Lidl Great Britain Limited & Anor. v Tesco Stores Limited & Anor.

On an application to strike out a pleaded allegation of bad-faith trade mark registration, the pleaded facts and permissible inferences must be assumed to be true. The claim survives if objective indicia give a real prospect of overcoming the presumption of good faith and shifting the evidential burden to the applicant.

Bad faith may arise where a mark was sought without an intention to use it and to obtain unjustifiably broad protection for purposes outside the functions of a trade mark. Re-filing is not inherently objectionable, but may constitute bad faith where intended to circumvent the sanctions for non-use. Such questions are fact-sensitive and ordinarily require investigation of the applicant’s intentions and commercial explanation.

The claimants owned registrations for a wordless version of their supermarket logo, although they had never used that mark in the registered form. They alleged that the defendants’ Clubcard Prices sign infringed those registrations. The defendants counterclaimed for invalidity, alleging that the wordless mark was registered as a defensive legal weapon and that later registrations were filed to avoid the consequences of non-use.

The High Court struck out the bad-faith counterclaim under rule 3.4(2)(a) of the Civil Procedure Rules 1998, holding that the pleading disclosed no reasonable grounds: [2022] EWHC 1434 (Ch). The defendants appealed. The central issue was whether the pleaded facts and permissible inferences gave the counterclaim a real prospect of overcoming the presumption of good faith.

1. Appeal allowed. The allegations concerning both the original wordless registrations and the later re-filings pleaded claims with a real prospect of success. The relevant paragraphs of the amended defence and counterclaim should not have been struck out.

2. For rule 3.4(2)(a) of the Civil Procedure Rules 1998, the pleaded factual allegation that the wordless mark had been obtained solely as a legal weapon had to be assumed true. A subjective intention will commonly be inferred from objective facts. The alleged intention was a permissible inference from the pleaded absence of use, the separate registration of a mark said to confer wider protection and the proprietor’s admission that it had sought to expand its monopoly rights.

3. Bad faith is not confined to dishonesty. It may include an intention to obtain an exclusive right for purposes outside the functions of a trade mark. Lack of intention to use is insufficient by itself. It may nevertheless support bad faith when combined with objective, relevant and consistent indicia of an improper objective. Whether wider protection was legitimate required factual investigation, including the reputation of the mark actually used and consumer perception when the application was filed.

4. Seeking unjustifiably broad protection may constitute an abuse of the trade mark registration system. At the strike-out stage, the question was whether the pleading contained sufficient objective indicia to give a real prospect of rebutting the presumption of good faith and shifting the evidential burden to the applicant to explain its intentions. The defensive-mark allegations met that standard.

5. Re-filing a mark is not objectionable in itself. It may amount to bad faith where the applicant intends to circumvent the sanctions for non-use. The pleaded sequence of partially duplicative registrations, coupled with alleged non-use and the purpose attributed to the original registration, supported both the original allegation and an independent challenge to the later registrations.

6. An invalidity claimant alleging an illegitimately broad specification does not necessarily have to plead the precise narrower specification which could legitimately have been sought. In any event, that suggested requirement did not apply to an allegation of re-filing to avoid non-use sanctions. The defendants had sufficiently identified the registrations, duplication and alleged intention.

1. Court of Appeal (Civil Division): By [2022] EWCA Civ 1433, unanimously allowed the appeal and held that the pleaded bad-faith counterclaim had a real prospect of success.
2. High Court, Chancery Division: By [2022] EWHC 1434 (Ch), struck out paragraphs 46–48 of the amended defence and counterclaim under rule 3.4(2)(a) of the Civil Procedure Rules 1998.