Combatting Lookalikes Revisited - clouds lift for brand owners as Thatchers wins its appeal over Aldi copycat cider

In April 2024 I wrote an article on the vexed issue for retail brand owners of combatting lookalike products, typically by discount retailers, following a decision in the Intellectual Property Enterprise Court (“IPEC”) that Aldi’s lookalike Cloudy Lemon cider product did not infringe the Thatchers registered trade mark for the packaging of its Cloudy Lemon Cider product. Below for ease of reference are Thatchers’ trade mark, Thatchers’ products to which its trade was applied, and Aldi’s equivalent can and cardboard 4-pack.  

Happily, for Thatchers, and many other brand owners, the IPEC decision has recently been reversed by the Court of Appeal in a unanimous decision led by IP specialist Lord Justice Arnold. 

In the IPEC Thatchers relied on three grounds:

1. s. 10(2) Trade Marks Act 1994 (“TMA”) – essentially, Aldi had adopted a similar sign to the Thatchers’ trade mark on identical goods such that there was a likelihood of confusion on the part of consumers.
2. s.10(3) TMA – the Thatchers’ trade mark had a reputation and Aldi had adopted a similar sign and without due cause took unfair advantage of or caused detriment to the distinctive character or repute of Thatchers’ trade mark.
3. the use by Aldi of its packaging amounted to passing off, i.e. consumers would be confused as to the origin of the Aldi product thinking it to be made by Thatchers or otherwise economically connected with Thatchers’ product, resulting in damage to the goodwill in Thatchers Cloudy Lemon Cider product. 

Thatchers did not appeal the conclusions under s.10(2) TMA and passing off, focussing its appeal on s.10(3) TMA and, in particular, that in adopting a similar sign to the Thatchers’ trade mark, Aldi took unfair advantage of the reputation in the Thatchers’ trade mark (so-called “free riding”).

To succeed in the Court of Appeal, Thatchers must persuade the Court of Appeal that findings of fact made by the IPEC Judge were rationally unsupportable and/or that multi-factorial evaluations by the judge were based on an error in law or principle.

Arnold LJ, having reviewed the IPEC decision and the key authorities on free-riding, identified several errors on the part of the IPEC Judge, including:

• The IPEC Judge’s assessment of “the Sign” used by Aldi.  The IPEC Judge found the Sign was the 3-dimensional Aldi canned cider product, whereas Arnold LJ said what constituted the Sign were the graphics applied to the cans and the cardboard 4-pack.  The IPEC Judge was incorrect in thinking that a point of difference between the Sign and Thatchers’ trade mark was a 3D sign and a 2D mark – that partly stemmed from her assessment of what constituted the Sign.
• The IPEC Judge was incorrect in disregarding how Thatchers itself used its mark. Trade mark infringement is to be considered based on a “notional fair use of the mark”, even if it is not used. Proprietors of registered trade marks have a period of 5 years from registration in which to use the mark, before it becomes vulnerable to cancellation for non-use. This enables businesses to seek early protection for new products which it then takes some time to bring to market. Of course, it is necessary for a mark to be used in order to rely on s. 10(3) TMA because the mark must have a reputation.  Arnold LJ said that if a trade mark has been used in fact, the manner in which the trade mark has actually been used by the proprietor is normally the paradigm case of notional fair use of the trade mark. The manner of use made by the trade mark proprietor is also relevant to distinctive character and reputation.
• Arnold LJ found, as matter of fact, that the IPEC Judge was obviously wrong to find that Aldi had not significantly departed from its own house style for Taurus ciders in its design of the Cloudy Lemon flavour.  As can be seen below, the Aldi product represents “a manifest departure” from the house style of its other cider products. First, the house style features the word TAURUS printed in white on a black background, whereas the Cloudy Lemon product has TAURUS printed in black on a pale yellow background. Secondly, the house style does not include any images of fruit, whereas the Cloudy Lemon product includes prominent images of lemons (and also leaves). Thirdly, the combined effect of the pale yellow background and the presence of the lemons makes the “swooshes” less prominent.

The IPEC Judge was also incorrect to ignore the faint parallel lines on the Aldi product when considering Aldi’s intentions (even if it was not incorrect to disregard them for the purposes of considering the likelihood of confusion under s.10(2) TMA or passing off).  It was, therefore, necessary for the Court of Appeal to reassess Thatchers’ pleaded allegations. 

• It was plain from a comparison that the Aldi Sign closely resembled the Thatchers’ mark and, from the evidence, that Aldi intended to take advantage of the reputation of the Thatchers’ mark in order to assist it in selling the Aldi product.  Aldi achieved significant sales of the product in issue over a short period without any promotion and the Cloudy Lemon flavour sold better than the nearest comparator in Aldi’s Taurus cider range.
• The IPEC Judge made a clear error of principle in her assessment of the claim of “free-riding”.  Although she referred to the leading authority of the CJEU in L’Oreal v Bellure, she did not then examine the issue by reference to the principles of that decision particularly the issue of “transfer of image”.  The CJEU said (in paragraph 41 of its decision in L’Oreal v Bellure) “As regards the concept of ‘taking unfair advantage of the distinctive character or the repute of the trade mark’, also referred to as ‘parasitism’ or ‘free-riding’, that concept relates not to the detriment caused to the mark but to the advantage taken by the third party as a result of the use of the identical or similar sign. It covers, in particular, cases where, because of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation” (my emphasis).
• It was clear that Aldi intended the Sign to remind consumers of the Thatchers mark to convey to consumers that the Aldi product was “like Thatchers, only cheaper”.    Aldi took advantage of the reputation of the Thatchers mark.  The level of sales, without promotion, evidenced the advantage to Aldi, and that advantage was unfair because it enabled Aldi to profit from Thatchers’ investment in developing and promoting the Thatchers product, rather than Aldi competing purely on quality and price and/or its own promotional efforts.  That is precisely the kind of conduct the law is designed to protect proprietors of a registered trade mark with a reputation against.
• Aldi argued that if there was an infringement, it had a defence based on the descriptive or non-distinctive elements of its pack design, such as the images of lemons and leaves.  Section 11(2)(b) TMA provides that a registered trade mark is not infringed by the use of signs or indications which are not distinctive or which concern the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or rendering of services, or other characteristics of goods or services, provided the use is in accordance with honest practices in industrial or commercial matters. The IPEC Judge did not consider this defence, given that she rejected Thatchers’ claim.  It fell to the Court of Appeal, therefore, to consider the issue.  Arnold LJ said that on the basis of the IPEC Judge’s unchallenged findings, and viewed as a whole, the Aldi Sign is distinctive (of Aldi) and it does not concern any of the characteristics of the goods (although it does convey the message that the Aldi Product is like the Thatchers Product, but cheaper).  He said that it is wrong to dissect the Aldi Sign into its constituent parts, and then to say that because some elements are descriptive, the sign as a whole falls within s.11(2)(b).
• Arnold went on to say that if the Court was wrong on that, Aldi’s use was not in accordance with honest business practices because it amounted to unfair competition. In considering honest practices, Arnold LJ considered the criteria developed by the CJEU in assessing whether Aldi’s use amounted to use in accordance with honest business practices.   He also considered a number of factors which Arnold LJ first set out in Samuel Smith v Lee^[1] at:

i) whether the defendant knew of the existence of the trade mark, and if not whether it would have been reasonable for it to conduct a search;

ii) whether the defendant used the sign complained of in reliance on competent legal advice based on proper instructions;

iii) the nature of the use complained of, and in particular the extent to which it is used as a trade mark for the defendant’s goods or services;

Judgment Approved by the court for handing down. 

iv) whether the defendant knew that the trade mark owner objected to the use of the sign complained of, or at least should have appreciated that there was a likelihood that the owner would object;

v) whether the defendant knew, or should have appreciated, that there was a likelihood of confusion;

vi) whether there has been actual confusion, and if so whether the defendant knew this;

vii) whether the trade mark has a reputation, and if so whether the defendant knew this and whether the defendant knew, or at least should have appreciated, that the reputation of the trade mark would be adversely affected;

viii) whether the defendant’s use of the sign complained of interferes with the owner’s ability to exploit the trade mark;

ix) whether the defendant has a sufficient justification for using the sign complained of; and

x) the timing of the complaint from the trade mark owner.

Arnold LJ said it was not clear whether Aldi was aware of Thatchers’ trade mark when it adopted the Sign, but if not it would have been reasonable for Aldi to have carried out a search. Aldi has not disclosed any legal advice it obtained. Aldi was aware of the reputation of Thatchers’ trade mark and intended to take advantage of it. It should have been appreciated that Thatchers would object. It had no justification for using the Sign, and Thatchers was prompt in making its complaint. 

• Aldi also invited the Court to depart from the CJEU decision in L’Oreal v Bellure given that the UK had now left the EU. That was roundly rejected on a number of bases including that Parliament had not repealed or amended s. 10(3) (or 5(3))TMA, since Brexit, it intended trade mark law to be harmonized with the EU on that respect (and other aspects of trade mark law), countries outside the EU have adopted similar principles and all courts charged with interpreting and applying such provisions should be striving for harmony with each other, and that L’Oreal v Bellure was not an isolated decision, and to depart from it would cause considerable legal uncertainty.

Following the Thatchers Court of Appeal decision, an Aldi spokesperson is reported as saying “Aldi offers exclusive brands as low-price alternatives to more expensive branded products. The High Court [IPEC] was clear that Aldi customers know what they are buying when they shop with us. We will continue to produce high-quality exclusive brands for our customers at unbeatable prices.”

However, the Court of Appeal judgment was not about consumer confusion; the IPEC decision on those issues were not appealed by Thatchers. This appeal was not about legitimate competition, and Aldi is, of course, able to offer low-price alternatives to more expensive branded products, and nothing in this decision prevents that. Consumers are accustomed to seeing own label versions of popular products, and that is all part of healthy competition and consumer choice.

This welcome decision is about competing unfairly. It should act as a warning to discount retailers looking to launch competing products to established brands, that they cannot expect to adopt lookalike packaging, which deliberately and shamelessly piggy backs on other companies’ substantial marketing and advertising through which they build brand reputation without significant repercussions. That is not fair competition. It is however, necessary for the branded product packaging to be protected by a registered trade mark.

This decision, and the affirmation of the Court of Appeal in a case brought by Marks & Spencer that Aldi’s lookalike glitter gin bottles had infringed M&S’ registered designs is a shot in the arm for brand owners, particularly in the retail sector, and justification for investing in registered protection of brand get up through carefully considered and formulated trade mark applications and registered designs.   

 
[1] [2011] EWHC 1879 (Ch)