Lidl v Tesco: judge refuses Tesco's request to avoid an injunction

In the latest instalment of the ongoing dispute between Lidl and Tesco, Tesco's request to pay damages instead of suffering a final injunction for its acts of copyright infringement has been rejected. In April 2023, the High Court found Tesco liable for trade mark infringement, passing off and copyright infringement - see our earlier post here:  High Court rules in Lidl v Tesco: Lidl walks away with a trolley full of victories | Fieldfisher.

In May 2023 there was a 'consequentials' hearing before the same judge who heard the main proceedings, Mrs Justice Joanna Smith.  The parties had agreed beforehand that Lidl was entitled to a final injunction in respect of the trade mark and passing off claims, but they disagreed over whether it was entitled to a final injunction in respect of the copyright infringement, and over the time period Tesco should be permitted for compliance with any injunctions granted.  Judgment was handed down on 21 June 2023.
 
As with the main judgment, the judge clearly set out the relevant law before drawing conclusions.
 
The court has the powers to a) grant a final injunction, and b) award damages instead of an injunction (sections 37(1) and 50 of the Senior Courts Act 1981 respectively).  The judge confirmed that "the prima facie position is that an injunction should be granted.  The legal burden is on the defendant to show why it should not".  The framework for when the court should exercise its discretion to award damages instead of an injunction is set out primarily in the 1895 case of Shelfer v City of London Electric Lighting Company ("Shelfer"), which sets out four factors to consider:
 
“(1) If the injury to the plaintiff's legal rights is small,
 
(2) And is one which is capable of being estimated in money,
 
(3) And is one which can be adequately compensated by a small money payment,
 
(4) And the case is one in which it would be oppressive to the defendant to grant an injunction…”
 
These four factors are not exhaustive; even if they are fulfilled an injunction will not necessarily be granted, and additional relevant circumstances will be taken into account including, for example, where the defendant's "reckless disregard of a claimant's rights" mean that he "has disentitled himself from asking that damages may be assessed in substitution for an injunction". Article 3(2) of the Enforcement Directive (2004/48/EC) sets out similar considerations to Shelfer in different wording, and refers to remedies being both effective and dissuasive.
 
The judge began by setting out how damages in lieu of an injunction – which are forward-looking as they seek to legitimise future acts of infringement rather than seeking to compensate past acts of infringement – would be assessed, before considering each aspect of the Shelfer test.
 
Is the injury to Lidl's legal rights small?
 
In short, no.  Tesco argued that the logo was simple and that identifying an alternative sign would cost in the region of £25,000.  It also argued that the logo should be looked at on its own, stripped of all other rights, goodwill and reputation, and that therefore when negotiating for the notional licence (the notional royalty being the basis on which the damages would be assessed here), the parties were concerned with "a market of strikingly low value". 
 
The judge rejected all of this, stating that to accept it would ignore the commercial realities; notional negotiations must take into account the reality of the parties and the market.  The only reason for seeking a licence, as found in the main judgment, was to "convey the message of 'value', a message which Lidl's Logo already conveyed so effectively" and that it was "difficult to see that the price of the licence … would not have reflected this".
 
The alternative logos put forward by Tesco were simply not comparable; damages were unlikely to be "anything other than substantial".
 
Is the injury to Lidl's rights capable of being estimated in money?

No. It would plainly be very difficult in this case to estimate damages for past and future infringements, which both rely largely on the extent of the unfair advantage taken by Tesco and the detriment caused to Lidl.  Neither can be quantified easily.
 
Can the injury to Lidl's rights be adequately compensated by a small money payment?
 
No. Tesco had used at least 8 million pieces of collateral with the logo across its estate, and had used it extensively in other channels such as out of home (outdoor posters etc), TV, online and print advertising. It showed every intention of continuing such extensive use and for a considerable time, given the success of the Clubcard Prices campaign. Therefore it was "unrealistic to think that this could be adequately compensated with a small 'one off' payment".
 
Would it be oppressive to Tesco to grant an injunction?
 
No. Proving oppression is a high threshold to reach.  It was not enough that a rebrand would cost up to £7.8m and take 9-20 weeks; this was not disproportionate to the level of Lidl's loss if Tesco were to continue using the logo. The judge bore in mind that Lidl had made repeated requests to Tesco to cease using the logo and made a number of Part 36 offers, all of which Tesco had rejected. Tesco had been well aware of the risks of continuing to use the logo yet continued anyway; granting an injunction against it would not be oppressive but would give effect to the Enforcement Directive's requirements that a remedy be both effective and dissuasive. Note however that it was not necessary to decide whether Tesco's conduct had disentitled it from damages in lieu of an injunction.
 
Time to comply with injunctions
 
Based on the evidence before her, the judge ordered that Tesco should have 9 weeks to comply with any final injunctions barring all use of the logo, save for use on F&F clothing products where it would have a maximum of 20 weeks.
 
Comment
 
This is a well-reasoned and compelling judgment. There is nothing extraordinary in these circumstances to justify moving away from the prima facie position that the injured party should obtain an injunction. As you would expect from the judge's discussions and findings of fact in the main judgment, she is keen that not only should Lidl benefit from an effective remedy against infringement of its monopoly rights, but on the other side of the coin Tesco should be effectively prohibited from continuing its infringing acts. Furthermore, the judge gives the impression that although she has refused leave to appeal the main judgment, she is aware that the Court of Appeal may permit it (both parties are currently seeking leave to appeal aspects of the main judgment).