Insights Court of Appeal overturns decision to strike out allegation of bad faith by Tesco in relation to trade marks owned by Lidl



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

Lidl had been using the Mark with Text in the UK since about 1987, which had generated a substantial reputation and goodwill. Lidl had never used the Wordless Mark in the UK in the form in which it is registered, i.e. on its own and without the word LIDL, but contended that its use of the Mark with Text constituted use of the Wordless Mark in a form that did not alter the distinctive character of the Wordless Mark.

Lidl issued proceedings for trade mark infringement against Tesco Stores Ltd pursuant to s 10(3) of the Trade Marks Act 1994 in relation to Tesco’s use, since around September 2020, of a new sign in its “Clubcard Prices” marketing as follows (the Sign):

Although Lidl complained about use of the Sign, which does not include any text, Tesco had not, in fact, used the Sign on its own, but only with the words CLUBCARD PRICES within the yellow circle.

Tesco disputed all Lidl’s claims. It also counterclaimed, amongst other things, that the Wordless Mark should be declared invalid as it was applied for in bad faith. Lidl successfully applied to have this bad faith part of Tesco’s counterclaim struck out. Tesco appealed.


Tesco argued that the judge had failed properly to consider the pleaded facts and inferences of the bad faith counterclaim as a whole and in the context of Lidl’s infringement case, taking into account that no disclosure had yet been given by Lidl as to its intentions when registering the Wordless Mark. In Lord Justice Arnold’s judgment this ground was well founded for the following reasons:

  • the judge had been wrong to find that Tesco’s argument that the Wordless Mark was applied for solely for deployment as a legal weapon was “no more than assertion”: all allegations in statements of case are assertions by parties as to the facts and Tesco’s plea was no different; it was open to Lidl to adduce evidence on a summary judgment application to show that the factual assertion was manifestly unsustainable, but it did not do so; in any event, for the purposes of CPR rule 3.4(2)(a), the allegation must be assumed to be true; although the allegation was implicitly pleaded as an inference, that was no objection as, absent an admission, the subjective intention of a party is usually a matter of inference from objective facts, and bad faith was no different in that respect; accordingly, the intention alleged by Tesco was a permissible inference from the facts pleaded and was supported by Lidl’s admission that it had registered the Wordless Mark in order to obtain a wider scope of protection; whether obtaining that wider scope of protection was legitimate required a factual investigation, in particular as to the extent of the reputation and goodwill that attached to the Mark with Text in 1995 (when the Wordless Mark was registered) and as to whether the average consumer at that time would have perceived the Wordless Mark as designating the origin of Lidl’s goods and/or services;
  • it was clear from the case law that for an applicant to seek unjustifiably broad protection might amount to an abuse of the trade mark system that constitutes bad faith: this is, to some extent, a fact-sensitive question that depends in large part on the applicant’s intentions; on a strike out application, the question is whether the statement of case pleads sufficient objective indicia to give rise to a real prospect of the presumption of good faith being overcome so as to shift the evidential burden to Lidl to explain its intentions and Tesco’s pleading did so;
  • Tesco’s failure to plead Lidl’s 1989 Mark with Text registration was not significant: the judge had been wrong to find it surprising that Tesco had not pleaded the registration of Lidl’s Mark with Text before 1995 (when the Wordless Mark was registered) in support of its bad faith argument, as it was a matter of public record; Lidl had also said that there was nothing inherently wrong with having “overlapping” trade mark registrations, thereby implicitly accepting the existence of earlier registrations of the Mark with Text; the judge had found that, even without Tesco pleading the 1989 registration, the mere existence of an “overlapping” mark was not enough, without more, to undermine the presumption of good faith, but this assessment failed to recognise that Tesco’s case was not based on the mere existence of an overlapping mark;
  • the judge had been wrong to dismiss Tesco’s allegation of “evergreening” by Lidl on the grounds that it had failed to plead “specific points of detail”: Tesco’s case relied on undisputed facts that: (a) Lidl had never used the Wordless Mark in the form in which it was registered; (b) Lidl had registered the Wordless Mark in 1995 in order to obtain a wider scope of protection than that conferred by the Mark with Text; and (c) Lidl had applied to re-register the Wordless Mark in respect of (partially) duplicative goods and services in 2002, 2005, 2007 and 2021, which amounted to “evergreening” on the part of Lidl; although Tesco had not specifically pleaded the goods and services on which it relied in respect of the “evergreening” registrations, these were a matter of public record and Tesco had averred that these registrations ““duplicate coverage of various goods and services covered by” the 1995 registrations; it had then provided an Excel spreadsheet showing the goods and services covered; therefore, there was in fact no dispute that the later registrations duplicated coverage of several goods and services covered by the 1995 registrations; there was also no dispute that the later registrations covered goods and services not covered by the 1995 registrations; therefore, Tesco had not failed to plead “specific points of detail” that it ought to have pleaded; contrary to Jaguar Land Rover Ltd v Bombardier Recreational Products Inc [2016] EWHC 3266 (Ch), as cited in Sky Ltd v SkyKick UK Ltd [2021] EWCA Civ 1121, in Arnold LJ’s view, it was not for Tesco to specify what would have been a legitimate specification for Lidl to have applied for; Tesco’s allegation that Lidl had applied for an illegitimately broad specification and thereby abused the trade mark system was adequate at this stage in proceedings because the allegation was not of an unduly broad specification, but of evergreening so as to avoid sanctions for non-use;
  • the judge had been wrong to find that Lidl’s attempt to rebut the charge of evergreening by pointing out that the later registrations were EU registrations was a sufficient explanation as to why it had made the later applications: while the UK was in the EU, it was commonplace and legitimate for the owner of a UK trade mark to apply for registration of the same mark as an EU mark in respect of the same goods and/or services to obtain much wider geographical coverage, but that was not sufficient to explain Lidl’s applications in 2005, 2007 and 2021; and
  • it was not a flaw in Tesco’s case that it was premised on non-use of the Wordless Mark in the form in which it is registered: although it was true that if Lidl had used the Wordless Mark in the form in which it had been registered it would not have needed to re-register the Wordless Mark to avoid the consequences of non-use, that was no answer to Tesco’s case on evergreening; further, the lack of intention to use and lack of actual use of the Wordless Mark in the form in which it was registered were what linked the two aspects of Tesco’s overall case.

Accordingly, in Arnold LJ’s view, Tesco had pleaded a claim that had a real prospect of success. The appeal was allowed. (Lidl Great Britain Ltd v Tesco Stores Ltd [2022] EWCA Civ 1433 (2 November 2022) — to read the judgment in full, click here).