Lidl v Tesco: When only an injunction is adequate relief

After a consequential hearing which took place in May 2023, and following the handing down of the subsequent approved judgment in June 2023, the presiding judge, Mrs Justice Joanna Smith, has decided not to exercise the court’s discretion to award damages in lieu of a final injunction in the Lidl v Tesco dispute.

Whilst Tesco’s legal team sought to persuade the judge that the damage to Lidl was small, was capable of being estimated in money and would be adequately compensated by a relatively small payment, the judge confirmed that the prima facie starting position, having determined that there had been copyright infringement, was that an injunction should be granted and that to do so would not be oppressive to Tesco.

The judge recognised that copyright is a “monopoly right” and agreed with Lidl that the only certain way to put an end to the loss that Lidl is incurring by the continuing use by Tesco of its infringing Club Card Points sign and logo, is to grant a final injunction.

Submissions and findings

The judge heard submissions from both Lidl’s and Tesco’s legal teams about the different types of approach that may be taken to the quantification of damages in intellectual property cases and recognised that the assessment of damages in this particular dispute for past infringement, where a logo that is the subject of a registered trademark is also a copyright work, would inevitably be an “imperfect estimate” and “profoundly challenging”. Further, the judge recognised that the assessment of future losses would be even more difficult but concluded that the injury caused to Lidl was very likely to be substantial.

The judge was not persuaded by Tesco’s argument that a “rudimentary design”, similar in artistic complexity to Tesco’s infringing Club Card Points logo and sign, could have been conceived by a commercial design agency for in the region of (only) £25,000. As a yardstick which the court could use to estimate the financial value of the sign and logo, or as an example of the price of a comparable licence, the judge found that such a measure would not adequately reflect the true value of Lidl’s likely loss or the commercial context of this particular dispute, i.e. where the hypothetical “notional negotiation” of a license would involve consideration of the sum that would have been arrived at in negotiations between parties had each been making reasonable use of its bargaining positions. The fact that one of or both parties would not, in practice, have agreed to make a deal is irrelevant because the parties are taken to have been willing to make a deal even if one or both would not in reality have been prepared to do so.

Lidl contended that the hypothetical notional negotiation was not commercially realistic because the starting point would be that Tesco would be negotiating to copy Lidl’s “crown jewels” with a view to enhancing the value perception of Tesco’s own Club Card Pricing, by adopting a get-up that would take unfair advantage of the value messaging that Lidl’s logo conveyed to consumers, and be to the detriment of Lidl’s sign. In the circumstances, the judge decided that in this dispute, the notional negotiation would be divorced from its commercial context and from all reality.

The apparent cost to Tesco of eradicating its infringing Club Card Points sign and logo from all of its stores and products would, it said, exceed £7 million and while Lidl was seeking only 14 days for Tesco to comply with the final injunctions following determination of the action, the judge sided with Tesco’s submission that it would need at least 9 weeks to comply given the extremely wide use of the Club Card Points sign and logo.

Comment

Although the judge has not yet determined the damages that Lidl will be entitled to from Tesco, based upon the main judgment from April 2023, the litigation between Lidl and Tesco is far from over. Whilst the judge refused an application for permission to appeal she indicated that there was no doubt the application would be renewed to the Court of Appeal in due course. Pending any such application for permission to appeal or any appeal finding, it may be that the judge will soon have to grapple with what approach the court should adopt in quantifying Lidl’s losses and damages.

The parties currently hang onto their baskets - neither is prepared to check out yet. Watch this space.