Rapid Reaction - Thatchers v Aldi - Aldi loses on appeal as Court of Appeal overturns IPEC decision in lookalike cider case

In a significant decision that will be warmly welcomed by brand owners in their continued fight against lookalike products, the Court of Appeal has upheld Thatchers' appeal and overturned the decision of the Intellectual Property Enterprise Court (“IPEC”) rejecting Thatchers’ claims of trade mark infringement and passing off against Aldi’s Taurus Cloudy Lemon Cider.

At first instance the IPEC dismissed Thatchers' claims of trade mark infringement and unlawful passing off relating to the graphics on the cans and 4-can cardboard pack of Aldi’s Taurus Cider. In a unanimous decision the Court of Appeal has allowed Thatchers' appeal, overturning the IPEC’s decision on infringement under s.10(3) of the Trade Marks Act 1994 (“TMA”) by finding that the appearance of Aldi's packaging took unfair advantage of the reputation of Thatchers’ registered trade mark for the packaging of its Cloudy Lemon Cider.

IPEC decision

The case concerned the appearance of Thatchers' Cloudy Lemon Cider and Aldi’s Taurus Cider (pictured below). Thatchers alleged that the appearance of Aldi's packaging infringed its registered trade mark for the packaging of its Cloudy Lemon Cider (the “Thatchers Mark”) and amounted to unlawful passing off. 

The Thatchers Mark      

                       Aldi’s Taurus Cloudy Lemon Cider 

Bristows reported on the IPEC decision here. In summary, the IPEC decided that:

1. The s.10(2) claim failed on the basis of a low degree of similarity between the Thatchers Marks and Aldi's packaging, and there being no likelihood of confusion.
2. Although the Thatchers Mark had a reputation and Aldi's packaging would create a link in the minds of consumers, the s.10(3) claim failed because HHJ Melissa Clarke held that Aldi’s packaging did not take unfair advantage of, nor cause any detriment to, the Thatchers Mark. 
3. The passing off claim failed on the basis that there was no evidence that any consumers would believe Aldi’s products was connected to Thatchers, for example, that it is manufactured, or licensed, or approved by Thatchers, therefore Aldi’s packaging did not involve a misrepresentation.

The appeal and decision of the Court of Appeal

Thatchers appealed the IPEC decision on no less than ten grounds, all of which related to the IPEC’s assessment of infringement under s.10(3) TMA. Since many of those grounds overlapped, we focus on the Court of Appeal’s key findings for overturning the IPEC’s decision on s.10(3). 

Lord Justice Arnold gave the leading judgement in the Court of Appeal and agreed with Thatchers’ arguments that HHJ Melissa Clarke had erred in her assessment of s.10(3) in several respects. According to Arnold LJ this was a case that fell squarely with the category of “riding on the coat-tails” of the Thatchers Mark and involved “a transfer of the image” from the Thatchers Mark to Aldi’s product.

Arnold LJ held that the “inescapable conclusion” from the evidence of Aldi’s product development process was that Aldi intended the packaging design to remind consumers of Thatchers' cider and convey the message that its cider was a cheaper version. According to Arnold LJ the evidence showed that some consumers had “received the message loud and clear” and Aldi had been able to achieve significant sales of its product without any form of marketing or advertisement. 

In those circumstances Arnold LJ held that it was legitimate to infer that Aldi’s packaging had taken advantage of the Thatchers Mark and that had been Aldi’s intention. Further, Arnold LJ found that the advantage was unfair because Aldi had been able to profit from Thatchers’ investment in developing and promoting its Cloudy Lemon Cider, rather than Aldi competing fairly on quality and/or price and investing in its own promotional efforts.

Aldi argued that even if its packaging infringed under s.10(3), it had a defence under s.11(2)(b) TMA on the basis that all the features of the packaging that give rise to similarity with the Thatchers Mark are descriptive or otherwise non-distinctive and its use of the packaging accorded with honest commercial practices. 

Arnold LJ held that s.11(2)(b) defence was not open to Aldi because when considered as a whole the packaging was distinctive of Aldi and for the purpose of assessing s.11(2)(b) it was wrong to artificially dissect a sign into component parts and then argue that the sign as a whole benefits from s.11(2)(b) because some parts are non-distinctive or descriptive. 

Even though the s.11(2)(b) defence failed at the first hurdle Arnold LJ considered whether Aldi’s conduct conformed with honest commercial practices. On this issue, he concluded that Aldi’s conduct fell below the standard of honest commercial practices. Arnold LJ found that Aldi was aware of the reputation of the Thatchers Mark and intended to take advantage of it. Aldi had not conducted any trade mark searches and had not disclosed any legal advice in that regard. According to Arnold LJ Aldi had no justification for using its packaging design and ought to have appreciated that Thatchers would strongly object to the packaging. 

 For those reasons, Arnold LJ held that Aldi’s conduct was tantamount to unfair competition and “precisely the kind of conduct that the law is designed to protect the proprietor of a registered trade mark with a reputation against.”.

Reaction

The outcome on appeal demonstrates how infringement claims under s.10(3) can be a useful weapon to combat lookalike products. The result should reassure brand owners that registered trade marks can still offer valuable legal protection for their branded products in the fight against lookalikes. Indeed, the finding of infringement under s.10(3) illustrates the value and importance of brands registering trade marks for their product labels and packaging, not only for brand names and stylised logos. 

The Court of Appeal’s decision marks a significant u-turn from the IPEC decision at first instance and is a considerable victory for Thatchers and brand owners more generally. The outcome at first instance was in keeping with more recent decisions on s.10(3) involving lookalike products. Given the outcome at first instance the decision on appeal was somewhat unexpected. Although the outcome of the appeal swings the pendulum back in favour of brand owners, it would not be surprising if the case is subject to a further appeal to the Supreme Court.