The Advocate General’s Opinion in Arsenal Football plc v Matthew Reed

A recent development in a trade mark dispute between football club Arsenal and a local trader who had been selling football scarves and other memorabilia to fans close to the football club grounds could have major implications in future for determining exactly what constitutes trade mark infringement. IP lawyer Louisa Albertini of City law firm Field Fisher Waterhouse discusses.

Earlier this month, an Advocate General of the European Court of Justice (ECJ) gave his opinion in response to a reference from the High Court in the case of Arsenal v Reed. This concerned whether or not use of a trade mark as a badge of allegiance, rather than a badge of origin, could lead to infringement.

The football club had registered ARSENAL and ARSENAL GUNNERS as trade marks, together with two graphics featuring a crest and cannon, in class 25 in relation to articles of clothing, sports footwear and goods. The defendant, himself a fan, had for 30 years sold souvenirs and articles of clothing close to the ground which bore the signs which the club had registered as trade marks. In particular, he sold scarves which bore the name "Arsenal" but which he advertised as being "unofficial".

The claimant sued for passing off and trade mark infringement. The Court rejected the passing off claim, but felt unable to give final judgment on the trade mark claim without guidance from the ECJ, and therefore, two questions were referred to the ECJ for further consideration.

It was accepted by Mr Reed in the High Court proceedings that the products he had been selling bore the words ARSENAL and GUNNERS and carried designs similar to the crest and cannon marks which had been registered by the club. However, there was a notice on Mr Reed’s stall making it very clear that he was not claiming any of his merchandise to be official Arsenal merchandise.

Arsenal’s claim for passing off failed since it was unable to produce even one instance of confusion throughout the three decades during which Mr Reed had been trading. Moreover, there was evidence that members of the public knew that the products he sold were unofficial.

While holding that the Arsenal trade mark registrations were validly registered, when considering infringement, Mr Justice Laddie said that the trade marks were being used as a badge of allegiance to Arsenal. The judge decided that the Arsenal signs were not being used in a trade mark sense since they were not perceived by consumers as indicating the origin of the goods.

Although Mr Justice Laddie recognised that a previous Court of Appeal decision had held that infringing use did not have to be use in a trade mark sense; he thought that the law on this issue was unclear. For this reason, he decided to refer the matter to the ECJ for determination to enable him to make a final judgment on the trade mark infringement claim in this case.

Mr Justice Laddie referred two questions to the ECJ which can be summarised as follows:

• Is it a defence to infringement that the use complained of does not indicate trade origin (ie a connection in the course of trade between the goods and the trade mark owner)?
• And, if so, is it a defence that the use in question would be perceived as a badge of support, loyalty or affiliation to the trade mark proprietor?

Traditionally, the function of a trade mark has been recognised as being a badge of origin, in other words its purpose is to distinguish between the goods and services of the trade mark owner and those of other businesses. The purpose of this is to guarantee to the user or consumer the origin of the trade marked goods and services. Specific reference to this function is made in the EU Trade Mark Harmonisation Directive which forms the basis of the trade mark legislation in all EU countries.

When considering the first question referred by Mr Justice Laddie, Advocate General Ruiz-Jarabo accepted that the function of a trade mark is to act as a badge of origin. He said that the rationale behind this is to ensure genuine competition in the European Union.

The Advocate General recognised that, in most cases, the users are unaware of who produces the goods they consume. Instead, they view the trade mark as a sign of quality, reputation and even, in certain circumstances, as representative of a particular lifestyle. In the Advocate General’s opinion, all these various functions of a trade mark should be safe-guarded.

Mr Ruiz-Jarabo considered that a trade mark owner is entitled to prevent third parties from using identical marks in relation to the same goods or services for which the trade mark is registered, if they are capable of giving a misleading indication as to their origin, provenance, quality or reputation. This test substantially widens the scope of protection for trade mark owners beyond the traditional approach of protecting the trade mark’s function as a badge of origin.

This wider test means that a defendant to trade mark infringement proceedings can now claim in defence of all infringement claims that use of the mark does not indicate the origin of the goods or of the services or give rise to confusion over their quality and reputation.

Advocate General Ruiz-Jarabo commented that, in cases where a party is using a sign which is identical to a registered trade mark, the likelihood of confusion over the quality and reputation of the goods or services should be presumed. This presumption may be rebutted by proof to the contrary, but the Advocate General said that the possibility of doing so was remote where a sign to another registered trade mark is being used for goods or services identical to those for which the trade mark is registered.

The Advocate General noted that, in cases such as the one brought by Arsenal against Mr Reed, where the signs and goods or services are identical, there is a presumption of use of the trade mark as a trade mark. However, this is a question of fact which falls to the national court to determine in the light of the information available to it.

The Advocate General then went on to consider the uses to which a trade mark proprietor could not object. The first is where the trade mark is not validly registered because it does not satisfy the requirements to be met in order for it to be a trade mark, or because it falls under one of the prohibitions laid down in legislation (such as the prohibition on registering Royal arms or Olympic symbols without obtaining the necessary consent).

In relation to signs which may legitimately be a trade mark, he held that a trade mark owner could not object to their use by third parties outside the "course of trade" (ie outside any commercial activity involving the production and supply of goods and services on the market.)

Finally, Mr Ruiz-Jarabo considered the second question referred by Mr Justice Laddie - whether the use of a mark as a badge of allegiance could constitute trade mark infringement.

The Advocate General said that a badge of support, loyalty or affiliation to the trade mark proprietor all express a connection between the goods, the sign and the trade mark owner. The decisive factor is not the feelings of the consumer, or of the third party using the goods, towards the registered proprietor, but the fact that the goods are acquired because, by bearing the sign, they identify the product with the trade mark (irrespective of whether the consumer buys the product as a badge of allegiance, or as an act of rebellion, or because, as a rival fan, they want to burn the product).

Therefore, it is necessary to examine the motives which have led a person who is not the trade mark owner to place the goods on the market or to provide the services using the same distinctive sign in the first place. If, regardless of these reasons, they attempt to exploit the sign commercially, they can be said to be using it "as a trade mark". In such circumstances, the trade mark owner will be entitled to object, within the limits and the extent allowed under legislation.

The Advocate General recognised that a large portion of revenue earned by many of the most successful professional clubs comes from merchandising of football memorabilia associated with their team. When football clubs register a sign in order to use it as a trade mark to supply to the market with certain goods or services identified with that mark (either directly or through a licensee), they are making effective use of their intangible property. This means that they are perfectly within their rights to object to third parties using an identical sign with the purpose of commercially exploiting and profiting from it.

In summary, therefore, the Advocate General’s opinion favours trade mark owners since it broadens the scope of their trade mark protection. Although the opinion of an Advocate General is not legally binding, it is often followed by the ECJ when making its final ruling on a matter. Therefore, Mr Ruiz-Jarabo’s decision in this case is a strong indication of the ultimate decision that will be handed down by the ECJ.

Once the ECJ has delivered its judgment, Mr Justice Laddie will then have to rule on the trade mark infringement point in the Arsenal v Reed case in light of the ECJ’s ruling.

On the basis of this opinion, it is highly likely that Mr Reed will be held liable for trade mark infringement.

This case is very helpful for professional sporting organisations which are also involved in merchandising activities. It means that, in future, they should be able to enforce trade mark registrations to prevent other traders from selling unauthorised merchandise and, in doing so, maximise their profit from official merchandise.

As for street traders such as Mr Reed, as well as facing civil sanctions in the form of damages and injunctions preventing the sale of unauthorised goods, they may also face criminal sanctions. This could mean that they end up paying a fine or potentially even going to jail. If professional sports clubs pursue these remedies, they could act as a very powerful deterrent in the future.

From a legal perspective, this opinion has important implications in relation to the test for trade mark infringement. Previously, trade mark owners were entitled to protect the function of a trade mark as being a badge of origin. However, in light of Advocate General Ruiz-Jarabo’s remarks, consideration will now also have to be given to the quality, provenance and reputation of the trade-marked goods when deciding whether trade mark infringement has taken place. This may well lead to an increase in the protection afforded to trade mark owners.

Such an increase in the scope of trade mark protection could be a double-edged sword. While enabling trade mark owners to enforce their rights over a potentially wider spectrum of activities, it could also mean that trade mark infringement proceedings could become more complex. In cases involving the use of identical marks for identical goods and services which have been traditionally fairly straightforward claims, these could now be complicated by the defendant seeking to avoid liability by arguing that their use of the trade mark does not indicate the origin of the goods or services concerned, or give rise to confusion over their quality and reputation.

The final outcome of this matter will be decided shortly when the ECJ delivers its final judgment. In the meantime, those trading in unauthorised sports merchandise would be well advised to stop selling these goods until they know more.