Sweet success for Thatchers in Court of Appeal decision on Aldi’s lookalike lemon cider

Lord Justice Arnold delivered the leading judgment. The Court acknowledged that there had been a lot of debate about the IPEC decision, and reaffirmed that it was not the Court’s place to weigh in on policy debates: “Our task is to apply the law enacted by Parliament to the facts of this case. This point is particularly significant because … Aldi invites us, if necessary, to depart from the leading judgment of the Court of Justice of the European Union in this field”.

It was accepted that Aldi used Thatchers’ lemon cider as the “benchmark” for its product and packaging, but a key difference between the products was that Aldi didn’t use real lemon juice. There was no evidence that Aldi had invested money in promoting its Taurus lemon cider. 

Similarity of Signs

In assessing similarity, HHJ Melissa Clarke had found that it was a relevant “point of difference” that Thatchers’ trade mark was two-dimensional, whereas Aldi’s sign was three-dimensional. However, Arnold LJ held that the judge was wrong to disregard that Thatchers used the trade mark printed on the cylindrical surface of cans of its cider. As confirmed in the CJEU’s judgment in Specsavers, the manner in which the trade mark has been used is also relevant to the assessment of its distinctive character and reputation.

Thatchers further argued that the assessment of similarity for the purposes of s 10(3) should be different from s 10(2). Specifically, Thatchers argued that it was appropriate to focus upon the distinctive and dominant components of the trade mark and the sign for the purposes of likelihood of confusion, but not for s 10(3). However, Arnold LJ disagreed at [85]:

In my view there is nothing wrong in taking such a short-cut provided that the tribunal takes care not to allow its analysis of the other requirements for infringement under section 10(3) to be conditioned by factors which are only relevant to likelihood of confusion.

Intention

There was disagreement about the relevance of intention to a finding of infringement under s 10(3). Arnold LJ found that part of the problem was that the judge had failed to distinguish between the assessment for s 10(2) and s 10(3). In doing so, HHJ Clarke had cited passages of authority about the relevance of intention to a finding of passing off (i.e. intention to deceive), rather than the passages that focused on unfair advantage (i.e. intention to take advantage). 

Arnold LJ reaffirmed that there can be a finding of unfair advantage, even if the defendant didn’t subjectively intend to exploit the reputation of the trade mark. Nevertheless, upon re-assessing the packaging, Arnold LJ found that Aldi had departed from its house style for Taurus ciders and imitated features of the Thatchers lemon cider, which showed an intention to take advantage of the reputation of the trade mark in order to convey the message that Aldi’s cider “was like the Thatchers Product, only cheaper”. 

Unfair Advantage

In deciding whether Aldi had infringed s 10(3) TMA, the key issues were whether Aldi’s sign gave rise to a “link” between the sign and the trade mark in the mind of the average consumer, and whether it gave rise to a specified injury, namely: taking unfair advantage of the distinctive character or repute of the trade mark (also known as “free riding”), or detriment to the repute of the trade mark (also known as “tarnishment”). 

Thatchers argued that this was a “paradigm case” like L’Oréal v Bellure of a link in the minds of consumers resulting in a “transfer of image” and “riding on the coat-tails” of the registered trade mark. The Court accepted that HHJ Clarke had neglected to discuss this argument. The Court found that Aldi intended to take advantage of the reputation of the trade mark to help sell its own product. It was clear from the social media evidence that at least some consumers received the intended message loud and clear (for example, consumers referring to it as “a Thatchers Lemon cider rip off”). Arnold LJ continued at [114]:

That was an unfair advantage because it enabled Aldi to profit from Thatchers’ investment in developing and promoting the Thatchers Product rather than competing purely on quality and/or price and on its own promotional efforts.

Tarnishment

The Court of Appeal agreed with the judge’s findings that there was no detriment to repute. The Court accepted that the packaging of the Aldi product, with its language like “made with premium fruit”, was likely to give consumers the impression that it contained real lemon juice, when that wasn’t the case. However, that didn’t necessarily mean that there was detriment to the reputation of Thatchers’ trade mark. 

For there to be tarnishment, consumers would need to become aware that they had been misled about the composition of Aldi’s cider, and as a result, regard Thatchers’ cider less favourably. But there was no evidence this had occurred. Furthermore, even if consumers realised that they had been misled, they would realise that the Aldi packaging was materially different from the Thatchers trade mark, which includes the unambiguous words “made with real lemons”. Consumers would be likely to see this as part of the explanation for the cheaper price of the Aldi product. 

Defences

The Court found that Aldi couldn’t rely on the descriptive use defence in s 11(2)(b) TMA. Viewed as a whole, the sign was distinctive of Aldi and it didn’t concern any of the characteristics of the goods. Arnold LJ held that it was “illegitimate to dissect the Sign into its constituent elements for the purposes of applying section 11(2)(b), and to argue that, because some of those elements are descriptive, the Sign as a whole falls within section 11(2)(b)”.

As for the honest commercial defence, Arnold LJ referred to his list of factors set out in Samuel Smith v Lee and held that Aldi’s packaging “was not in accordance with honest practices in industrial and commercial matters because it was unfair competition.”

Time to depart from the CJEU?

If all else failed, Aldi invited the Court to depart from L’Oréal v Bellure, but the Court declined to do so. Arnold LJ noted that L’Oréal v Bellure provides a principled basis for taking decisions about unfair advantage, and Aldi’s submissions did not articulate any alternative principled basis for doing so: “They amounted to an invitation to this Court to discard all of the existing learning on unfair advantage and to start again from scratch, but without providing any road map for that exercise.” 

Aldi argued that many academics had criticised the L’Oréal v Bellure decision (without any specific citations), but Arnold LJ noted that “My impression is that some of the academics who were initially critical of the ruling have subsequently moderated their views.” As for the judicial criticism when L’Oréal v Bellure returned to the UK courts, those remarks were confined to the comparison lists. Amongst other issues, Arnold LJ further noted that departure from L’Oréal v Bellure would cause considerable legal uncertainty.

Conclusion

Many brand owners and trade mark lawyers are celebrating this judgment as a positive outcome for companies that seek to protect themselves against unfair competition from lookalike products. No doubt some lemon cider (or another sparkling alcoholic beverage) will be enjoyed this evening. 

Of course, the commentators who celebrated the IPEC decision as upholding competition, and hence cheaper prices for consumers, will be disappointed with this outcome. Aldi expressed their disagreement with the Court of Appeal’s decision to the media today and indicated that they intend to appeal. The IPKat will be curious to see whether this bitter dispute will continue, and, of course, will keep readers informed!