Tesco will drop the blue-and-yellow logo it uses to promote its Clubcard program. This rebrand could cost Tesco almost £8m after it lost an appeal over a ruling it copied a Lidl design.
Legal experts say Lidl has the right to sue for compensation for trademark infringement, which could result in a multi-million pound bill for Britain’s largest supermarket.
Tesco appealed a ruling by the High Court last year which found that the company had violated Lidl’s trademark, and that they were guilty of “passing off” in misleading customers into believing that the products offered under the Clubcard Prices Scheme are the same price or less than those at Lidl.
Tesco started using a circular yellow design on a blue backdrop to promote its Clubcard loyalty program. Lidl’s logo is based on the same design but with a red outline around the circle.
In a decision published on Tuesday, judges ruled that Tesco’s appeal for trademark infringement should be dismissed. However, they agreed with the High Court that there was no copyright violation.
Tesco has the right to appeal the ruling to the Supreme Court, but it’s understood that it accepted the decision of the court and will update its brand in the next few weeks. Tesco claimed during the legal proceedings the cost of rebranding would be around £7.8m, which does not include the potential compensation Lidl may seek.
Tesco’s spokesperson stated on Tuesday that they were disappointed by the decision regarding the color and shape of their Clubcard Prices logo, but wanted to assure customers that this will not affect our Clubcard Prices program.
Lidl’s spokesperson said: “Last Year, the High Court ruled that Tesco Clubcard was copied from us and violated our trademark rights. This allowed them to unfairly profit from our longstanding reputation of value while misleading their customers. Tesco, however, appealed the case, misleading customers for an additional year.
We are therefore delighted that the Court of Appeal has now agreed with Tesco that its use of the Clubcard logo was unlawful. We expect Tesco to now respect the court’s ruling and change its Clubcard Logo to one that does not look like ours.”
Lord Justice Lewison of the appeal court said that while he supported the findings of the high court with “undisguised hesitation”, he still found some elements “surprising”.
He said: “It’s clear that Tesco was trying to communicate that by joining Clubcard, the consumer could get better prices than someone who hadn’t joined.
Tesco has been found liable for trademark violation and passing off despite its desire to distinguish itself from Lidl, and promote the value and uniqueness of its very own brand.
John Coldham, a partner in intellectual property at Gowling WLG said that Lidl would be pleased with this result. The court found that Lidl has a reputation for being a discounter who offers low-priced goods, and Tesco used its Clubcard Prices logo to make a comparison of prices.
The court of appeal had no choice but to accept the factual conclusion made by the previous judge that the price comparison was with Lidl and not with its own non-Clubcard prices. However, they were unable to change this on appeal.