UK: Sport Update: Merchandising; Photographic Rights and Image Rights

When the case of Arsenal Football Club plc -v- Matthew Reed came before Mr Justice Laddie in April 2001 he found that whilst Mr Reed was not passing-off his replica Arsenal kit as that of Arsenal Football Club, he needed help from the European Court to establish whether or not Mr Reed was infringing Arsenal’s registered trade marks. The European Court appeared to indicate that Mr Reed was infringing Arsenal’s registered trade marks but when the case went back to the High Court the Judge decided that it he had no option but to find in favour of Mr Reed. That judgment has been appealed and will be heard on 30 April 2003.

We will issue a further update once that decision is published.

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 referred the following questions to the European Court:

• "Does a defendant in a registered trade mark infringement case have a defence on the ground that the use complained of does not indicate trade origin?"

• "Is the fact that the use in question would be perceived as a badge of support, loyalty or affiliation to the trade mark proprietor a sufficient connection to be considered an indication of origin?"

Although, 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 affect the consumer’s ability to guarantee the origin of the goods in question, it 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 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, bearing in mind what the European Court had said.

The European Court had been asked to interpret the law and 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.

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. Arsenal have now appealed 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.

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.

The average parent of an 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.

The Court of Appeal hears the case later this month. 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 his advisors.

As has been recently reported in the Press Gazette, national newspapers are becoming increasingly agitated by the growing demand for increased fees and greater editorial and copyright control being imposed by the organisers of major sporting and entertainment events on the use of photographs taken at such events. There have been various recent disputes with the organisers of, amongst others, the Wimbledon Tennis Championships, the British Open Golf Tournament, the Nationwide League and the London Marathon.

The Newspaper Publishers Association has now prepared its own draft accreditation document for all such events, the purpose of which is to seek to give publishers total control of copyright of their photographs and other material taken at these accredited events. It is understood that the draft document, together with a series of "principles", will be presented to the FA Premier League soon because their current three-year agreement with the NPA expires at the end of the 2002/2003 season. The situation with the FA Premier League is most imminent but it is likely, over the coming months, to spread to many other event organisations as well, not just sporting ones.

The concerns of event organisers, like the FA Premier League, are that they wish to maintain control over the exposure of their "event" and the use of the rights that are created by or are inherent in the staging of their event. There are, no doubt, pressures from sponsors and participants in these events to ensure that standards are maintained and that rights they own within them are used to generate all the income possible for them. It will be an interesting time ahead for the NPA and perhaps the biggest showdown will be that which is imminent with the FA Premier League.

Historically, English law has not specifically recognised "image rights", unlike other jurisdictions (notably France). Recent cases demonstrate that certain areas of English law are developing in response to the greater frequency with which celebrities and sporting stars exploit their names and images commercially.

It is possible to protect certain intangible property rights through registration (eg patent or trade mark) and other rights will gain automatic protection through copyright. These devices are of little use to the famous person attempting to protect his "image rights". The most useful claim that he can now bring involves the law of passing-off. Passing-off has traditionally referred to an instance where one trader passes-off goods or services as those of another in an attempt to harness the goodwill associated with the original trader (eg a drinks manufacturer packages its product to look like Coca-Cola).

Last year the High Court found in favour of Eddie Irvine, the Formula 1 racing driver in his passing-off claim against Talksport, the company responsible for Talk Radio. The Court of Appeal has since confirmed the High Court judgment and has, in fact, increased Mr Irvine’s damages quite considerably. In 1999, Talksport had produced an advertising brochure that contained a photograph of Mr Irvine holding a mobile phone. The photograph had been doctored to make it appear that he was holding a hand-held radio emblazoned with the Talk Radio logo. The court recognised that Mr Irvine held a level of fame that made it possible for him to exploit his name and image commercially, and that companies and organisations would pay large sums of money to get a celebrity such as him to endorse their product. Talksport had misrepresented that Mr Irvine was endorsing Talk Radio. It had unlawfully attempted to harness the marketable force that Mr Irvine held in his name and reputation in order to sell its product. The decision enables

famous individuals to protect their exclusive right to market their reputation or goodwill.

The case has widespread implications for any sports governing body, sole-trader, commercial company or other organisation that uses images of well-known sporting personalities in its brochures/promotional material etc. Although the legal importance of the High Court’s decision was considerable, in practical terms, it was somewhat undermined when Mr Irvine was awarded only £2,000 in damages. However, that has now changed following the Court of Appeal’s decision to increase the award of damages to £25,000. This amount, the Appeal Court concluded, represented a "reasonable royalty" based on the value of other endorsement agreements Mr Irvine had entered into in 1999. This, therefore, raises the stakes in these endorsement cases.

The law as it now stands makes an important distinction between the use of a celebrity image to endorse a product, and the use of it to merchandise a product. Endorsement is when an individual tells the public that he approves of the product or the service or is happy to be associated with it. Merchandising involves exploiting images, themes or articles which have become famous (eg the image of the face of Princess Diana on a porcelain plate). The courts have been unwilling to grant celebrities monopolies over the use of their "character rights", and have refused to uphold anyone’s exclusive rights to merchandise their celebrity. They will only intervene when a personality’s right to endorse products has been infringed.

What will constitute an unlawful endorsement?

For a sports personality to succeed in a passing-off claim he will have to show two things, namely that:

• at the time of the act complained of he had a level of fame that enabled him to exploit his image commercially;

• the offending ad/brochure gives out a false message (understood by a not insignificant section of his market) that the goods/services are being endorsed, recommended or approved by him.

In essence, if people think that he is being paid to endorse the product/service, when in fact he is not, this is passing-off. He will be able to sue for damages to the extent of his loss. (In the absence of direct financial loss, the loss will be assessed as how much he would have been paid for an endorsement of this type – a so-called "reasonable royalty" and this will be assessed in light of all relevant circumstances.)

The grey area in the recent developments in the law involves the question of what will be perceived to be an "endorsement". The Eddie Irvine case was a unique example. The doctored image was a blatant attempt to imply to the recipient that Irvine listened to Talk Radio.

The problem with the development of the law in this area is that, as sports stars become more used to exploiting their images by endorsing products, the public in turn becomes more used to the idea that the personality will be being paid where their image is used. The result could be that the scope of what is perceived as an "endorsement" becomes ever

wider. In addition, the boundary between endorsement and merchandising could become blurred.

It is not yet clear whether courts will extend liability for passing-off where a promotion merely implies that the personality has agreed to the use of his name/image without suggesting any direct endorsement.

Last year, Ian Botham threatened to sue the makers of Guinness for its use of images of him playing in the famous 1981 Ashes series in a campaign of newspaper advertisements. The ads showed archive images of the all-rounder and quoted the commentator Fred Truman saying of Botham:

"He couldn’t bowl a hoop downhill".

(Botham went on to take seven wickets in the match.) They also carried the Guinness tagline "Believe", in which the "v" is replaced by a picture of the Guinness pint glass. Botham’s lawyer’s comments indicated the impact of the Irvine case: "The advertisement suggests that Ian is endorsing the Guinness product when he is not doing any such thing and has no contract with them". Botham’s argument may have been that his image was used in a national advertising campaign and, as such, some of the audience may have assumed that he was being paid.

The matter reportedly settled for "several thousand pounds" even though it is clearly arguable that the advert did not imply official endorsement by Botham. As with other advertisements, the campaign used images of a historical moment to conjure up the feelings associated with it (epic porting victory in the face of adversity). We will have to wait and see whether the court intended endorsement to cover cases where there is no overt" endorsement, as with the Botham example.