Dear Readers,

This issue of Trademark Insight once again summarizes a number of interesting decisions from the past few months, including the following key cases:

• CJEU preliminary ruling on the granting and revocation of a license for a co-owned trademark,
• German Federal Constitutional Court's decision on the equality of arms in injunction proceedings and,
• EUIPO decision on the admissibility of a trademark modernization in the case of an interim registration of an identical geographical indication.

As always, we also report on current case law on the likelihood of confusion and distinctiveness of trademarks.

In  the Country Focus section of this edition, our colleagues Sahira Khwaja and Emily Sharkey present three exciting recent decisions from the United Kingdom:

• In Match v Muzmatch, the Court of Appeal considers the requirements for assuming bona fide prior use and its implications for any trademark infringement.
• In Lidl v Tesco, the Court of Appeal finds Tesco infringes Lidl's trade mark but not copyright.
• Finally, we look ahead to the Supreme Court's forthcoming decision in Sky v SkyKick, which is expected to provide fundamental guidance on the bad faith of trademark applications.

We hope you find these summaries helpful, and look forward to receiving your feedback and suggestions by e-mail to trademark.insight@hoganlovells.com. 

Thorsten Klinger und Dr. Andreas Renck

Index

Main part - Trademark law in the European Union and Germany

Written by  Thorsten Klinger, Christine Stoeber, Robert Taeger und Sophia Siegling

• Bad faith of "Nhehra" trademark applications an consideration of evidence filed late  (EUIPO)
• Preliminary ruling on the granting and revocation of a license in the case of trademark co-ownership (CJEU)
• Distinctive character of the colour mark green/orange for agricultural machinery (GC)
• Influence of graphical elements on the perception of Cyrillic signs in the context of likeli-hood of confusion (BPatG)
• Registrability of the EU collective mark "EMMENTALER" (GC)
• Protectability of a shape mark claiming protection for cheese (BPatG)
• Procedural equality of arms in injunction proceedings (BVerfG)
• Admissibility of a trademark modernization in case involving interim registration of an identical geographical indication (EUIPO)

Country Focus – United Kingdom:

Written Sahira Khwaja und Emily Sharkey

• Match v Muzmatch: honest concurrent use
• Lidl v Tesco: Court of Appeal finds Tesco infringes Lidl's trade mark but not copyright
• Sky v SkyKick: Supreme Court to rule on bad faith

Bad faith of "Nehera" trademark applications and consideration of evidence filed late (EUIPO)

The EUIPO’s Fourth Board of Appeal dealt with the invalidity of the EU trademark "Nehera" (shown below) on the grounds of bad faith. The  contested trademark covers various fashion goods in classes 18, 24 and 25. According to the invalidity applicants, the contested trademark is identical to an old clothing brand that was registered in the 1930s and became very well-known at the time due to intensive use.

The Cancellation Division's initial decision rejecting the application for cancellation was overturned by the Board of Appeal, which with its first decision in this matter found the contested trademark was filed in bad faith. In its opinion, the circumstances of the case left no doubt that at the time of the filing, the trademark applicant had knowledge of the then founder Jan Nehera and his market success in Czechoslovakia and wanted to exploit the residual reputation.

The Board’s decision was then overturned by the GC on appeal by the applicant. The court emphasized that the concept of bad faith requires the application to be made with the intention of harming a third party. This was, however, not the case here. The decisive factor was whether the trademark proprietor filed its trademark to prevent further use of the sign knowing that a third party was using the trademark, as well as the degree of protection remaining for the sign. According to the court, the earlier trademark had neither legal protection nor any residual reputation at the time of filing.

The applicant’s intention to "revive" the old brand for itself is not sufficient to assume unfair exploitation of the reputation. If, when reviving a mark, the applicant does not limit itself to exploiting the earlier reputation, but makes considerable efforts to revive the image of the old brand at his own expense, this is in accordance with honest practices in trade and commerce. The Board of Appeal was therefore wrong to assume that the applicant acted in bad faith.

After referring the case back to the Board of Appeal, the Board clarified that the evidence of bad faith that was provided by the applicants after the GC judgment was delivered had to be disregarded as this evidence was only submitted after the written proceedings were closed. The Board therefore had to implement the General Court’s judgment on the basis of the evidence taken into account by the Court. The Board of Appeal confirmed the rejection of the invalidity application as the invalidity applicants had not succeeded in proving bad faith.

(EUIPO BoA decision of  17.4.2023, R 1216/2020-4)

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Preliminary ruling on the granting and revocation of a license in the case of trademark co-ownership (CJEU)

The preliminary ruling is based on a trademark licensing dispute. Four Italian private individuals are equal co-owners of an Italian national trademark and a European Union trademark "LEGEA", each of which is protected for sporting goods. In 1993, the four co-owners granted an exclusive, royalty-free and perpetual license to the company Legea S.R.L. At the end of 2006, one of the co-owners objected to the continuation of this license agreement, whereupon Legea filed an action in Italy for a declaration of invalidity of the "Legea" trademarks registered by this co-owner. The co-owner counterclaimed for a declaration of invalidity of the trademarks registered by Legea and sought a declaration that Legea's use of the trademarks in question was unlawful from the time of its opposition to the continuation of the license in 2006.

The Italian Court of Cassation referred to the CJEU the question of the majority (unanimous or simple majority) by which co-owners of a national trademark and an EU trademark can grant or withdraw a license to use this trademark.

With regard to national trademarks, the CJEU stated that the relevant First Directive 89/104 does not contain any provisions on co-ownership. In this respect, the respective applicable national law and the national provisions contained therein are decisive. This means that the national court must clarify, on the basis of the national legal system, under which conditions licenses can be established and terminated in the case of co-ownership of a trademark.

With regard to EU trademarks, the CJEU stated that Regulation No. 40/94, which is relevant here, recognizes the legal institution of co-ownership, but does not regulate the modalities of the collective exercise of trademark rights itself. The CJEU pointed out that the EU trademark is treated like a national trademark in terms of property rights in accordance with the regulation. The majority requirements for granting or withdrawing licenses to EU trademarks in co-ownership are therefore also determined by the applicable national law, which is to be determined via the provisions of the Regulation.

(CJEU, judgment of 27.4.2023, C-686/21)

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Distinctive character of the color mark green/orange for agricultural machinery (GC)

A manufacturer of agricultural machinery tried to extend the geographical protection of the International Registration consisting of the below colour combination green/orange for agricultural machines and implements, namely field sprayers in class 7 to the EU. The mark contained the following description: "The trademark consists of a combination of the colours green (Pantone 7742C) and orange (Pantone 1505C); the frame including the nozzle support frame of the field sprayer is green; attachments to the frame, including nozzle holders, container and cover, are orange." The EUIPO Examination Division found the application to be devoid of distinctive character. The Board of Appeal confirmed this assessment.

The General Court dismissed the applicant's action against the Board’s decision as manifestly unfounded. Field sprayers are aimed at professionals, in particular farmers. On the one hand, the relevant public would associate the colour green with the environment and the colour orange with warning. On the other hand - and irrespective of the colour association - both colours are frequently used in the field of agricultural machinery.

Contrary to the applicant's view, a colour mark is not inherently distinctive merely because it designated a very limited number of goods or services and the relevant market is very  specific . Although the applicant argued that no other manufacturer of agricultural spraying machines uses the colour combination green/orange, it did not provide any evidence for this.

(GC, order of  4.5.2023, T-618/22)

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Influence of graphical elements on the perception of Cyrillic signs in the context of likelihood of confusion (BPatG)

The German Federal Patent Court (BPatG) dealt with the likelihood of confusion between the sign "Хозяюшка" shown below (application, Russian for “lady of the house”, “good housewife”) and the earlier EU word mark "Хозяин" (opposition mark, Russian for “boss-”, “lord-” or “master of the house”), each protected for various foodstuffs in classes 29 and 30. The Opposition Division of the German Patent and Trademark Office (DPMA) had previously rejected a likelihood of confusion. The applicant appealed this decision.

The BPatG now confirmed the absence of a likelihood of confusion. The signs were aimed at different publics - objectively distinguishable according to their knowledge of the Russian language - so that a differentiated assessment of distinctiveness was appropriate. However, even for the Russian-speaking public, no weakening of the distinctive character could be recognized due to a descriptive indication of the sign.

The trademarkapplication maintains a sufficient distance from the earlier trademark even with regard to identical goods. This applies in particular due to the figurative element contained in the trademarkapplication, which confers a sufficiently distinctive character. A phonetic comparison of the signs was only possible for members of the public with knowledge of Cyrillic signs. This numerically small proportion of the public had to be taken into account because of its objective demarcation and its not inconsiderable size. However, despite the same word stem, even for the Russian-speaking part of the public the  signs clearly sound different due to their respective different endings.

Conceptually, the influence of the figurative element on the interpretation of the word element cannot be denied. The representation of a woman dressed in traditional garment precludes a conceptual understanding in the sense of “(female) proprietor/owner/holder” that differs from “lady of the house” or “good housewife”. There is therefore a difference to the conceptual meaning of the earlier mark in the sense of “boss”, “gentleman". An indirect likelihood of confusion by association was also not apparent due to the completely different design.

(BPatG, decision of 13.2.2023, 25 W (pat) 576/20)

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Registrability of the EU collective mark "EMMENTALER" (GC)

The Swiss industry association Emmentaler Switzerland applied for the designation "EMMENTALER" for cheese products in class 29 as an EU collective mark. A collective mark serves to distinguish the goods and services of the members of an association (as the trademark owner) from those of other companies. EU collective marks may, in particular, consist of signs or indications which may serve in trade to designate the geographical origin of the goods.

In its judgment, the GC confirmed the Board of Appeal’s decision that the EU collective mark application "EMMENTALER" describes a type of cheese, in particular for the German-speaking public, and is not perceived as a geographical indication of origin for the goods cheese with the protected designation of origin ‘Emmentaler’ in class 29.

In doing so, the Court relied on the definition of the term "Emmentaler" in the German Duden dictionary, namely a "full-fat Swiss cheese with cherry-sized holes and a nutty taste; Emmentaler cheese". This definition refers to the characteristics of the cheese, namely the appearance and taste, and thus speaks for the descriptive character of the word "Emmentaler". The German Cheese Regulation also classifies Emmentaler as a standard variety in its Annex 1 (to Section 7). Finally, a significant proportion of Emmentaler produced in Germany is also marketed in Germany. Based on these considerations, the term "EMMENTALER" is not perceived as a geographical indication of origin for cheese products.

(GC judgment of 24.5.23, T-2/21)

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Protectability of a shape mark claiming cheese (BPatG)

As part of invalidity proceedings, the German Federal Patent Court (BPatG) dealt with questions regarding the protectability of shape marks for goods using the example of the shape mark for cheese in class 29 shown below. The corresponding cancellation request had previously been rejected by the German Patent and Trademark Office (DPMA).

The trademark applicant's appeal against this decision was successful. According to the BPatG, the cancellation applicant had not succeeded in proving that the shape was necessary to obtain a technical result. A technical effect could not be inferred from the mere illustration without further indications. Even if it were assumed that there were four separate strands of cheese, the helix structure alone would not prevent them from falling apart. Nor does a corresponding patent provide any evidence for this.

Furthermore, the trademark does not consist exclusively of a shape that gives the product a substantial value. In the case of everyday foodstuffs - unlike possibly in the case of luxury foods - the value is not achieved by the shape, but by the quality of the ingredients, smell, taste and the presence of additives. The appearance of the cheese sticks cannot be regarded as an exclusively decisive or at least predominant characteristic for the purchase decision, which supersedes all other product characteristics.

However, in the opinion of the court, there is a need to keep the sign applied for free. Such a need exists where a descriptive use of the trademark cannot yet be observed, but may occur at any time in the future. There are parallels to the BGH’s decision in "Black Friday" (BGH, decision of 27.5.2021, I ZB 21/20), according to which a need to keep an indication free is to be assumed where there are already sufficient indications at the time of filing that a sign that has so far been directly descriptive of a characteristic exclusively abroad will also be understood accordingly in Germany in the future due to changing linguistic use. For product shape marks, this means that there is a need for availability where the product shape is hardly known and therefore distinctive in Germany, but it is to be expected that the shape known on a foreign market could also gain a foothold in Germany. These conditions are fulfilled here.

(BPatG, decision of 8.12.2023, 30 W (pat) 2/21)

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Procedural equality of arms in injunction proceedings (BVerfG)

The German Federal Constitutional Court (BVerfG) recently dealt with the procedural principle of equality of arms in injunction proceedings. The proceedings were based on a dispute between a publishing company (V) and a former professional athlete (P) regarding press and expression rights. After V published a report with a close personal reference to P, P requested the publisher to publish a counterstatement, setting a deadline. V let the deadline pass, as the statement in question was true, for which prima facie evidence could also be presented if required. P then requested an interim injunction before the Berlin Regional Court for the issuance of a counterstatement as previously sent to V. The request was accompanied by the publisher's letter of rejection.

The Berlin Regional Court issued the interim injunction without an oral hearing due to urgency, against which V filed an objection. In addition, V filed a constitutional complaint against the order and invoked the right to procedural equality of arms.

The Federal Constitutional Court has now granted the publisher's motion. The decision of the Berlin Regional Court violated V's procedural equality of arms, as the decision was made without hearing the publisher. A hearing is only dispensable in exceptional cases, which the present case was not. The possibility to respond to a warning preceding the injunction proceedings could be taken into account. However, procedural equality of arms is only achieved in such cases if (cumulatively) (1) the application for an injunction is submitted immediately after the expiry of a reasonable period, (2) the content of the warning is identical to the application for an injunction and (3) any letter of rejection from the defendant who has been warned is submitted.

In the court's view, there was a lack of immediacy in the present case, as the deadline set in the warning letter had elapsed and there was a long gap between the expiry of the deadline and the filing of the injunction. The seriousness of the application must also be substantiated in the warning letter by means of an affidavit, as otherwise the person being warned might not feel compelled to make a statement. If these requirements are not met and the court nevertheless issues the order without a hearing, the decision issued must in any case show that the court was aware of the exceptional nature of the handling of the proceedings.

Even though the judgment was handed down in proceedings relating to the right of expression, it is relevant for IP due to the general statements it contains on the necessity of a hearing in injunction proceedings. However, it remains to be seen whether the principles clarified in this decision will also be of similar practical relevance in trademark injunction proceedings as they are in proceedings concerning the right to make statements. After all, in proceedings relating to the right to make statements, it will regularly be a matter of facts that are not or cannot be known to the court, whereas in trademark law proceedings, the focus is regularly on questions of law.

(BVerfG, decision of 26.4.2023, 1 BvR 718/23)

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Admissibility of a trademark modernization in case of interim registration of an identical geographical indication (EUIPO)

The EUIPO’s First Board of Appeal dealt with the registrability of the sign shown below on the left inter alia for meat products as fresh and canned goods and sausage products as fresh and canned goods in class 29, which was applied for as a modernization of the mark registered in 2007 and shown below on the right. Alongside the geographical designation “Halberstädter” as a reference to something belonging to or coming from the German city “Halberstadt” and the hint “original since 1883” (above), both signs contain a laudatory element (below in red). The older version’s laudatory element is “quality for over 135 years”, whereas the younger version’s says “enjoyment at its best”.  The application was previously rejected by the EUIPO's Examination Division due to the conflicting protected geographical indication (GI) "Halberstädter Würstchen" registered in 2010. Despite a suggestion to do so, the Applicant did not limit the list of goods to goods to comply with the specification of the GI.

The appeal against the rejection was unsuccessful. The application was precluded by Art. 7 (1) l (j) EUTMR, according to which trademarks which are excluded under the provisions on the protection of geographical indications must be refused. Geographical indications are to be protected against allusions if the goods claimed with the trademark relate to the same product class. An allusion already exists if the term used to designate a product includes part of the protected designation and the consumer is prompted to make a mental association. However, a likelihood of confusion is not relevant.

In the present case, the element "Halberstädter" is contained in the GI "Halberstädter Würstchen", which has been protected since 2010. The minor additional elements did not prevent the public from making a mental association with the product protected by the GI when perceiving the sign. In particular, the feature of allusion does not require unlawful use. A right to use the designation does not lead to the inapplicability of the ground for refusal.

Relying on the earlier EU trademark shown below on the right would also not work. Although the Regulation does not affect the use of marks that were registered before the application for protection of the geographical indication was filed, this does not  apply to comparable marks applied for after that date (here: the modernized version of the earlier mark). The appeal against the rejection was therefore unsuccessful. However, it should be noted that the application would likely have been successful if the list of goods had been adjusted as proposed by the Office in the context of the objection.  

(EUIPO BoA decision of 5.6.2023, R 1394/2022-1)

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Country Focus - United Kingdom

Match v Muzmatch: honest concurrent use

In a trademark dispute between two dating service companies, the Court of Appeal has held that honest concurrent use is not a separate defence to a registered trade mark infringement claim, but instead is a factor to be considered in the infringement analysis.

Match Group ("Match") had been offering online dating services in the UK since 2001 under various forms of "match" branding, and by 2010 it had achieved substantial brand awareness and grown to dominate the market. Match owned EU trade marks for “MATCH.COM” and a UK trade mark for "match" in a lower case font together with a small heart device.

Since 2011, Muzmatch Ltd ("Muzmatch") provided online matchmaking and dating services to Muslims in the UK under the name MUZMATCH. In 2020, Match sued Muzmatch, alleging that Muzmatch had infringed its trade marks and committed passing off (a common law form of unfair competition), through the use of the word MUZMATCH, logos incorporating the word MUZMATCH and phrases including the word "match", which Muzmatch used for search engine optimisation purposes.

The High Court held that there was a likelihood of confusion and that the use of the signs complained of would give rise to a link in the mind of the average consumer, so that Muzmatch’s signs took unfair advantage of the repute of Match’s trade marks. Passing off was established for essentially the same reasons. It also held that Muzmatch’s defence of honest concurrent use could not apply because the infringing use had commenced after Match’s registered trade marks had been filed. Muzmatch appealed.  

The Court of Appeal dismissed the appeal. It held that it was not appropriate for the court to intervene in relation to the High Court's conclusions on trade mark infringement because it involved a multi-factorial assessment of the evidence and there was no error in law or in principle.

The most interesting aspect of the appeal relates to Muzmatch’s claim to honest concurrent use in defence of its infringement. The Court of Appeal held that Muzmatch did not have a free-standing “honest concurrent use” defence to trade mark infringement; instead “honest concurrent use” is a factor to be considered in the infringement analysis. In claims involving double-identity infringement, the relevance of honest concurrent use is that it can be relied on as sufficiently rebutting the presumption that there is a likelihood of confusion (arising from double-identity marks and goods and services). 

In double-identity infringement cases, once the claimant has established a prima facie case of infringement, the burden shifts to the defendant to establish that, by virtue of its honest concurrent use, there is nevertheless no adverse effect on any of the functions of claimants’ trade mark.

Honest concurrent use may lead to the conclusion that there has been no infringement, even though there is a small level of actual confusion between the claimant’s trade mark and the defendant’s sign, if most of the relevant class of consumers have come to understand that the trade mark and the sign denote different trade origins.

The relevant date of assessment is the date when the defendant started to use the sign complained of. However, a use which was initially infringing as at that date can eventually cease to be infringing if: the trade mark proprietor takes no action; there is substantial parallel trade for a long period; and as a result, the trade mark and the sign come to be understood by the relevant class of consumers as denoting different trade origins. It is therefore not necessary for the use complained of to have started before the claimant’s trade mark was registered (as the High Court had held).

Here, there was no evidence that most of the relevant class of consumers had been educated to understand that MUZMATCH was unrelated to MATCH and it was not a case where the length and scale of the concurrent use compelled the court to infer that most consumers had learnt the difference between the two marks as to the trade origin of services concerned.

This decision provides welcome clarity as to the relevance of and practical deployment of evidence of concurrent use by defendants in trade mark and passing off cases. It also makes very clear that concurrent use is likely to make a difference in outcome only in rare and unusual cases where there is a really long and honest period of that use by the defendant.

(UK Court of Appeal, decision of 27 April 2023, Case No. CA-2022-001355)

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Lidl v Tesco: Court of Appeal finds Tesco infringes Lidl's trade mark but not copyright

In June 2023, Tesco, a major UK supermarket chain, was found to have infringed the trade marks and other rights of Lidl, a discount supermarket chain, by using a similar logo in its Clubcard Prices promotion. The High Court ruled that Tesco's logo caused confusion and took unfair advantage of Lidl's reputation for low-priced goods. However, Tesco successfully invalidated Lidl's wordless logo, claiming it was registered in bad faith.

Lidl sued Tesco for trade mark infringement, relying on its trade mark registrations for the standard LIDL logo (the "Mark with Text") as well as a registration for the same design without any text (the "Wordless Mark").

Lidl argued that Tesco's adoption of a logo for its “Clubcard Prices”-promotion (the "Clubcard mark"), which resembled Lidl's logo, created confusion among consumers and damaged Lidl's brand. Lidl said that a substantial number of customers would see the Clubcard mark, and form a link with Lidl’s trade marks, in particular, by associating Lidl’s reputation for offering low-price goods with Tesco, and so believing Tesco’s prices were comparable to Lidl’s prices or that they were price-matched with Lidl. Lidl argued that this caused detriment to its brand, both by dilution and the implied message to customers that Tesco’s prices were similar to Lidl’s prices, meaning Tesco was taking unfair advantage of the reputation in Lidl’s marks.

In Tesco's defence and counterclaim, it argued that Lidl's registrations for the wordless mark should be declared invalid on grounds of bad faith. Tesco alleged that Lidl had registered the wordless mark as a legal weapon, without any intention to use the mark in trade. Tesco also accused Lidl of "evergreening" by re-registering marks periodically to avoid having to prove genuine use (given that marks are invulnerable from use challenges up until 5 years after registration).  The court rejected this counterclaim, stating that the use of the Text Mark also constituted use of the Wordless Mark. However, several registrations for the Wordless Mark were deemed invalid due to being applied for in bad faith. The court concluded that these registrations were sought not for genuine use but as a legal strategy to protect Lidl's rights by “evergreening” its trade marks.

The court found that Tesco's Clubcard mark infringed Lidl's registered trade marks and constituted passing off and copyright infringement. Despite the dissimilarity between the words "Clubcard Prices" and "Lidl" in the Text mark, the average consumer was found to perceive a connection between the two signs. This led to confusion over origin and price comparison, causing damage to Lidl's distinctive character and reputation. Although Tesco did not intentionally seek to take advantage of Lidl's reputation, the court concluded that it had still benefited unfairly from Lidl's marks. In relation to Lidl’s claim that use of the Clubcard mark caused detriment to the distinctive character of its logo marks, the judge held that detriment could be found in the steps that Lidl was “forced to take” to counteract the dilution (e.g. an advertising campaign against Tesco’s Clubcard process). This is a departure from established case law, which requires the detriment to take the form of a change in the economic behaviour of the consumer (not the brand owner).

Tesco appealed against findings of trade mark infringement, passing off and copyright infringement and the grant of an injunction to restrain copyright infringement, which had been granted in a supplemental judgment dated 22 May 2023, but which was stayed pending the appeal. Lidl also appealed against the finding that the Wordless Mark had been registered in bad faith.

The crux of Tesco’s appeal was that the trial judge was wrong to find that the average consumer, on seeing the Clubcard Mark, would be led to believe that Tesco was offering prices that were “price-matched” with Lidl’s prices. Tesco said the judge should have come to her own view from her own common sense and experience, not based on the evidence that Lidl relied on. The Court of Appeal disagreed. Given that Tesco had not objected to the admission of the evidence relied by Lidl, it was open to the judge to rely on it.

Although the Court of Appeal found the judge’s conclusion that the Clubcard Mark conveyed a price-matching message was surprising, the issue for the Court of Appeal was not whether, if the price-matching message was conveyed, it was false, but whether the judge was entitled to find that consumers were led to believe that Tesco’s prices were matched with Lidl’s, or lower, for equivalent goods. The Court of Appeal could only overturn the findings if they were “rationally insupportable”. Since there was clear evidence that a substantial numbers of customers thought there was a price-matching message, the trial judge’s conclusion was not “rationally insupportable”, and Lidl succeeded.

The Court of Appeal found that the trial judge had made no error of law in finding that the burden of proof had shifted to Lidl to prove good faith in making the applications for the Wordless Mark. Lidl’s appeal in relation to the Wordless Marks was therefore dismissed.

Tesco’s appeal in relation to findings of copyright infringement was two-fold. First, Tesco appealed the judge’s finding that copyright subsisted in Lidl’s logo (i.e. Lidl’s logo featuring the yellow circle with a thin red line border within a blue square, with the word “Lidl” written across the yellow circle). Tesco argued that the judge was wrong to find that applying an existing work (the yellow circle with a red line border) to a square blue background was sufficient to pass the threshold for “originality”. And secondly, Tesco appealed the finding that Tesco had infringed by copying a substantial part of the logo.

The Court of Appeal held that the judge was correct to find that the logo was protectable by copyright: the creation of the logo had involved free and creative choices and therefore met the test for originality. Lord Justice Arnold said that, although the degree of creativity was low, the result was not dictated by any constraints that left no room for creative freedom: choices had been made about the shade of blue; the positioning of the work centrally within a square; the distance between the edge of the yellow circle and the edge of the blue square.

The Court of Appeal did however agree with Tesco that Tesco had not infringed the copyright in Lidl’s logo because Tesco had not copied a substantial part of what was original about Lidl’s logo. Lord Justice Arnold said that, although Lidl’s logo was sufficiently original to be protected, the scope of protection was narrow. Due to the creative process for the logo over the years, what was original about the Lidl logo was limited to the changes made by combining an existing work (the yellow circle with a red border) with a blue square. The Court of Appeal said Tesco had not copied the details that made this logo original: namely the shade of blue and the distance between the circle and the square. All Tesco was found to have copied was the visual concept of a yellow circle in a blue square which is not, in itself, protectable.

Whilst Tesco will be disappointed that the findings of trade mark infringement and passing off have been upheld, it will be pleased that the Court of Appeal has allowed its appeal in relation to copyright infringement.

Tesco had argued that the main case was predominantly a trade mark dispute and an injunction in relation to the copyright claim (which is typically ordered upon a finding of infringement) was disproportionate and oppressive. Instead, it argued that it should pay damages in lieu of an injunction, not least because the cost of removing all the offending materials to avoid breaching that injunction would be prohibitive, exceeding £7 million.

The decision highlights the differences in the tests between copyright infringement and trade mark infringement and the practical consequences that will follow in cases involving lookalike logos. Whilst copyright infringement can be avoided by making even very small differences to the logo design, if a logo is similar enough to bring to mind a trade mark owner’s mark, including everything that mark represents (e.g. low prices) there may be trade mark infringement and/or passing off but no copyright infringement. Although copyright claims in relation to simple logo designs are generally more difficult to succeed on than trade mark claims, brand owners should nevertheless consider including claims for copyright infringement when seeking to prevent third parties from using similar get-up and logos, because even the threat of a copyright claim, which brings with it additional disclosure requirements in relation to the design process and the ownership of the copyright work, together with the more burdensome requirements of a copyright injunction, can help to put pressure on infringers to settle or change their allegedly infringing use.

The case also serves as a reminder of the importance of presenting strong evidence in intellectual property disputes. The trial court meticulously analysed the evidence from both parties, giving weight to Lidl's consumer witness testimony and internal concerns expressed by Tesco. Lidl's failure to provide contemporaneous evidence to prove its intention to use the Wordless mark weakened its defence against Tesco's bad faith allegation.  The Court of Appeal was also at pains to emphasise that, although some of its bench might have reached different conclusions on certain aspects of the case, the findings of fact that the trial judge had made were “rationally supportable”.  As Arnold LJ said, “information is preferable to intuition” and this case emphasises – above all - that success in cases of this type will turn on the evidence presented and the conclusions that can be drawn from it. See also our full publication on this decision here.

(UK High Court, decision of 19 April 2023, Case No. IL-2020-000127 and UK Court of Appeal, decision of 19 March 2024, Case Nos: CA-2023-001115/001117/001290)

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Sky v SkyKick: Supreme Court to rule on bad faith  

Another significant UK decision on registering marks in bad faith is also due shortly: the highly anticipated Sky v SkyKick appeal to the Supreme Court was heard in June 2023 and the decision should be handed down anytime. As we reported earlier, the Court of Appeal in Sky v SkyKick reversed a High Court decision which had held that Sky’s trade marks were invalid on the grounds of bad faith. SkyKick has appealed to the Supreme Court.

In its appeal, SkyKick places great stead upon the function of the trade mark register to convey accurate messages about what trade marks are available and which might block plans to use. It alleges that filing broadly leads to a cluttering of the register and makes clearance of new brands difficult. SkyKick also alleges that it leaves it open to the trade mark owner to use those registrations to enforce widely against competitors, at least for the five year use period following registration. SkyKick suggests that the Supreme Court needs to decide the case, as the Court of Appeal’s pragmatic judgment flies in the face of EU caselaw, but now the CJEU is unable to correct this post-Brexit.

However, the Court of Appeal was very clear in its straightforward application of existing UK caselaw (and retained EU law) based upon policy considerations of “business as usual” for brand owners. The Court of Appeal concluded that to find bad faith there must be both no intention to use the trade mark by the proprietor and also a dishonest intention or other sinister motive, involving conduct which departs from accepted standards of ethical behaviour or honest commercial, such as deliberately seeking to block a third party from entering the market.

In terms of filing with a bona fide intention to use, the Court of Appeal believed it would be onerous upon brand owners to have to formulate a commercial strategy for using the mark in relation to every species of goods or services falling within a general description over the next five years, in order to avoid invalidity on the basis of bad faith. Many supported the Court of Appeal’s guidance that the proper way to review trade marks is through the lens of non-use, after the first five years. A proprietor is entitled to file a trade mark with a bona fide intention to use, where it has a legitimate belief that the trade mark will be used across at least some of each category of goods and services claimed. That filing should not be challenged unless the goods or services fail to be used in whole or part within the first 5 years, unless there is clearly at the date of filing no intention to use a trade mark in relation to a whole category of goods or services, coupled with some form of dishonest practice. Otherwise, the trade mark proprietor is entitled to see how the business develops around the trade mark filed, without fear of the risk of early challenge on grounds of filing in bad faith.

Arguably, the decision in Tesco in Lidl v Tesco (see above) lowers the hurdle for bad faith invalidity claims, albeit the decision is under appeal. However, the Supreme Court may see Sky v SkyKick as an opportunity to set the rules definitively under UK law post-Brexit, in this developing area of law, without recourse to principles from the previous line of caselaw of the CJEU under Lindt. Industry will be keeping a watchful eye out for such guidance from the Supreme Court.

We are tracking the Sky v SkyKick litigation closely, and will be reporting on it extensively when the decision is handed down, so continue to follow us on Engage to keep up with this topic.

(UK Court of Appeal, decision of 26 July 2021, Case No. A3/2020/1374 and A3/2020/1370)

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Disclaimer: Please note that the decisions included in this newsletter are a subjective selection of relevant trademark decisions made by the authors without any claim to completeness.