Will Lidl v Tesco signify the end of evergreening?

The ‘Battle of the Supermarkets’ is increasingly stepping out of the shopping aisles and into the courtroom. Following settlement of the now infamous ‘Colin v Cuthbert’ dispute between Aldi and Marks and Spencer’s, Tesco and Lidl have taken centre stage, with Lidl accusing Tesco of infringing the intellectual property rights in its logos.

The case involves numerous interesting points of intellectual property law, including the use of a trade mark strategy known as ‘evergreening’. Here, our trade mark solicitors discuss what evergreening’ is, its benefits for business owners and the potential pitfalls.

What is ‘evergreening’?

To understand what evergreening is, and why a trade mark owner might use it, it is important to appreciate how the trade mark filing system works.

The UK operates a ‘first to file’ system, so the entity who registers a mark first obtains the exclusive right to use it. It is vital to protect any proposed branding as a trade mark as soon as it is developed. Following registration, trade mark owners have a five-year grace period to begin using their mark. If it does not, the mark is at risk of cancellation for non-use. To defend a non-use cancellation action, the owner must prove it has used the mark for the purposes it was registered. Even if the mark has been used, gathering the evidence can be time consuming and costly.

To circumvent the five-year rule, some trade mark owners employ an ‘evergreening’ strategy. Evergreening involves registering a mark identical to an existing trade mark, for identical or broadly similar goods, before the existing trade mark’s five-year grace period has expired. By ensuring it always has a registered trade mark less than five years old, the trade mark owner avoids ever having to provide evidence of use of an older mark. 

Evergreening in Lidl v Tesco 

Lidl’s case is that Tesco’s Clubcard logo infringes various intellectual property rights in Lidl’s blue and yellow logos. Lidl has trade mark registrations, both for a logo featuring its name and one without (known as the ‘Wordless Mark’). Lidl alleges Tesco’s actions amount to infringements of both logos. Lidl’s Wordless Mark is shown below, next to Tesco’s allegedly infringing sign.

Whilst Lidl has used the logo incorporating its name extensively, it has never used the Wordless Mark in the UK. It has, however, adopted an evergreening strategy in relation to it, periodically reregistering it for partially duplicate goods and services each time.

Tesco alleges that Lidl’s registrations for the Wordless Mark were made in bad faith and are therefore liable to cancellation. Tesco contends that Lidl has no genuine intention to use the Wordless Mark and the registrations are purely defensive, to extend the scope of its protection against infringement. It is easier for Lidl to show infringement by Tesco of the Wordless Mark than of its logo incorporating the Lidl name. Tesco relies on Lidl’s evergreening strategy in support of its bad faith case.

Tesco’s bad faith case was the subject of a strike out application by Lidl, where they claimed that the allegations were so hopeless that they had no chance of success. Whilst initially successful, the Court of Appeal reversed the decision, holding that Tesco’s bad faith claim has a reasonable chance of success, and so should be heard at trial. 

Evergreening – cost-effective brand protection strategy or abuse of the trade mark system?

Reregistering a trade mark is a perfectly legitimate brand protection strategy. A business may wish to alter or extend the breadth of trade mark protection shortly after the initial registration or be unable to use it as planned within the first five years but retain an honest intention to use it in future. The latter scenario regularly arises in sectors where product development is lengthy and laborious, such as pharmaceuticals and tech. Reregistration of a trade mark which is not yet in use, or further amended applications, do not imply bad faith.

However, reregistration strategies intended solely to circumvent the five-year rule and gain a commercial advantage have been held by the Court to be an abuse of the trade mark system. For example, in invalidation proceedings involving Hasbro’s MONOPOLY mark, the Court took a dim view of Hasbro’s evergreening strategy. During the proceedings, Hasbro, somewhat surprisingly, admitted to evergreening its mark to avoid having to prove use, a tactic which the Court considered amounted to bad faith. Hasbro’s latest registration was invalidated in respect of the goods and services identical to those included in its earlier registrations. In Lidl v Tesco, the Court of Appeal commented that applications made with the intention of obtaining ‘unjustifiably broad [trade mark] protection’ may represent an abuse of the system.

Does evergreening remain a sensible brand protection strategy?

Evergreening is relatively common, particularly amongst larger businesses. Whilst the Court has expressly stated that its prevalence does not render the practice legitimate, it is important to note that the previous decisions on evergreening do not place a blanket prohibition on it. In any bad faith action, there is a presumption of good faith, and the burden falls on the party seeking cancellation to prove otherwise. The fact that Hasbro admitted its strategy was intended to avoid having to show evidence of use essentially removed that burden and was a deciding factor for the Court when considering bad faith. It remains to be seen whether cases such as Hasbro will be followed in future proceedings, and their nuances may ultimately limit their applicability.

The decisions have exposed a major potential pitfall to evergreening. They indicate that an ‘evergreen’ trade mark is at serious risk of cancellation if challenged, at least to the extent that it duplicates earlier registrations. This considerably reduces the value of such marks and has further, significant, implications for brand owners seeking to enforce them against third parties. The emerging case law provides those accused of infringement with a valuable defence and a potential counterclaim for invalidity on the grounds of bad faith.

All business owners should review their brand protection strategy and consider whether the commercial benefits of evergreening justify the now apparent cancellation risk. Whilst the decision in Lidl v Tesco will hopefully provide further guidance and clarification on the issue, the reality is that the outcome of a case will likely continue to hinge on its own facts. Expert legal advice from a trade mark lawyer should therefore be taken, and a strategy adopted that provides optimum protection with minimal cancellation risk.