UK: Arsenal v. Reed: In the European Court of Justice and in the High Court (for the second time)

Mr Reed is an Arsenal fan who has been selling unofficial Arsenal memorabilia and souvenirs for over 30 years. Back in April 2001 Mr Reed convinced the Judge that, where used on replica kit and other merchandise, the ARSENAL name and badge did not function as trade marks in the traditional sense because the Arsenal marks did not tell people where the goods originated from. Rather, the Arsenal marks served merely as "badges of support, loyalty or affiliation". Since the law affords protection to the owners of registered trade marks in order to prevent people from misrepresenting the origin of their goods, Mr Reed argued that his use of the Arsenal marks, which did not misrepresent where the goods came from, was lawful.

The Judge had some sympathy for this argument and found that the UK legislation was too vague for him to be able to interpret it without help from the European Court. He therefore asked the European Court the following questions:

Well over a year later, and after the European Commission and the European Free Trade Association had both shared their views with it, the European Court gave its judgment.

The European Court agreed that the enforcement of a trade mark registration must be reserved to cases where the use of the mark is liable to effect the consumer’s ability to guarantee the origin of the goods in question. The answer to Mr Justice Laddie’s first question was therefore: Yes!

However, the European Court went on to say that Mr Reed’s use of the Arsenal marks was such as to create the impression that there was a material link between his replica goods and Arsenal. Mr Reed argued that there could be no such link because the sign above his stall told buyers that the merchandise was unofficial but the European Court said that when those goods were seen by others away from Mr Reed’s stall, those others would not know that the goods were unofficial and would assume the contrary.

The European Court were of the opinion that people expect goods baring the Arsenal marks to conform with a type and quality controlled by Arsenal and since Mr Reed’s use of the Arsenal marks was depriving Arsenal of its legitimate right to control the type and quality of Arsenal goods, Arsenal had the right to stop him. The European Court concluded by saying that use of a sign as an indication of support or loyalty in the manner used by Mr Reed was indeed use as an indication of origin. However, the European Court would not say if, on the facts, Arsenal had sufficiently proved that there was an infringement. That decision was for Mr Justice Laddie to make baring in mind what the European Court had said.

On 12 December 2002 the two sides met again in the High Court before Mr Justice Laddie. Rather surprisingly, Mr Reed used an entirely new argument against Arsenal and again, the Judge found Mr Reed’s arguments very persuasive.

Mr Reed’s argument focussed on the fact that the European Court had not categorically answered the Judge’s questions. They had qualified their answers by saying that they only applied "in circumstances such as those in the present case".

It must be appreciated that the European Court was asked to interpret the relevant law. The European Court was not provided with any of the evidence submitted to the High Court and therefore was not capable of reaching any decisions on the facts of the case. However, their decision was laced with references to the facts of the case and even went as far as to disagree with Mr Justice Laddie’s analysis of those facts. Mr Reed argued that the European Court did not have the jurisdiction to do this and Mr Justice Laddie agreed saying:

This left the Judge in the unusual position of having a European Court decision before him that he felt he had no option but to effectively ignore. He found that if you disregard the European Court’s analysis of the facts (which he was compelled to do), their guidance on the law does not change his original decision that there was no infringement of the Arsenal registered trade marks by Mr Reed.

The only option left open to Arsenal now is to appeal this High Court decision in the Court of Appeal. Mr Justice Laddie accepts that there is a distinct possibility that the Court of Appeal will agree with the European Court’s analysis of the facts and decide that there has indeed been an infringement of the Arsenal trade mark registrations. However, that is for the Court of Appeal and not the European Court to decide.

Initially this was an important registered trade mark case for the sports industry and some other trade mark owners. It has now snowballed into a case concerning the role of the European Court within the English judicature. As mentioned above, Mr Justice Laddie has hinted that the Court of Appeal may well find in favour of Arsenal next time around and most commentators agree that all Mr Reed has gained is another reprieve before he is finally ordered to close down his stall forever.

The replica sports kit industry is a hugely lucrative one and any decision in favour of Arsenal will not please those involved in it as it will signal a serious blow to their previously perceived immunity from trade mark infringement claims. The major kit sponsors (the likes of Nike, Adidas and Reebok) will be very happy with such a decision because it safeguards their monopoly on the sale of official kit to loyal fans. This will make kit sponsorship a more valuable commercial asset so is bound to please the teams themselves.

What about the consumer - will they better or worse off as a result of the anticipated eventual decision? The European Court made the point that one of the purposes of trade mark law is to ensure that the consumer’s ability to rely on a trade mark as an indication of origin is not compromised. However, this ‘absence of confusion’ is primarily of benefit to the trade mark proprietor rather than the man on the street. The average parent of a under 16 year old football fan will probably lament the demise of Mr Reed and his ilk who provide a cheaper alternative to the high prices charged by official kit retailers.

Coming after the high profile dispute between Tesco and Levi which was generally seen as a poke in the eye to the consumer, any decision in favour of Arsenal (which, as mentioned above, most commentators believe is inevitable) could be seen as another excuse for premium brands to use the ® symbol as an excuse to add 50% to the cost of their goods.

In hypothesising like this we are, or course, assuming that the Court of Appeal will find in favour of Arsenal. This case has already provided us with a number of unexpected twists and turns so perhaps we should not be so quick to doubt the resilience and inventiveness of Mr Reed and has advisors.

© Farrer & Co 2003