Tesco has lost a Court of Appeal bid to overturn a ruling that it had copied Lidl’s yellow circle logo.

Lidl had accused Tesco of trying to “deliberately to ride on the coattails of Lidl’s reputation” by using a yellow circle to promote its Clubcard scheme.

Last year, the German discount supermarket won its High Court claims of trademark infringement, “passing off” and copyright infringement against the rival supermarket over the use of yellow circles.

We are delighted to see that the Court of Appeal has now agreed with the High Court that Tesco’s use of its Clubcard logo is unlawful

Tesco denied infringement and took a challenge to the ruling to the Court of Appeal in February, arguing there was “no basis” for the High Court judge, Mrs Justice Joanna Smith’s, decision.

But in a ruling on Tuesday, Lord Justice Arnold dismissed the UK’s largest supermarket chain’s bid to overturn the claims of trademark infringement and “passing off”.

Tesco is not expected to attempt to appeal against Tuesday’s ruling and is understood to be updating its Clubcard prices logo in the coming weeks, while a Lidl spokesperson said the grocer was “delighted” by the judgment.

Lord Justice Arnold, sitting with Lord Justice Birss and Lord Justice Lewison, said the High Court judge found the yellow circle with a red outline on a blue background “had become distinctive of Lidl” and that the Clubcard prices signs would bring the Lidl logo “to mind”.

He continued: “Tesco could easily have used a different sign to promote Clubcard prices. There is no error of law or principle in that reasoning, and the conclusion is one that the judge was fully entitled to reach.”

However, Lord Justice Arnold overturned the previous finding of copyright infringement against Tesco.

He said: “Any painter will confirm that placing one colour against another changes the viewer’s perception of both. So too does placing one shape within another… Although Tesco have copied the visual concept of a blue square surrounding, among other material, a yellow circle, that is all they have done.”

Lidl had also brought an appeal against the High Court judge’s findings, after Mrs Justice Smith ruled that Lidl’s trademark registrations in 2002, 2005 and 2007 were applied for in bad faith.

Tesco had previously alleged that “some of the Lidl trademarks” were liable to be declared invalid on the grounds that they were “registered in bad faith”, or “should be revoked for non-use and/or that they have no distinctive character”.

Lidl’s appeal against this decision was dismissed in Tuesday’s judgment.

A Lidl spokesperson said: “Last year, The High Court ruled that Tesco’s Clubcard logo was copied from ours and infringed our trademark rights, allowing them to unfairly benefit from our longstanding reputation for value while misleading its customers.”

The spokesperson continued: “We are delighted to see that the Court of Appeal has now agreed with the High Court that Tesco’s use of its Clubcard logo is unlawful.

“We expect Tesco now to respect the court’s decision and change its Clubcard logo to one that is not designed to look like ours.”

A Tesco spokesperson said: “Our customers always tell us just how important Clubcard Prices are to giving them great value – and it’s been a key reason why we’re consistently the cheapest full-line grocer.

“We are disappointed with the judgment relating to the colour and shape of the Clubcard Prices logo but would like to reassure customers that it will in no way impact our Clubcard Prices programme.

“Clubcard Prices, irrespective of its logo, will continue to play a central role in rewarding our Clubcard members with thousands of deals every week.”