Laddie J. Rejects ECJ Ruling in Arsenal Case

On 12th November 2002, we reported the ECJ decision in the Arsenal v. Reed case. It seemed that the ECJ had given a definitive ruling in Arsenal’s favour and a judgment that would make it easier for brand owners to prevent the sale of "unofficial" merchandise. After this ruling, many assumed that the High Court would treat the granting of an application by Arsenal for a permanent injunction as a formality. Laddie J.’s decision of 12th December 2002 proved them wrong.

Background

The case concerned the sale by Mr Reed of football souvenirs and memorabilia bearing the marks "Arsenal", "Gunners" and the cannon and crest logos – all of which are registered trade marks belonging to Arsenal F.C. Arsenal sued Mr Reed for trade mark infringement under section 10(1) of the Trade Marks Act 1994 – that is, use by Mr Reed of signs identical to its registered trade marks for goods identical to those in respect of which it registered the marks.

In March 2001, it fell to Laddie J. in the High Court to determine whether any use in the course of trade of an identical trade mark for identical goods infringes the registered mark, or whether only "use as a trade mark" could be prevented by the trade mark owner. By "use as a trade mark", the Court meant use of the mark to indicate the trade origin of the goods. Laddie J. found that the use of Arsenal’s marks made by Mr Reed fell outside the parameters of "trade mark use"; rather than indicating that the merchandise originated with Arsenal, the marks were perceived "as a badge of support, loyalty or affiliation" to the football team.

However, a number of courts in this country had expressed different views when considering whether there was a requirement of trade mark use under section 10(1) or whether any use of the trade mark was sufficient to invoke the infringement provisions of the Act. In these circumstances, Laddie J. decided to make an Article 234 reference to the ECJ.

The ECJ decision

The ECJ found that a trade mark owner can only prevent use of a sign under Article 5(1)(a) of the Trade Marks Directive (corresponding to section 10(1) of the Trade Marks Act) where that use affected the guarantee of origin function of the trade mark. However, the ECJ went on the find that the particular use made of the Arsenal marks by Mr Reed is "liable to jeopardise the guarantee of origin" such that "it is immaterial in the context of that use the sign is perceived as a badge of support for or loyalty or affiliation to the proprietor of the mark".

Laddie J. - back in the UK High Court after the ECJ decision

Counsel for Mr Reed submitted that the ECJ had exceeded its jurisdiction by making findings of fact that it was not entitled to make. In particular, Mr Reed claimed that the ECJ’s conclusion that his use of the marks was liable to jeopardise the guarantee of origin of the goods, was a finding of fact, at odds with Laddie J.’s earlier finding that the particular use made by Mr Reed was not perceived as indicating trade origin. Laddie J. agreed with this analysis and found for Mr Reed. The judge rejected any suggestion that there should be a further reference to the ECJ seeking clarification of its initial ruling and suggested that the correct route of appeal by Arsenal would be to the Court of Appeal.

Comment

This is the first occasion of which we are aware when an English High Court has refused to follow an ECJ judgment on the grounds that the ECJ had ruled outside its area of competence. According to Laddie J. this is a "most unattractive outcome" but nevertheless "the High Court has no power to cede to the ECJ a jurisdiction it does not have".

Of particular interest is the last paragraph of the judgment in which Laddie J. records that both parties to the dispute had suggested that the ECJ might have interpreted the Trade Marks Directive in a way which gave rise to a scope of protection for trade marks somewhere between the positions initially advanced by each side. Laddie J. rejected this possibility without further analysis. However, a "middle way" which meant that there could be infringement even though Mr Reed’s activities had not resulted in a single instance of confusion in three decades, was the path that we suggested had been taken by the ECJ in a previous IP newsflash. We also noted that such an approach had parallels with the ECJ’s earlier decision in the Boehringer v. Swingward pharmaceutical repackaging case.

It now falls to the Court of Appeal to consider whether the ECJ did overstep its authority or whether Laddie J. has misinterpreted the ECJ’s ruling.

© Herbert Smith 2002

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