Arsenal win on the replay

In Arsenal Football Club Plc v Reed, the Court of Appeal has unanimously ruled in favour of Arsenal in the latest development in a lengthy battle between the club and an unofficial merchandise trader, Matthew Reed. The ruling, which reverses a High Court decision, represents welcome news to brand owners and is a landmark decision on the scope of the UK trademark infringement provisions.

Arsenal started proceedings against Reed in 1999 for trademark infringement and passing off. In his first judgment in 2001, Justice Laddie held that (i) allegations of passing off had not been established, and (ii) the defence to infringement raised questions that required a reference to the European Court of Justice (ECJ). Central to those questions was whether Reed could escape liability because the trademarks on the merchandise he sold were perceived as a badge of support, loyalty or affiliation to the club and were not used to denote the origin of the goods.

The ECJ held that it is immaterial that the use of a sign is perceived as a badge of support. However, when the case came back to the UK High Court in December 2002, Laddie concluded that the ECJ had exceeded its jurisdiction by disagreeing with findings of fact made in his first judgment. This, ruled Laddie, meant that he was not bound by the ECJ's conclusion. Therefore, Laddie applied the guidance on the law as he understood it to the findings of fact made in the first judgment and concluded that infringement had not taken place.

On appeal, the court held that the ECJ had not disregarded findings of fact, holding that the ECJ's conclusion was inevitable in the circumstances. In other words, although Reed's merchandise was purchased as a badge of support, loyalty or affiliation to Arsenal, it did not mean that Reed's use of the trademarks would not jeopardize their function, namely to guarantee origin. To the contrary, the wider and more extensive the use, the less likely the trademarks could perform their function. Laddie never considered this matter in his first judgment. Instead, he concentrated on whether Reed's use was trademark use.

This ruling significantly reinforces the rights given to brand owners through registration of their marks. It endorses the view that a trademark right is a property right and infringement must be considered in that context. Use of a trademark, which is not descriptive use, is likely to damage the function of the mark because the mark can no longer guarantee origin, which is its essential function. Reed has announced that he may appeal. Perhaps brand owners still need to wait?

For background information on the case, see Arsenal win in Europe but suffer shock defeat at home. For discussion of the UK trademark infringement provisions, see Trademark infringement in a nutshell.

Darren Olivier, Field Fisher Waterhouse, London