Arsenal Football Club Plc -v- Matthew Reed
Court of Appeal (Aldous, Clarke & Jonathan Parker, LJ)
[2003] ECWA Civ 96
Summary
Have Arsenal Football Club finally won their match against Matthew Reed, seller of unauthorised Arsenal merchandise, in the second half of extra time? The Court of Appeal has reversed the decision of Laddie J. (see Hot Topics for December 2002) that Reed had not infringed the trade marks, despite a ruling by the ECJ which appeared to have resolved the dispute in favour of AFC.
Background
AFC sued Reed for trade mark infringement and passing off because he was selling unauthorised merchandise bearing the AFC trade marks. At first instance, Laddie J. held as a fact that Reed was not using the marks to indicate the origin of the goods he sold, indeed Reed always told customers they were not AFC goods. Laddie J. held that Reed was using the marks as a badge of support, loyalty or affiliation.
Laddie J. had concluded that using the signs as a badge of loyalty was not a "trade mark use" because it did not indicate a trade connection between the goods and the proprietor of the marks. His view was that use that was not trade mark use was non-infringing, but he referred to the ECJ the question of whether a defendant who is using an identical sign on identical goods has a defence if the use complained of does not indicate trade origin (i.e. a connection in the course of trade between the goods and the trade mark proprietor).
The ECJ did not answer directly the question of whether use other than trade mark use was an infringing use. The ECJ ruled that "in circumstances such as those in the present case" there was no defence. It was immaterial that the use was perceived as a badge of loyalty rather than an indication of origin.
When the case returned to Laddie J. he held that the ECJ had essentially reversed his finding of fact, something the ECJ was not competent to do. Laddie J. held that on the basis of the ECJ’s opinion on the interpretation of the Trade Mark Directive, there was no trade mark use and therefore no infringement. AFC appealed to the Court of Appeal.
Issues
The Court of Appeal looked at two particular aspects of the ECJ ruling. First, what was the Court’s view as to the interpretation of the Directive given that the ECJ did not directly answer the question referred to it? Second, had the ECJ made a finding of fact inconsistent with the findings of fact made by the judge, and, more generally, to what extent can the ECJ review the legal characterisation of the facts found by the national court?
Outcome
The fundamental basis of the Court of Appeal decision was that Laddie J. had asked the wrong question. In cases in which there was use of an identical sign on identical goods, whether or not the defendant’s use was "trade mark use" was irrelevant. The true test was to ask whether the use complained of was likely to damage the function of the trade mark as a right, which was to guarantee the trade origin of the goods bearing the mark.
Whether or not the use by Reed of the marks was a trade mark use by him (which it was not because he always made it clear that his goods were not authorised), its effect was that goods came into circulation bearing the trade marks but which were not the goods of the proprietor. That was bound to damage the basic function of the marks to distinguish goods of AFC from goods of others. This was not considered by the judge. He had concentrated on whether the use by Mr Reed was trade mark use.
On the factual questions, the Court of Appeal held that the ECJ had not dealt with the facts in any way inconsistent with the facts as found by the judge. The ECJ had held that "in circumstances such as those of the present case" the proprietor could prevent the use. This was not inconsistent with the finding that the use by Mr Reed was not a trade mark use; the question of whether or not the use by Mr Reed was a trade use was not the correct test for infringement.
The ECJ had reviewed the legal characterisation of the facts. It had found that on the facts established by the judge, there was likely to be damage to the essential function of the trade marks. Not only was the ECJ entitled to do this, the Court of Appeal thought it was an inevitable conclusion on the facts found by the judge that the function of the trade marks would be damaged.
Was the judge right to hold that Mr Reed’s use was not trade make use?
Given that the Court of Appeal upheld the findings and conclusions of the ECJ, it was not necessary to decide whether the judge’s finding that Mr Reed’s use was not trade mark use was correct. The Court of Appeal reviewed the evidence and came to a view diametrically opposed to that of the judge. Aldous L.J. said, "In my view the evidence is all one way, namely that the use of the trade mark on the goods such as scarves and hats, whether by Arsenal or others does denote trade origin."
Comment
Under the Trade Marks Act, 1938 the principal test for infringement was whether the defendant’s use would be taken as use as a trade mark. Although the 1994 Act was all new and gave effect to the European Trade Mark Directive, for years people have wondered whether "use as a trade mark" was necessary for infringement under the new law. Now we know that in cases of identity of mark and goods, at least, use as a trade mark is not needed. The test is :-
"Does the third party’s use of the sign affect or is it likely to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods?"
What next?
Is this the end of the line for Mr Reed or will he be able to appeal to the House of Lords? Mr Reed is clearly going to have great difficulty in persuading the Court of Appeal or the House of Lords to give permission. The House of Lords cannot differ from the ECJ on the interpretation of the Directive and the Court of Appeal has found cogent arguments to support the way in which the ECJ has dealt with the facts. The finding by the Court of Appeal that on the evidence the use by Mr Reed was in any event a trade mark use closes off an avenue that would otherwise might been available to Mr Reed.
It looks as though Arsenal are carrying off the cup for the second time in a week.
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