Strike Out Decision Confirms High Bar for Establishing Bad Faith

In Lidl Great Britain Ltd v Tesco Stores Ltd 2022 EWHC 1434 the Judge declined to infer bad faith from overlapping registrations for a mark that remained unused over a prolonged period.

Lidl has 3 UK national trade mark registrations for its wordless device mark covering 14 goods classes and 4 services classes stemming from a 1995 filing. It also has an EU registration for the same mark, which gave rise to a UK registration following the UK’s departure from the EU. Lidl also obtained UK registrations for the same mark from filings in 2002 and 2007 each covering a wider range of goods and services. In 2021 Lidl also filed a currently pending UK application for the same mark covering goods and services in 43 of the 45 classes. Despite all of these overlapping registrations and the pending application Lidl has not used the wordless mark for any of its goods or services. Instead Lidl has extensively used and has substantial reputation in a mark consisting of the wordless mark with a stylised version of the word LiDL inside the circle, which is also registered.

After Tesco began using a similar device mark within its Clubcard Prices marketing Lidl brought proceedings for trade mark infringement, passing off and infringement of copyright. Tesco counterclaimed that Lidl’s wordless device mark registrations should be invalidated for bad faith and for non-use. The present case concerns Lidl’s strike out and/or summary judgment application in relation to Tesco’s bad faith counterclaim as well as Lidl’s application for survey evidence to be admitted for establishing acquired distinctiveness of the wordless device mark through use of the LiDL device mark. Despite the presence of a stylised version of its name, Lidl claims that its LiDL device mark does not alter the distinctive character of its wordless device mark in which case under section 46(2) use of the former qualifies as use of the latter. This decision does not rule on whether Lidl can claim the benefit of section 46(2) to avoid its wordless device marks being invalidated for non-use for a period of 5 or more years from the date of registration.

Lidl’s infringement claim is based upon having reputation in the wordless mark through use of the LiDL device mark and its claim that Tesco’s device mark takes unfair advantage of that reputation. Given Lidl’s lack of use of the wordless device mark on its own Tesco argued that the duplicate registrations thereof evidenced bad faith on the basis that Lidl merely sought to evade the non-use revocation ground by ever-greening. Tesco asserted that Lidl only sought to obtain legal protection for the wordless device mark so as to use it as a legal weapon with the prolonged absence of use establishing that the mark was never intended to be used in line with the true function of a trade mark. Tesco also contends that the wordless device mark has no reputation or goodwill and that consumers do not rely on it for indicating a source of origin for goods or services.

Citing the recent Court of Appeal case Sky Limited v Skykick UK Ltd [2021] EWCA 1121 at [59] the Judge noted that bad faith as a ground for invalidity requires a use of the system of trade mark registration which would be regarded in commerce as not in accordance with honest practices or acceptable commercial behaviour. It was further noted that seeking to obtain trade mark rights for purposes other than those falling within the functions of a trade mark would constitute bad faith, although lack of intention to use at the time of making the application on its own is insufficient to establish bad faith. There will only be bad faith where the absence of intention to use is coupled with objective, relevant and consistent indicia of additional positive intention of obtaining an exclusive right for purposes other than those falling within the functions of a trade mark. Good faith is presumed until the contrary is proved. Given that an allegation of bad faith is akin to an allegation of dishonesty it must be fully and properly pleaded so that the party alleged knows the respects in which their conduct is characterised as such, and the facts on which such an allegation is being made.

Applying these principles to the case the Judge found that Tesco’s allegation that the wordless device mark is merely a legal weapon is no more than an assertion with no objective basis. That Lidl already owned a registration for the LiDL device mark, from which it claimed use of the wordless device mark, did not add anything to that assertion according to the Judge, as the mere existence of an overlapping registration is not enough to shift the presumption of good faith. Similarly, Tesco’s contention that bad faith can be inferred from Lidl’s overlapping registrations on the basis that they merely amounted to ever-greening was rejected, with the Judge finding that the mere existence of overlapping filings is not enough on its own to give rise to a prima facie case of bad faith. The Judge indicated that to establish such a prima facie case would require something along the lines of showing that the making of the overlapping registrations was bogus or made no commercial sense. The Judge found nothing in Tesco’s pleadings was inconsistent with the presumption of good faith or gave rise to a clear inference of bad faith and also found that aspects of Tesco’s allegations of bad faith did not meet the higher bar for such pleadings of being fully and properly pleaded. Consequently, the Judge granted Lidl’s strike out and/or summary judgment application in relation to Tesco’s bad faith counterclaim.

The Judge went on to grant Lidl’s application to admit survey evidence for use in response to Tesco’s case of lack of use of the wordless device mark, lack of recognition by consumers and lack of distinctive character and reputation.

Author: Quinn Miller

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