A widely publicised Court of Appeal decision has paved the way to assist brand owners in their fight against ‘lookalike’ products.

Background

In late 2022, Thatcher’s Cider Company Limited (“TCC”) brought an action in IPEC for trade mark infringement and passing-off against the supermarket chain, Aldi, in respect of the appearance images on the packaging of Aldi’s ‘Taurus’ cloudy lemon cider product.

The action was based on a device trade mark registration (“Trade Mark”) for the label of TCC’s own THATCHER’S Cloudy Lemon Cider product which appears on both the cans and cardboard packaging of four-can packs. TCC claimed infringement under Section 10(2)(b) of the Trade Marks Act 1994 (“the Act”) based on likelihood of confusion as well as under Section 10(3), in that Aldi had taken unfair advantage of the reputation in the Trade Mark, without due cause, to ride off the coat-tails of TCC’s product. TCC also relied on passing-off, claiming Aldi’s product amounted to a misrepresentation that caused damage to the goodwill of TCC. Aldi relied on a defence under Section 11(2), in that its own sign is not distinctive and/or indicates the kind or nature of the goods, and that Aldi’s use was in accordance with honest practices.

TCC had made significant sales of its cloudy lemon product since its launch in 2020 and had invested millions in TV advertising and posters to promote the product.

Aldi admitted to benchmarking the TCC product in designing the packaging for its own lemon cider product. Furthermore, disclosure revealed internal communications within Aldi which said ‘add lemons as per Thatchers’ and requests for the product to be ‘a hybrid of Taurus and Thatchers’. Aldi made significant sales of its product in 2021 but there was no evidence it incurred any costs advertising it.

Despite this, in a much debated first instance decision, the High Court found in favour of Aldi, ruling there was no infringement or passing-off. In particular, under the Section 10(3) reputation grounds, despite the judge, HHJ Melissa Clarke being satisfied that:

1. TCC had a reputation in the whole ‘get up’ of the packaging;
2. that the Aldi product may call TCC’s product to mind; and
3. No intention by Aldi to take unfair advantage is needed if the effect of their product is still to benefit from TCC’s reputation;

The judge ruled that Aldi did not design its product to take unfair advantage of TCC and that there would be no likely change in economic behaviour by consumers. The judge also ruled that Aldi’s use of their ‘Taurus’ word and logo was consistent with their ‘Taurus’ family of other flavoured ciders. Aldi’s Section 11(2) defence was therefore not considered.

The appeal

TCC appealed the decision, but only in respect of its claim under 10(3). TCC’s central criticism was that the judge was wrong to reject its case that Aldi had taken unfair advantage of the Trade Mark, when Aldi’s actions resulted in a ‘transfer of image’ from the Trade Mark.

TCC relied on the established case law of the Court of Justice of the European Union (“CJEU”), namely, from the L’Oreal v Bellure decision, whilst Aldi argued the court should depart from the CJEU reasoning in the L’Oreal case, if all arguments on unfair advantage failed.

The Court of Appeal unanimously overturned the High Court decision, with the lead judgement from Arnold LJ ruling that Aldi intended its packaging to remind consumers of the TCC product, to convey the message that the Aldi product was cheaper. This fell squarely into the realm of taking unfair advantage and the reasoning from L’Oreal as to the transfer of the image of a mark. This was supported by the fact that Aldi was able to make significant sales in its product without investing any money to promote it, profiting from TCC’s investment in its lemon cider product.

Further, Aldi’s departure from its own house style for its other ‘Taurus’ flavoured ciders, with the addition of faint horizontal lines and images of fruit on the lemon product, meant Aldi intended their sign to remind consumers of the Trade Mark.

Arnold LJ swiftly dismissed Aldi’s defence under Section 11(2) because i) Aldi’s sign was distinctive, containing word and logo elements and ii) its actions were not in accordance with honest practices because Aldi was aware of TCC’s reputation and intended to take advantage of it.

Finally, although the court has the power to depart from the L’Oreal decision following the European Union (Withdrawal) Act 2018 and the European Union (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020 (SI 2020/1525), Arnold LJ refused to do so as, ruling that it would cause considerable legal uncertainty from well-established case law on unfair advantage.

Take-aways

Discount supermarket chains have, for a long time, designed product packaging with closely similar features to those of established brands, with brand owners historically struggling to stop such use through passing-off claims or based on likelihood of confusion. This decision has strengthened the position of brand owners to prevent the use of lookalike products, provided the brand owner has the right registered trade marks in its arsenal, beyond the usual word and logo registrations, and can demonstrate a reputation in such marks.

Brand owners should carefully consider whether to register the appearance of labels or packaging of their core products as trade marks, particularly for more established labels with a reputation. This may result in a more dynamic portfolio to enforce against lookalikes.

At the time of writing, Aldi indicated it intends to seek leave to appeal the decision.