatively low cost of the survey, combined with its potential value, meant that the court did not take issue with Lidl having conducted the survey before receiving the court's permission.
Comment
This case provides a clear steer to future litigants considering running bad-faith invalidity arguments that rebutting the presumption of good-faith filing is a significant hurdle to get over. It also highlights that the court’s view of survey evidence will be highly fact- and case-dependent. The court will be very reluctant to permit substantial sums to be incurred in relation to a survey; however, where evidence from a properly conducted (distinctiveness) survey has potential value, the court will allow proportionate costs to be incurred and the resulting evidence relied upon, albeit that evidence will never be the ultimate deciding factor in a case. This reopens the door for the use of modest, highly-targeted surveys as one form of evidence to assist the court.
Authored by Joel Smith, Alastair Shaw and Femi Williams.
This article first appeared in WTR Daily, part of World Trademark Review, in August 2022. For further information, please go to www.worldtrademarkreview.com.
