Arsenal win merchandising battle in the Court of Appeal

Arsenal Football Club plc -v- Matthew Reed, Court of Appeal, 21 May 2003

The Facts

The defendant, Mr Reed, had sold football memorabilia bearing the Club's trade marks from outside the grounds of the Club for over 30 years. He sold a small amount of "official" merchandise but largely sold "unofficial" merchandise bearing the Club's marks. Mr Reed displayed on his stand a prominent disclaimer relating to unofficial goods which made clear that they were not official merchandise. The Club alleged trade mark infringement based on their trade mark registrations and passing off.

Mr Reed argued that he was not using the Club's trade marks within Section 10 of the Trade Marks Act 1994, and alternatively, that the marks were incapable of distinguishing the Club's goods in a "trade mark sense". He claimed that he used the marks as "badges of allegiance" rather than as a trade source. The passing off claim was also denied. Mr Reed argued that those consumers caring about the origin of his goods would know that they were unofficial and that in any event most consumers had no interest in their origin at all.

High Court decision - April 2001

The claim in passing off failed as there was no convincing evidence of confusion. The onus was on the Club to show likelihood of deception and relevant damage and given the length of time during which Mr Reed had traded, the lack of evidence was telling. In relation to the unofficial products, no significant numbers of customers would reasonably think that Mr Reed was selling licensed products except when they were expressly so marked. This was supported by the Club's own policy of carefully distinguishing between "official" and "unofficial" goods and the warnings which it gave to fans concerning unofficial goods.

Concerning registered marks the Court's view was that Mr Reed was not using the Club's marks in a "trade mark sense" to indicate trade origin but as badges of support and affiliation to the Club. It was unclear under the Trade Marks Act 1994 as to whether a defendant infringed only if he used the trade mark "as a mark" (which had been the position under the previous legislation.) For this reason the case was referred to the ECJ.

The ECJ decision – November 2002

In a clearcut judgment the ECJ decided that trade mark registrations are enforceable against unlicensed use in the course of trade on goods for which registrations are held, whether or not consumers regard the mark as a "badge of support" rather than a trade origin. However such protection would be limited to cases where use of a sign by a third party affected the function of a trade mark, in particular in guaranteeing origin.

The ECJ went on to make clear its view that on the facts of this case the guarantee of origin was adversely affected and infringement had occurred. Although there was no proven confusion on the part of the public and Mr Reed had used a disclaimer on his stall, the risk of confusion could not be ruled out, particularly as the goods may have been taken to be official merchandise once they were removed from his stall. This meant that the guarantee of origin was adversely affected.

Return to the High Court – December 2002

It had been assumed that the hearing in the High Court would be a foregone conclusion in the light of the ECJ's firm judgement. However, Mr Justice Laddie decided that in examining the facts the ECJ had exceeded its jurisdiction, it being the task of the national courts only to apply principles of law to the facts of the case. On this basis he found that he was not bound by the ECJ's conclusion, stating "I must apply its guidance on the law to the facts as found at the trial".

He therefore disregarded the ECJ's findings of fact and substituted his original (different) findings, ie. that Mr Reed's goods carried no message of trade origin. This led to the conclusion that the guarantee of origin attached to Arsenal's trade marks was unaffected by Mr Reed's activities and that an infringement had not occurred.

Mr Justice Laddie was clearly uncomfortable with this result, saying that it was in no-one's interests for "there to be such a difference between the views expressed by the High Court and the ECJ". He refused another reference to the ECJ and confirmed that the correct course would be an appeal to the Court of Appeal.

In the Court of Appeal – May 2003

On 21 May the Court of Appeal ruled in favour of Arsenal. It agreed that Mr Justice Laddie had correctly decided that he was not bound by the ECJ's findings on the facts, the jurisdiction of the ECJ being limited to guidance on questions of law. However the Court of Appeal found that Mr Justice Laddie had not interpreted the ECJ's judgment correctly. Lord Justice Aldous said:

"…the result reached by the ECJ was inevitable once their judgment had made it clear that the material consideration was whether the use complained of was liable to jeopardise the guarantee of origin, not whether the use was trade mark use. The judge should have followed the ruling and decided the case in Arsenal's favour."

Although it was not strictly necessary to go on to determine whether in fact Mr Reed's use was trade mark use, the Court of Appeal considered the issue. It found that use of the marks did denote origin and constitute trade mark use, notwithstanding the fact that the marks also operated as "badges of allegiance". The incidences of confusion highlighted in the evidence which the Judge had dismissed as de minimis were probably the "tip of the iceberg". Further, the use of a disclaimer by Mr Reed pointed to the conclusion that, absent the disclaimer the Club's marks would denote origin.

The Court of Appeal has steered a careful course between supporting Mr Justice Laddie's approach where possible and, equally, adhering to the authoritative and clearcut ruling of the ECJ. The hand of brand owners has been greatly strengthened by the decision and despite press reports of a possible appeal to the House of Lords, it is now difficult to see the basis for a further round of legal argument.

For further information, please contact Stephen Whybrow on +44 (0) 20 7367 2175 or by email at [email protected] or Lucy Kilshaw on
+44 (0) 20 7367 2044 or by email at [email protected]