Clifford Chance

The Court of Appeal have sided with Thatchers in a recent lookalike product case, partially overturning an earlier IPEC decision and deciding that Aldi's Taurus Cloudy Cider infringes Thatchers registered trade mark protecting its own Cloudy Lemon Cider. The judgment will be welcome news for brand owners trying to protect themselves against lookalike products. We look at key takeaways from the decision, and what companies can do to best protect their brands going forward.

Background

Thatchers is a British family run cider business, founded in 1904. In 2020, it identified what it considered to be a gap in the market and decided to expand its offerings beyond apple-based ciders to launch a cloudy lemon cider. Thatchers invested in excess of £2.9 million in advertising to promote this new product and registered a trade mark for its lemon cider design that appears on its cider cans and its cardboard packaging.

Aldi is a well-known German supermarket that is famous for advertising its products as "like brands, only cheaper". Aldi has sold cider under the brand name Taurus since 2013, and in May 2022, Aldi launched a Taurus Cloudy Lemon Cider. To bring the product to market, Aldi worked with an external design agency, using a 'benchmarking' exercise. This involves identifying a product, usually the market leader, as a quality barometer, as well as a product to be the benchmark for the design of the packaging. In this case, the Thatchers product was the benchmark for both quality and design, and it was clear in the evidence that Aldi had made decisions about its own product with reference to Thatchers.

Four months after Aldi launched its cider, Thatchers commenced proceedings on the basis that Aldi had infringed its registered trade mark for its product packaging, under section 10(2) and 10(3) of the Trade Marks Act 1994 and also for passing off. Thatchers chose to bring the claim in the Intellectual Property Enterprise Court ("IPEC"), which meant the parties were confined on evidence and trial length. The first instance judge found, following a two-day trial, no infringement or passing off, ruling in favour of Aldi. Thatchers appeal was limited to section 10(3).

The Court of Appeal has now found, following a two-day hearing, that Aldi's packaging did take unfair advantage of the reputation of Thatchers registered trade mark.  It also rejected Aldi's defence under section 11(2)(b) that its use was "in accordance with honest practice in industrial and commercial matters". Thatchers' appeal did not re-open the first instance court's rejection of its case for confusion-based infringement, nor for passing off.

The judgment of the Court of Appeal was provided by Arnold LJ and is a thorough discussion of the evidence in the case and of the relevant provisions of UK trade mark law, incorporating EU Directives and judgments of the Court of Justice ("CJEU") as well as of the national courts.  

He found that the first instance judge had erred in a number of respects, including her identification of the specific use of Aldi's sign that Thatchers was complaining about, and the application of the different factors relevant to 10(2) compared to 10(3).

In deciding whether Aldi had infringed Thatchers' registration under 10(3), Arnold LJ considered whether there was a link between Aldi's sign and Thatchers' mark in the minds of an average customer, and whether it took unfair advantage of the distinctive character of Thatchers' registration, or detriment to the repute of the trade mark.

Unfair advantage

When considering unfair advantage, Thatchers relied on the CJEU decision in L'Oréal v Bellure, which defines 'unfair advantage' as an 'advantage taken unfairly by that third party of the distinctive character or repute of the mark where that party seeks by that use to ride on the coat-tails of the mark with a reputation in order to benefit from the power of attraction…of that mark'.

Arnold LJ confirmed that even if the defendant did not subjectively intend to exploit the reputation of a trade mark, a claimant can succeed on the grounds of unfair advantage if the objective effect is to enable the defendant to benefit. He also confirmed that this is not just limited to imitation products. However, in this case the Court did find that Aldi had intended to take advantage of Thatchers' reputation to help its own product, and it was clear from the various social media evidence – including consumers calling the product a 'Thatchers Lemon cider rip off' - that this message was received loud and clear.

Detriment to repute

The Court of Appeal agreed with the first court's judgment that there was no detriment to repute.

Thatchers had argued that Aldi's use of its sign damaged the repute of Thatchers' trade mark, given the different product's respective compositions (Thatchers' product was made with real lemons, Aldi's was not), and Aldi's claim on its product that it was made with 'premium fruit'. While Arnold LJ accepted that Aldi's product packaging could be misleading, this didn't necessarily mean that there was detriment to the reputation of Thatchers' trade mark.

For tarnishment to occur, consumers would need to first become aware they had been misled about Aldi's cider, and then for them to regard Thatchers' cider less favourably as a result. There was no evidence of consumers complaining about the cider composition, nor that this criticism had been applied to Thatchers.

Defences

Aldi argued that even if its use of the sign fell within section 10(3), it had a descriptive use defence under 11(2)(b). The Court of Appeal disagreed and held that Aldi's sign was distinctive as a whole, and that Aldi's packaging was not in accordance with honest practices because it was unfair competition. 

Departing from the  CJEU

As a matter of last resort, Aldi also invited the Court of Appeal to exercise its post-Brexit power to depart from the CJEU decision in L'Oréal v Bellure. The Court rejected this invitation, noting that the L'Oréal ruling provides a principled basis for determining when the use of a sign does or does not take unfair advantage of a trade mark's reputation. Further, Arnold LJ noted that Parliament has not repealed or amended section 10(3), and that the Court should aim for harmonisation when possible, rather than adopting different approaches unnecessarily. Further, he noted that while Aldi criticised the CJEU decision in principle, it did not offer any alternative path, and departure from L'Oréal would cause considerable legal uncertainty.

Finally, Arnold LJ noted it ironic that Aldi was asking the Court to depart from L'Oréal, when he believed Thatchers would likely have a remedy for Aldi's use under many systems of law outside the United Kingdom, including in German unfair competition law.

Key takeaways

• Benefit of registering packaging designs, not just the brand name: The judgment illustrates the advantages of having registered trade mark protection for packaging designs in addition to brand names, especially, as here, where considerable effort and expense has gone into product design, packaging design and advertising. Without its packaging registration, Thatchers would have been limited to a claim of passing off (which was unsuccessful), given there is no unfair competition law in the UK.
• Clear pleadings: The first instance judge found that Thatchers' pleadings did not clearly identify the sign of Aldi's that it was complaining about, resulting in her interpretating their claim in a manner the Court of Appeal held was incorrect. This had significant repercussions for her analysis.
• Evidence: The social media evidence of consumers clearly identifying the Aldi product as a 'knock-off' of Thatchers was clearly persuasive to the Court, and shows the importance of the average customer's impression. While not determinative, Aldi's benchmarking exercise and its attempt to sail 'close to the wind' to Thatchers' cider also appears to be persuasive in showing Aldi's intent.
• IPEC proceedings: It is worth thinking about whether IPEC is the best option for proceedings involving multiple claims. In this case, there was certainly sympathy from the Court of Appeal for the trial judge dealing with the evidence and time constraints, and the limited ability for counsel to assist. While there may have been valid cost or other reasons for Thatchers' election, it did ultimately mean the original decision was vulnerable for appeal, resulting in continued litigation and rising costs.

Conclusion

This decision is important for all brand owners, particularly those in the consumer goods space that regularly deal with copycat products in the market. While this may not mean the end of lookalike products, it is certainly a cautionary tale of the risks of 'benchmarking' too close to an established brand.

Aldi has said that it intends to appeal the decision.

The full judgment can be found here.