Tesco loses appeal to register CLUBCARD marks

United Kingdom

The appointed person, Ian Purvis QC, has rejected an appeal by Tesco Stores Limited to register as trademarks the word mark CLUBCARD and the CLUBCARD device (depicted below).

http://www.ipo.gov.uk/trademark/image/GB50000000002587219.jpg 

The trademarks were partially refused in December 2013 by the Intellectual Property Office under Section 3(1)(b) of the Trademarks Act 1994, as being devoid of distinctive character in relation to goods and services that covered or were closely related to loyalty schemes. The hearing officer found that Tesco rarely used the word 'Clubcard' on its own, but usually in combination with the word 'Tesco'. This led to the conclusion that consumers did not consider CLUBCARD to be an indicator of Tesco's trade origin.

The appeal covered two issues:

  1. whether the marks were inherently devoid of distinctive character, so as to fall within the exception to registrability set out in Section 3(1)(b); and
  2. if that were so, whether the marks had acquired distinctive character as a result of Tesco's use so as to be nonetheless registrable under the proviso to Section 3(1).

With the agreement of the parties, the appeal proceeded on the basis that the application was for "goods and services relating to loyalty schemes". The registry consented to the appeal being allowed in relation to "credit cards".

With regard to the first issue, the appointed person rejected all of Tesco's arguments and confirmed that both marks were inherently devoid of distinctive character.

It was not necessary to demonstrate that the combination of words 'Club' and 'Card' were in use by third parties at all. However, evidence of third-party traders using the same combination of words to indicate the same goods or services bolstered the finding that the average consumer would understand the term descriptively.

It is possible for the sum of the parts of a mark to have distinctive character even if the individual parts do not. However, the CLUBCARD marks would not enable an average consumer to distinguish the loyalty scheme of Tesco from that of another trader. The evidence of use by other traders showed that the term was apt to describe a card for claiming benefits under a loyalty scheme.

The appointed person also confirmed the hearing officer's conclusion that the stylisation in the CLUBCARD device mark was minimal and insufficient to add any degree of distinctive character.

With regard to the second issue, the hearing officer had found that the evidence presented to her, consisting of one witness statement from Tesco, showed that the CLUBCARD sign was always used in conjunction with the distinctive mark TESCO, which was acting as the primary badge of origin. There was no advertising of the term 'Clubcard' alone and there was no evidence that the mark had been promoted to non-Tesco customers.

The appointed person did agree with Tesco that there was some evidence of use of the CLUBCARD sign on its own. This suggested that Tesco does use the sign in-store and in its literature, not as a generic loyalty scheme but as a way of indicating its own loyalty scheme. However, this was not sufficient for registrability because the sign was always used in circumstances that were intimately connected with the TESCO mark and shopping experience.

It was always important to consider the context in which the customer encounters the sign in question. Tesco had to show that a significant proportion of consumers would understand CLUBCARD to indicate Tesco's loyalty scheme when used in any normal and fair context. The relevant question was whether an average consumer, when asked whether he had a 'Clubcard' in a different store (eg, a steak house or hotel chain) would understand that he was being asked for Tesco's card. This had not been established on the evidence. To the contrary, if asked for a Clubcard in a Beefeater restaurant, the loyal customer would believe he was being asked for his "Beefeater Reward Club Card".

There was no evidence that the use by other businesses of the term has caused any confusion with Tesco's card. Neither was there any suggestion that customers visiting businesses who did not have a loyalty card would assume they were being asked for Tesco's loyalty card when they were nowhere near a Tesco store and there was nothing to indicate any connection with Tesco.

The appointed person found that the hearing officer had given clear reasons and Tesco had failed to show an error in law or misinterpretation of the facts. The case highlights the difficulties that can be faced in trying to register a non-distinctive term that is widely used in a generic sense. Tesco submitted a single witness statement and could show use since 1995, with around 15.6 million users, but this still did not suffice. The appointed person noted that there was no actual confusion, from surveys or otherwise, as to the understanding of the average consumer. Perhaps if Tesco had submitted better evidence before the relevant date, the result could have been different.

It is not possible to appeal a decision of the appointed person so the decision will now stand. Tesco can continue to rely on its common law rights but these are more complicated to enforce. There is always the possibility of another trademark application and perhaps better evidence will allow Tesco to invoke the acquired distinctiveness exception.

Leighton Cassidy and Beverley Potts, Fieldfisher, London

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