The Court of Appeal delivered its eagerly awaited judgment in Arsenal Football Club v Matthew Reed on 21 May. The case concerns the extent to which a registered trade mark can be used to create merchandising rights, that is exclusive rights to use words and devices on goods. In a landmark decision the court has come down decisively in favour of trade mark owners.
The facts of the case are by now well known. Arsenal has the words ‘Arsenal’ and ‘Gunners’, the Arsenal club crest and a logo featuring a canon all registered as trade marks in respect of a large range of goods. The marks are used on products in the club’s ‘official’ merchandise range.
The defendant Mr Reed sold ‘unofficial’ merchandise including hats and scarves bearing words and devices identical or similar to the Arsenal marks. Arsenal commenced proceedings against Mr Reed for trade mark infringement.
Mr Reed appeared to accept that the requirements of infringement were satisfied save in one respect. It was argued on his behalf that the use complained of must involve use of the offending sign as a trade mark. Mr Reed argued that he was not using the words and devices as trade marks at all on his merchandise.
This raised a fundamental issue which has been troubling trade mark lawyers since the 1994 Act came into effect. Is it a necessary element of infringement that the offending sign is used as a trade mark?
In the High Court Mr Justice Laddie concluded that Mr Reed’s use of the Arsenal marks was not trade mark use. The Arsenal marks were not used by Mr Reed to indicate the identity of the supplier of the goods. His customers did not think that Mr Reed’s products came from or were endorsed by the club. Mr Reed’s customers perceived the Arsenal marks ‘as a badge of support, loyalty or affiliation’ in relation to the club.
There was a previous decision of the Court of Appeal in which the court had concluded that non trade mark use could amount to infringement. Laddie J considered that he was bound by this decision. He expressed the hope that the issue would be referred to the European Court of Justice for clarification. The issue was indeed referred to the ECJ but clarification was in short supply.
The ECJ delivered a judgment in favour of Arsenal. Unfortunately the reasoning of the court left the lawyers on both sides and the judge scratching their heads in bewilderment.
Laddie J came to the conclusion that the ECJ had decided that non trade mark use did not constitute infringement but then disagreed with his conclusion on the facts, finding, contrary to his view, that Mr Reed’s use was trade mark use after all. The ECJ has no power to overturn the findings of fact made by the trial judge. Therefore Laddie J decided that he had no choice but to find in favour of Mr Reed.
So to the Court of Appeal, where the judges came to the unanimous conclusion that it was Laddie J and not the members of the European Court who had got it all wrong.
The court decided that non trade mark use could amount to infringement where it undermined the essential function of a registered trade mark which is to identify the origin of the goods. In his leading judgment Aldous, LJ stated: ‘As the ECJ pointed out, the actions of Mr Reed meant that goods not coming from Arsenal but bearing the trade marks, were in circulation. That affected the ability of the trade marks to guarantee the origin of the goods.’
This appears to introduce the principle of ‘dilution’ into UK trade mark law. Under this principle the rights of the trade mark proprietor go beyond preventing use by others of the trade mark to mislead consumers and enable the proprietor to prevent use by others simply to protect the exclusivity of the trade mark and the goodwill associated with it.
The position regarding sports clubs is now clear. Other trade mark proprietors will not be slow to assert the same expanded merchandising rights