It is a case of pivotal importance for brand owners in the ongoing battle against the cheaper, discounter stores that focus on lookalike products. We set out a summary of the Court of Appeal judgment and our thoughts below.

Background

Judge Melissa Clarke’s judgment was handed down in January 2024 and you can read our assessment of the decision here. By way of reminder, Thatchers sued Aldi for infringement of its UK 2D device mark, (the “Trade Mark”) by Aldi’s Cloudy Cider Lemon (the “Infringing Sign”), as shown below. Aldi has used the Taurus brand since 2013, and since 2020 had sold an apple cider known as Taurus Original and a pear variant known as Taurus Pear. Aldi’s product using the Infringing Sign was launched on 19 May 2022. Thatchers alleged that Aldi had infringed its Trade Mark by use of the graphics on the Taurus cans and on the 4-can cardboard pack pursuant to section 10(2) and 10(3) of the Trade Marks Act 1994, and for passing off. The Trade Mark was used consistently on the front and rear of each individual can and also on the cardboard packing for the four-packs. Likewise, Aldi used the same packaging design on its single cans and the cardboard for the four-packs:

Thatchers Cloudy Lemon Cider – UK device Trade Mark

Aldi's Taurus Cloudy Cider Lemon – the Infringing Sign

 

The Judge dismissed the claim on the following basis:

• Section 10(2) – there was low overall similarity between the Trade Mark and Aldi’s Taurus packaging and a lack of actual confusion evidence. The additions to its Taurus packaging create enough dissimilarity such that consumers would not be confused between the two products;
• Section 10(3) – Aldi’s Infringing Product would be called to mind by consumers (the necessary “link”), but that Aldi had not sought to take unfair advantage, and no detriment had been caused;
• Passing off – there was no misrepresentation on the part of Aldi and so there could be no passing off.

The Appeal 

Thatchers were granted permission to appeal on ten grounds, primarily focussing on section 10(3) and the conditions of link, unfair advantage and detriment to repute of the Trade Mark. They were denied permission to appeal on detriment to distinctive character and the Court of Appeal did not consider section 10(2) or passing off. Aldi filed a cross-appeal seeking to uphold the Judge’s decision on five additional or alternative grounds. The appeal judgment was led by eminent Lord Justice Arnold. 

Section 10(3)

The assimilated UK and EU case law has long established that nine conditions must be satisfied to succeed with infringement under this limb, namely:

• The mark must have a UK reputation;
• Third party use of the sign must be within the UK;
• In the course of trade;
• Use is without consent of the trade mark proprietor;
• Sign must be identical or similar to the trade mark;
• In relation to goods or services;
• It must give rise to a “link” between the sign and trade mark in the mind of the average consumer;
• It must give rise to injury in the form of: unfair advantage, detriment to distinctive character of trade mark or detriment to repute of the trade mark (tarnishment);
• it must be without due cause. 

Arnold LJ has provided a careful and reasonable analysis of the grounds of appeal in his leading judgment.  

1. The Infringing Sign: The Judge was incorrect in concluding that the Infringing Sign was the 3D cider can, whereas she should have assessed it as being the 2D graphics printed on the Aldi product and cardboard 4-can pack. Thatchers’ pleading was clear that this was the Infringing Sign (para 78);

2. Similarity between Infringing Sign and Trade Mark: The Judge erred in holding that the Trade Mark and Infringing Sign had a ‘low’ degree of similarity, differentiating between them as being 2D and 3D. The Judge had focussed on the distinctive and dominant elements of the Trade Mark and the corresponding elements in the Infringing Sign. She was then wrong to import this finding into her assessment of section 10(3) infringement. The question under section 10(3) is that of similarity, which in combination with the abovementioned factors, gives rise to a link and one of the three types of injury. Arnold LJ concluded that the similarity finding was higher than ‘low’ and the Judge erred in having assessed similar only once for the different limbs of infringement (para 86);

3. Aldi’s Intention: It was necessary to reassess Aldi’s intention as the Judge’s analysis was flawed. The Judge has confused the intention to deceive (relevant for section 10(2)) with the intention to take advantage of the reputation of a trade mark (section 10(3)); she had made a rationally insupportable finding that Aldi had not significantly departed from its house style for Taurus when designing the Infringing Sign; and she wrongly discounted the faint horizontal lines present in the Trade Mark and the Infringing Sign. Arnold LJ held that it was “plain from a comparison” that the Infringing Sign closely resembled the Trade Mark. Research of other lemon-flavoured products highlighted that it was easy to convey this message without using key elements of the Trade Mark. Considering the horizontal lines on Aldi’s cider, Arnold LJ said that even if they would not be strongly noticed by consumers it is “the reproduction of inessential details which gives away copying”. It was an "inescapable conclusion” that Aldi’s intention had been to remind consumers of Thatchers in order to take unfair advantage of the Trade Mark’s reputation (paras 89, 97-99);

4. Aldi’s sales figures: The Judge was wrong to find that Aldi’s sales of the Taurus Cloudy Cider Lemon were not disproportionate to other ciders in the Taurus range. Sale figures for all Taurus range products were not available, direct comparisons could not always be drawn between such figures and there was no evidence of popularity of certain flavours driving sales. Ultimately, Aldi’s product had achieved significant sales in a short period of time without any marketing promotion (paras 100 and 109);

5. Unfair advantage: The Judge erred in principle in not providing any discussion on the transfer of image when considering unfair advantage. Arnold LJ decisively found that this case sits squarely within the description of “a transfer of the image of the mark” and “riding on the coattails” as reasoned by the Court of Justice in L’Oreal v Bellure.  There could be no other way that Aldi could have achieved significant sales of a product that not been promoted at all, without consumers making a link between their product and Thatchers’. It therefore must be inferred that it was due to taking an unfair advantage of Thatchers that allowed Aldi’s product to succeed, despite the latter not being the same quality as Thatchers (Aldi’s did not contain real lemon juice to flavour it) or its promotional efforts. Arnold LJ concluded this analysis by confirming that this situation, of protecting the proprietor of a registered trade mark with a reputation, is precisely what the judgment in L’Oreal v Bellure sought to protect (paras 110, 114, 117);

6. Damage to repute of Trade Mark: The Court did not need to consider Thatcher’s ground of damage to the repute of the Trade Mark but did anyway and rejected it. Thatchers had to show that consumers had been misled by Aldi’s product (in not being the same quality as Thatchers) and consequently thought less favourably of the Trade Mark, but there was no relevant evidence to this. A consumer would likely assume that any product difference was due to buying a cheaper Aldi cider (paras 119, 122 and 125);

7. Section 11(2)(b) defence: The Judge did not consider this defence initially as her decision was in Aldi’s favour. Arnold LJ gave a short assessment of the defence concluding that Aldi was not in compliance with honest practices in industrial and commercial matters because its actions were unfair competition. Aldi would have been alerted to the Trade Mark in a search, it knew of the Trade Mark’s reputation, it had not disclosed any legal advice and Aldi intended to take advantage (para 141).

Departing from L’Oreal v Bellure

The Court then dealt with Aldi’s thorny appeal ground in which it invited the Court to depart from L’Oreal v Bellure if its appeal otherwise failed on unfair advantage. The option to depart from CJEU law is now open to the Court of Appeal following Brexit and the enactment of the European Union (Withdrawal) Act 2018 and the European Union (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020 (SI 2020/1525). This ground was politely but concisely rejected by Arnold LJ for the following reasons:

1. Section 10(3) has not been amended or repealed by the UK Parliament, so parties are still entitled to bring claims under this section;

2. UK trade mark law should remain harmonised with aspects of EU law and the UK courts should seek to enforce this unless it considers the CJEU’s legislation is in error;

3. In deciding if a party has taken unfair advantage of the reputation of a trade mark, the courts must consider a principled basis, which the CJEU provides. Aldi had not provided any alternative principled basis for this;

4. L’Oreal v Bellure is not an isolated decision and followed other leading decisions of the CJEU;

5. Aldi did not guide the court on the “ample academic commentary” that it said had criticised L’Oreal v Bellure

6. Departing from L’Oreal v Bellure would create considerable legal uncertainty. Arnold LJ was not persuaded by Aldi’s submission that the CJEU had restricted the development of law in this area or was heading in the wrong direction. On the contrary, by following and interpreting L’Oreal v Bellure parties in the UK are not prevented from fair competition. 

Accordingly, Thatchers’ appeal that Aldi had infringed its Trade Mark pursuant to section 10(3) was allowed and Aldi was not afforded any defence or departure from EU law which may have assisted its defence. 

Comment

This judgment should be music to the ears of all brand owners in the UK. The ongoing damage to brands by lookalike, cheaper products has become endemic, as discounter supermarkets and retailers attract previously brand-loyal customers with cheaper prices. Thatchers have ultimately shown that effective trade mark strategy (which includes enforcement) can stop copycat products.

So what is the guidance for brand owners?

• Think carefully about protection – this decision confirms the importance of effective packaging trade marks.  Even the presence of THATCHERS and TAURUS in the respective signs did not absolve Aldi of liability, given the distinctive nature of what had been taken.  Consider carefully the scope of protection and the role of any brand name within it;

• Reputation is key – it sounds obvious but relying on section 10(3) is all about showing the reputation in what has been taken. Without this there can be no unfair advantage. The evidence showed that Aldi deliberately included design aspects such as lemons and leaves and departed from its usual house style to sail as close as possible to the Thatchers product. Not only did that create the necessary link in a consumer’s mind, but Aldi achieved huge sales without any marketing;

• What court? – At places in the judgment Arnold LJ laments the original decision may have been different were the original hearing longer than two days (he noted that the Court of Appeal was the same length even though it was only dealing with one issue, rather than the three considered by the IPEC). This does not automatically render the IPEC unsuitable, but claimants should: (i) consider carefully whether the IPEC is the best court for their case given strategic and commercial considerations; (ii) if it is then think carefully about how your case is pleaded and whether, as here, solely relying on section 10(3) is enough;

• Section 10(3) as a proxy for unfair competition? – for those rightsholders who look enviously at those countries with flexible unfair competition regimes, is section 10(3) our equivalent unfair competition by another name? By its very nature (given the registration required) it is not, but the repeated references to Aldi using the Thatchers mark to compete unfairly show that effective trade mark protection can have a similar effect.

There are whispers that Aldi may yet appeal to the Supreme Court but for now, brands should take note of this illuminating judgment and consider their IP protection strategies accordingly.