- In
January 1999 Arsenal Football Club Plc (Arsenal) started proceedings against Mr
Matthew Reed in which they alleged that Mr Reed had infringed
certain of their registered trade marks and had carried out acts of passing off.
Those proceedings came before Laddie J in March 2001.
- The
judge in his first judgment, handed down on 6th April 2001, held that the allegations
of passing off had not been established. The judge went on to conclude that the
defence raised an issue of construction of the Trade Mark Directive (89/104/EEC)
which could not be decided without a reference to the European Court of Justice
(ECJ). He therefore referred the following questions to the ECJ.
"1.
Where a trade mark is validly registered and
(a) a third party uses in
the course of trade a sign identical with that trade mark in relation to goods
which are identical with those for which the trade mark is registered; and
(b) the third party has no defence to infringement by virtue of Article 6(1)
of the Directive;
does
the third party have a defence to infringement on the ground that 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)?
If
so, 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?"
- The
ECJ (Case C-206/01) did not answer those questions in the form posed. They concluded:
"62.
In the light of the foregoing, the answer to the national court's questions must
be that, in a situation which is not covered by Art.6(1) of the Directive, where
a third party uses in the course of trade a sign which is identical to a validly
registered trade mark on goods which are identical to those for which it is registered,
the trade mark proprietor is entitled, in circumstances such as those in the present
case, to rely on Art.5(1)(a) of the Directive to prevent that use. It is immaterial
that, in the context of that use, the sign is perceived as a badge of support
for or loyalty or affiliation to the trade mark proprietor."
- They
therefore ruled:
"In
a situation which is not covered by Art.6(1) of the First Council Directive 89/104
of December 21, 1988 to approximate the laws of the Member States relating to
trade marks, where a third party uses in the course of trade a sign which is identical
to a validly registered trade mark on goods which are identical to those for which
it is registered, the trade mark proprietor of the mark is entitled, in circumstances
such as those in the present case, to rely on Art.5(1)(a) of that Directive to
prevent that use. It is immaterial that, in the context of that use, the sign
is perceived as a badge of support for or loyalty or affiliation to the trade
mark proprietor."
- The
case came back before the judge in December 2002. In his judgment of 12th December
2002 ([2002] EWHC 2695 (CH)) (the second judgment) the judge concluded that the
ECJ had disagreed with findings of fact made by him in his first judgment. That
being so, the ECJ had "exceeded its jurisdiction" with the result that
he was not bound by its final conclusion. He then applied the ECJ’s guidance on
the law, as he understood it, to the findings of fact made in his first judgment
and concluded that infringement of the trade marks had not taken place. That resulted
in the judge coming to a different conclusion from that reached by the ECJ.
- Arsenal
have not appealed against the findings of the judge that passing off had not been
established. Mr Reed also contended that Arsenal’s trade mark was invalid. That
contention was rejected by the judge and there is no appeal against that conclusion.
Thus this appeal is only concerned with the issue of trade mark infringement.
- The
Background – The factual background was fully set out by the judge and is
not in dispute. I can therefore take from the judgment the salient facts to enable
my judgment to be understood.
- Arsenal
is the internationally known football club. It is known as "Arsenal"
or "the Gunners". Part of the business carried on by Arsenal involves
the sale of products bearing the words "Arsenal", "Arsenal Gunners"
and the device marks reproduced below:
The
Crest Device:
The
Cannon Device:
- Arsenal
alleged infringement of the following trade marks:
"(a) Registered
trade mark number 1383343 for "ARSENAL" in class 25 (registered 9th
May 1989);
(b)
Registered trade mark number 1387461 for the Arsenal Cannon device in class 25
(registered 8th June 1989);
(c)
Registered trade mark number 1387589 for the Arsenal Crest Device in class 25
(registered 13th June 1989)
(d)
Registered trade mark number 1393203 for "ARSENAL GUNNERS" in class
25 (registered 27th July 1989)."
Mr
Reed is the self-employed proprietor of a wholesale and retail football merchandise
business. Amongst the articles that he sells are souvenirs and memorabilia likely
to appeal to Arsenal fans. Such include articles bearing the trade marks Arsenal,
Arsenal Gunners and the device marks illustrated above. He accepted that he had,
without Arsenal’s consent, used in the course of trade signs identical to the
registered trade marks relied on by Arsenal in relation to the goods for which
they were registered. He denied infringement. No positive case was pleaded in
the defence, but in voluntary particulars it was made clear that he was asserting
that there could be no infringement if the use complained about was not trade
mark use, and his use was not trade mark use. It was that point which caused the
reference to the ECJ.
- The
Statutory Background – The Trade Marks Act 1994 swept away the old law and
implemented the Directive. It follows that the provisions of the Act must be construed
so as to reflect the terms of the Directive.
- Section
1(b) defines a "trade mark" as meaning "any sign capable of being
represented graphically which is capable of distinguishing goods or services of
one undertaking from those of other undertakings." There is no doubt that
Arsenal’s registered trade marks are signs which have the character required.
- A
registered trade mark is a property right (section 2) which is personal property
(section 22). It can be assigned either in connection with the goodwill of a business
or independently (section 24). Once obtained a registration is prima facie valid
(section 72). It need not be used for the initial 5 years after registration,
but thereafter it is liable to be revoked in whole or in part for non-use under
section 46.
- Section
2(1) states that the proprietor of a registered trade mark "has the rights
and remedies provided by this Act". For the purpose of this case the relevant
rights are those contained in section 10 (Article 5 of the Directive). The applicable
parts of that section are as follows:
"s.10
Infringement of registered trade mark.
(1) A person infringes a registered
trade mark if he uses in the course of trade a sign which is identical with the
trade mark in relation to goods or services which are identical with those for
which it is registered.
(2)
A person infringes a registered trade mark if he uses in the course of trade a
sign where because-
(a)
the sign is identical with the trade mark and is used in relation to goods or
services similar to those for which the trade mark is registered, or
(b) the
sign is similar to the trade mark and is used in relation to goods or services
identical with or similar to those for which the trade mark is registered,
there exists a likelihood of confusion on the part of the public, which includes
the likelihood of association with the trade mark.
(3)
A person infringes a registered trade mark if he uses in the course of trade a
sign which—
(a)
is identical with or similar to the trade mark, and
(b) is used in relation
to goods or services which are not similar to those for which the trade mark is
registered,
where the trade mark has a reputation in the United Kingdom and
the use of the sign, being without due cause, takes unfair advantage of, or is
detrimental to, the distinctive character or the repute of the trade mark.
(4)
For the purposes of this section a person uses a sign if, in particular, he—
(a)
affixes it to goods or the packaging thereof;
(b) offers or exposes goods
for sale, puts them on the market or stocks them for those purposes under the
sign, or offers or supplies services under the sign;
(c) imports or exports
goods under the sign; or
(d) uses the sign on business papers or in advertising.
…
(6)
Nothing in the preceding provisions of this section shall be construed as preventing
the use of a registered trade mark by any person for the purpose of identifying
goods or services as those of the proprietor or a licensee. But any such use otherwise
than in accordance with honest practices in industrial or commercial matters shall
be treated as infringing the registered trade mark if the use without due cause
takes unfair advantage of, or is detrimental to, the distinctive character or
repute of the trade mark."
- It
is important to note the difference between subsections (1) and (2) of that section.
This case is concerned with identicality of registered trade mark and sign and
identicality of goods. Thus infringement will occur if the alleged infringer "uses
in the course of trade" the sign. Subsection (2) deals with use when the
goods and/or the signs are not identical. In those circumstances a likelihood
of confusion must be shown. That requires the proprietor to establish that there
is a risk that the public might believe that the goods in question came from the
same undertaking or an economically linked undertaking (see Lloyd Schuhfabrik
Meyer & Co GmbH v Klysen Handel BV (Case C-C0342/97; [1999] ECR 1-3819).
- Section
11 contains exceptions to section 10. It is in this form:
"s.11
Limits on effect of registered trade mark.
(1) A registered trade mark
is not infringed by the use of another registered trade mark in relation to goods
or services for which the latter is registered (but see section 47(6) (effect
of declaration of invalidity of registration)).
(2)
A registered trade mark is not infringed by—
(a)
the use by a person of his own name or address,
(b) the use of indications
concerning the kind, quality, quantity, intended purpose, value, geographical
origin, the time of production of goods or of rendering of services, or other
characteristics of goods or services, or
(c) the use of the trade mark where
it is necessary to indicate the intended purpose of a product or service (in particular,
as accessories or spare parts),
provided the use is in accordance with honest
practices in industrial or commercial matters.
(3)
A registered trade mark is not infringed by the use in the course of trade in
a particular locality of an earlier right which applies only in that locality.
For this purpose an "earlier right" means an unregistered trade mark or other
sign continuously used in relation to goods or services by a person or a predecessor
in title of his from a date prior to whichever is the earlier of—
(a)
the use of the first-mentioned trade mark in relation to those goods or services
by the proprietor or a predecessor in title of his, or
(b) the registration
of the first-mentioned trade mark in respect of those goods or services in the
name of the proprietor or a predecessor in title of his;
and an earlier right
shall be regarded as applying in a locality if, or to the extent that, its use
in that locality is protected by virtue of any rule of law (in particular, the
law of passing off)."
- The
First Judgment – As I have said Mr Reed did not dispute that he had used signs
identical to Arsenal’s registered trade marks in the course of his trade. His
defence was that the words "uses in the course of trade a sign" required
the use to be trade mark use. By that he meant that the use had to be in a manner
that indicated the origin of the goods. It was his case that he used the word
"Arsenal" and other trade marks as badges of allegiance, not in a manner
that indicated a connection in the course of trade between the goods and Arsenal.
The judge held that Mr Reed’s use was not trade mark use. He said:
"58.
In my view, and consistent with the views expressed at para. 42 above, the Arsenal
Signs on Mr Reed's products would be perceived as a badge of support, loyalty
or affiliation to those to whom they are directed. They would not be perceived
as indicating trade origin. Therefore I reject Mr Thorley's first answer to Mr
Roughton's argument. It follows that for AFC to succeed on trade mark infringement,
it has to rely on the non-trade mark use of those signs, that is to say the wide
construction of section 10."
- The
judge went on to consider the submission of Arsenal that "non-trade mark"
use fell within section 10(1) of this Act. He referred to other sections of the
Act and the Directive and concluded that:
"60.
All of these points and others based on the recitals in the Directive might suggest
that only use as a trade mark can infringe the rights secured by registration.
…"
- The
judge then noted that Jacob J in British Sugar Plc v James Robertson &
sons Ltd [1996] RPC 28 had expressed a contrary view as had the Court of Appeal
in Phillips Electronics v Remington Consumer Products [1998] RPC 283. That
view was a provisional view expressed prior to the Court of Appeal seeking guidance
from the ECJ. It was therefore not binding on the judge. With that background
in mind the judge referred to the ECJ the questions set out in paragraph 2 above.
- The
Second Judgment (12th December 2002) – The judge went through the judgment
of the ECJ and concluded:
"20.
It appears from the above analysis that the ECJ held that where the defendant's
use of a mark is not intended by him, or understood by the public, to be a designation
of origin, there can be no infringement because such use does not prejudice the
essential function of the registered mark. If that is so, then the first question
in the reference should have been answered in the affirmative. However, it will
be seen that the ECJ did not answer that question in the affirmative or the negative
but only stated that "in the circumstances" of this case, the claimant should
succeed."
- The
judge then came to the submissions advanced on behalf of the parties. Mr Wyand
QC, on behalf of Mr Reed, submitted that the ECJ had interpreted the Directive
in the way that he had submitted it should be interpreted, but had then come to
a conclusion in paragraph 62 of the ECJ judgment (see paragraph 3 above) in favour
of Arsenal and had so ruled (see paragraph 4 above). That, he submitted, was the
result of the ECJ embarking on an impermissible determination of fact. In any
case the conclusion reached by the ECJ was incompatible with the findings of fact
made at the trial.
- Mr
Thorley QC, who appeared for Arsenal, submitted that Mr Wyand had misconstrued
and misunderstood the judgment of the ECJ.
- The
judge accepted the submissions of Mr Wyand. He said:
"27.
It appears to me that Mr Wyand's analysis is correct. The ECJ has disagreed with
the conclusions of fact reached at the trial and indicated that the claimant should
win because Mr Reed's use was such as would be perceived by some customers or
users as a designation of origin. If this is so, the ECJ has exceeded its jurisdiction
and I am not bound by its final conclusion. I must apply its guidance on the law
to the facts as found at the trial."
- The
judge went on to consider what should be done. He rejected the idea that there
should be a further reference and concluded that he should apply the guidance
on the law given by the ECJ to the facts as found by him. That he decided meant
that there was no infringement. As I understand his judgment, he believed that
the ECJ had upheld Mr Reed’s contention that there could not be infringement unless
the use complained about was trade mark use in the sense that it indicated trade
origin. He therefore dismissed Arsenal’s claim for trade mark infringement.
- The
Jurisdiction of the ECJ – There was no dispute between the parties that on
a reference under Article 234, the purpose of the ECJ is "to decide a question
of law and that the ruling is binding on the national court as to the interpretation
of the community provisions and acts in question." (see Benedetti v Munari
case 52/76 [1977] ECR 163). Even so, the ECJ has jurisdiction to review the legal
characterisation of facts found by the national court (Camar and Tico v Commission
and Council case C-312/00 (unreported 10th December 2002)). Also the ECJ has
in the past provided guidance in order to enable the national court to give judgment
(Helga Kutz-Bauer v Freie und Hansestadt Hamburg case C-187/00 (unreported
20th March 2003)). On occasions it has "steered" the national court
for the purpose of unified application of the law. However, as the House of Lords
made clear in R v Secretary of State for Transport ex parte Factortame (No.
5) [2000] 1 AC 524 at 550A, the English Court is not bound by that steer and
therefore, with hesitation, could conclude the case in a different way. It is
the national court alone that must find the facts.
- It
follows that the judge was entitled to disregard any conclusion reached, in so
far as it was based upon a factual background inconsistent with his judgment.
Thus, upon his perception of the ECJ’s judgment, he was entitled to disregard
the conclusion in the ruling and decide the case upon the legal principles stated
in the judgment of the ECJ.
- The
Submissions of the Parties – In outline, Arsenal put forward three submissions.
First, the ruling (see paragraph 3 above) was a ruling as to the law and was binding
on the court. Thus the judge’s conclusion was wrong. Second, the judge had misunderstood
the reasoning of the ECJ judgment. Arsenal accept that the jurisdiction of the
ECJ was interpretation, but the ECJ could and do reformulate questions referred.
That was what had happened in this case. That was necessary as ‘Yes’ or ‘No’ answers
could not be given to the questions referred. The court had interpreted the word
‘uses’ in the Directive (as in section 10(1) of the Act) as not requiring that
the use must indicate trade origin. It was sufficient if the use complained of
was liable "to jeopardise the guarantee of origin which constitutes the essential
function of the mark." That being so, upon the findings of fact made by the
judge, no reasonable court could come to a conclusion that differed from the ruling
of the ECJ. It was immaterial that the trade mark was perceived as a badge of
loyalty as the use complained of was liable to jeopardise the guarantee of origin
of the Arsenal trade marks.
- Arsenal
also submitted that the judge had in his first judgment wrongly held that the
use of signs identical to the registered trade marks by Mr Reed were not such
as to indicate trade origin i.e. a connection in the course of trade between the
goods and the trade mark proprietor. It did not follow from the fact that goods
bearing the signs were used by fans of Arsenal as badges of allegiance that the
use was not use in a trade mark sense and the judge was wrong to believe that
it did.
- Mr
Reed supported the conclusion and reasoning of the judge. He submitted that the
ruling was not binding upon the court as it contained within it conclusions of
fact contrary to those found by the judge. In any case, it needed to be interpreted
in the light of the reasoning that preceded it. He submitted that the judgment
of the ECJ provided three principles. First, not every use of a sign identical
to the trade mark in respect of identical goods to those for which the mark is
registered can be prohibited by the proprietor of the trade mark. Second, only
such use as affects or is likely to affect the functions of the trade mark is
prohibited. Third, the fact that the use is of a sign which is perceived as a
badge of support for or loyalty or affiliation to the proprietor of the mark is
immaterial to the issue of infringement. The judge had correctly understood the
law as set out in the ECJ judgment and upon his findings of fact in his first
judgment was bound to come to the conclusion he did.
- In
any case, Arsenal had failed to show that Mr Reed’s use was likely to affect the
functions of the trade marks. That was clear as they failed to produce any evidence
that anybody believed there was a connection in the course of trade between Mr
Reed’s goods and Arsenal. There was no evidence of confusion. The judge was correct
to come to the conclusions of fact that he did.
- Is
the ruling of the ECJ binding? – Of course the ruling of the ECJ is binding
in so far as it is a ruling upon interpretation. However I reject the submission
of Mr Thorley that the national court should confine its attention solely to the
ruling. Strictly speaking the judgment is the explanation of the ruling, but as
Advocate General Warner explained in Robert Bosch GmbH v Hamptzollant Hildestein
[1978] ECR 855: "the operative part of the judgment of this Court should
always be interpreted in the light of the reasoning that precedes it." That
is particularly apt in the present case as the ruling uses the words "in
the circumstances such as those in the present case". To ascertain what the
ECJ believed the circumstances were, it is necessary to have recourse to the preceding
paragraphs of the judgment. I therefore turn to consider the ECJ judgment with
the submissions of the parties in mind.
- The
ECJ’s Judgment – The ECJ concluded that:
"42.
To answer the High Court's questions, it must be determined whether Art.5(1)(a)
of the Directive entitles the trade mark proprietor to prohibit any use by a third
party in the course of trade of a sign identical to the trade mark for goods identical
to those for which the mark is registered, or whether that right of prohibition
presupposes the existence of a specific interest of the proprietor as trade mark
proprietor, in that use of the sign in question by a third party must affect or
be liable to affect one of the functions of the mark."
- In
paragraph 42 of their judgment, the ECJ do not set out to answer the questions
referred. Their reason becomes clear from the rest of the judgment. The referred
questions were based upon the view that the issue of infringement would depend
upon whether the use complained about was trade mark use, in the sense that the
use indicated the origin of the goods. That the ECJ concluded was not the relevant
consideration. In summary the ECJ held that registration of a trade mark gave
to the proprietor a property right (see section 2 of the Act). The relevant consideration
was whether the use complained about was likely to damage that property right
or, as the ECJ put it, is likely to affect or jeopardise the guarantee of origin
which constitutes the essential function of the mark. That did not depend on whether
the use complained of was trade mark use.
- The
judge in paragraph 66 of his second judgment stated that the first of the two
alternatives in paragraph 42 of the ECJ’s judgment was Arsenal’s submission and
the second was in substance Mr Reed’s argument. That was not correct. The crucial
difference between Mr Reed’s argument and the second alternative in the reformulated
question was that the reformulated question looks at the interest of the proprietor’s
trade mark right and whether that interest is liable to be affected: whereas Mr
Reed’s submission looks at whether his use was of a particular type, namely, did
it denote a connection in the course of trade between the goods and the proprietor.
- The
ECJ judgment proceeds to determine which of the alternatives in paragraph 42 of
the judgment is correct. Upon the basis of the reasoning in paragraphs 43 to 47,
the ECJ set out in paragraph 48 the essential function of a trade mark in these
terms:
"48.
In that context, the essential function of a trade mark is to guarantee the identity
of origin of the marked goods or services to the consumer or end user by enabling
him, without any possibility of confusion, to distinguish the goods or services
from others which have another origin. For the trade mark to be able to fulfil
its essential role in the system of undistorted competition which the Treaty seeks
to establish and maintain, it must offer a guarantee that all the goods or services
bearing it have been manufactured or supplied under the control of a single undertaking
which is responsible for their quality (see, inter alia, Case 102/77 Hoffmann-La
Roche [1978] E.C.R. 1139, para.7, and Case C-299/99 Philips Electronics
NV v Remington Consumer Products Ltd [2002] ECR 1-0000."
- The
judgment then gives guidance as to how that essential function can be ensured.
"50.
For that guarantee of origin, which constitutes the essential function of a trade
mark, to be ensured, the proprietor must be protected against competitors wishing
to take unfair advantage of the status and reputation of the trade mark by selling
products illegally bearing it (see, inter alia, Hoffmann-La Roche,
para.7, and Case C-349/95 Loendersloot [1997] E.C.R. I-6227, para.22).
In this respect, the 10th recital of the preamble to the Directive points out
the absolute nature of the protection afforded by the trade mark in the case of
identity between the mark and the sign and between the goods or services concerned
and those for which the mark is registered. It states that the aim of that protection
is in particular to guarantee the trade mark as an indication of origin.
51.
It follows that the exclusive right under Art.5(1)(a) of the Directive was conferred
in order to enable the trade mark proprietor to protect his specific interests
as proprietor, that is, to ensure that the trade mark can fulfil its functions.
The exercise of that right must therefore be reserved to cases in which a third
party's use of the sign affects or is liable to affect the functions of the trade
mark, in particular its essential function of guaranteeing to consumers the origin
of the goods."
- It
is important to note that the ECJ is not concerned with whether the use complained
about is trade mark use. The consideration is whether the third party’s use affects
or is likely to affect the functions of the trade mark. An instance of where that
will occur is given, namely where a competitor wishes to take unfair advantage
of the reputation of the trade mark by selling products illegally bearing the
mark. That would happen whether or not the third party’s use was trade mark use
or whether there was confusion.
- In
paragraph 54 of the judgment, the ECJ explains that certain uses for descriptive
purposes will not infringe because they cannot affect the registered proprietary
rights. That meant that the first alternative posed in paragraph 42 (see paragraph
32 above) could not be the law. The judge went further. Having cited paragraph
54 of the ECJ judgment he said:
"It
appears from the above analysis that the ECJ held that where the defendant's use
of a mark is not intended by him, or understood by the public, to be a designation
of origin, there can be no infringement because such use does not prejudice the
essential function of the registered mark. If that is so, then the first question
in the reference should have been answered in the affirmative. However, it will
be seen that the ECJ did not answer that question in the affirmative or the negative
but only stated that "in the circumstances" of this case, the claimant should
succeed."
- Paragraph
54 of the ECJ judgment has to be read in the context of paragraph 16 of the Holterhoff
judgment. The descriptive use in that case was held not to affect the proprietor’s
trade mark interest. At no stage did the ECJ suggest that use which was not understood
by the public to be a designation of origin could not infringe. The ECJ indicated
that the Directive required consideration as to whether the function of the trade
mark right was liable to be harmed. That becomes more apparent from the paragraphs
of the ECJ judgment that follow.
- In
paragraphs 56 to 59, two reasons are given as to why Mr Reed’s use of signs identical
to the registered trade marks is liable to affect one of the functions of Arsenal’s
registered trade marks. The first is contained in paragraphs 56 and 57 which are
as follows.
"56.
Having regard to the presentation of the word "Arsenal" on the goods at issue
in the main proceedings and the other secondary markings on them (see para.39
above), the use of that sign is such as to create the impression that there is
a material link in the course of trade between the goods concerned and the trade
mark proprietor.
57.
That conclusion is not affected by the presence on Mr Reed's stall of the
notice stating that the goods at issue in the main proceedings are not official
Arsenal FC products (see para.17 above). Even on the assumption that such a notice
may be relied on by a third party as a defence to an action for trade mark infringement,
there is a clear possibility in the present case that some consumers, in particular
if they come across the goods after they have been sold by Mr Reed and taken away
from the stall where the notice appears, may interpret the sign as designating
Arsenal FC as the undertaking of origin of the goods."
- The
judge read paragraphs 56 and 57 as containing a finding of fact by the ECJ contrary
to his findings of fact in paragraphs 42 and 58 of his first judgment which were
in this form:
"42.
It seems to me that the use of the Arsenal Signs on Mr Reed's products carries
no message of trade origin. Although I accept that some fans will want to purchase
official Arsenal memorabilia so as to support their club, it is a non-sequitur
to say that this means all Arsenal memorabilia or memorabilia displaying one or
more of the Arsenal Signs will be taken by them to have come from or be licensed
by AFC. Choosing to give your custom to one company by buying goods from it does
not mean that that type of goods only comes from that company. What is necessary
is some additional sign or circumstance of trading which says to the customer
that the goods come from or are commercially connected with the source he likes
and not some other source.
…
58.
In my view, and consistent with the views expressed at para. 42 above, the Arsenal
Signs on Mr Reed's products would be perceived as a badge of support, loyalty
or affiliation to those to whom they are directed. They would not be perceived
as indicating trade origin. Therefore I reject Mr Thorley's first answer to Mr
Roughton's argument. It follows that for AFC to succeed on trade mark infringement,
it has to rely on the non-trade mark use of those signs, that is to say the wide
construction of section 10."
- Paragraph
42 came in the part of the judgment where the judge dealt with passing off. The
issue was whether Mr Reed had misrepresented that goods sold by him were goods
that came from Arsenal. The judge held that he had not done so. In paragraph 58
there was a finding by the judge that Mr Reed’s use was not trade mark use in
that it did not indicate the origin of the goods. However the judge did not come
to any conclusion as to whether Mr Reed’s use was liable to affect or jeopardise
the guarantee of origin which was the essential feature of Arsenal’s trade mark
rights. No doubt this was not argued as an issue and because of that he did not
consider it to be relevant.
- Paragraphs
56 and 57 appear to contain conclusions of fact reached by the ECJ. As such they
cannot be binding on the national court. However, the conclusions reached are
not inconsistent with the findings of fact reached by the judge. The crucial sentence
in understanding the ECJ reasoning is the last one in paragraph 57. There the
court states that there is a clear possibility in the present case that consumers
may interpret the sign as designating Arsenal as the undertaking of origin in
a case where the goods are taken away from Mr Reed and therefore not subject to
Mr Reed’s explanation that they do not come from Arsenal. The judge’s findings
of fact were based upon the balance of probabilities. He was concerned with the
effect of the signs upon Mr Reed’s customers, not upon consumers who might not
know anything about Mr Reed.
- The
second reason is contained in paragraphs 58 and 59.
"58.
Moreover, in the present case, there is also no guarantee, as required by the
Court's case law cited in para.48 above, that all the goods designated by the
trade mark have been manufactured or supplied under the control of a single undertaking
which is responsible for their quality.
59.
The goods at issue are in fact supplied outside the control of Arsenal FC
as trade mark proprietor, it being common ground that they do not come from Arsenal
FC or from its approved resellers."
- Mr
Wyand submitted that those paragraphs also contained findings of fact contrary
to those made by the judge in his first judgment. I reject that submission. The
paragraphs contain reasoning and explanation based upon agreed facts. The ECJ
looks at the function of a trade mark not whether the use is trade mark use. Unchecked
use of the mark by a third party, which is not descriptive use, is likely to damage
the function of the trade mark right because the registered trade mark can no
longer guarantee origin, that being an essential function of a trade mark.
- There
follows in the ECJ judgment the conclusion in paragraph 61.
"61.
Once it has been found that, in the present case, the use of the sign in question
by the third party is liable to affect the guarantee of origin of the goods and
that the trade mark proprietor must be able to prevent this, it is immaterial
that in the context of that use the sign is perceived as a badge of support for
or loyalty or affiliation to the proprietor of the mark."
- The
judge held that the ECJ had indicated that Arsenal should win because Mr Reed’s
use was such as would be perceived by some customers or users as a designation
of origin. That in my view was not the basis of the ECJ judgment. The judgment
of the ECJ makes it clear that the important consideration is whether the right
given by registration is likely to be affected by a third party’s use. That occurs
when the use complained about is likely to jeopardise the guarantee of origin
which constitutes the essential function of the trade mark right. That was a matter
never considered by the judge in his first judgment. He concentrated on whether
Mr Reed’s use was trade mark use.
- The
Conclusion – For the reasons given, I do not believe that the ECJ disregarded
the conclusions of fact made by the judge in his first judgment. However I accept
that they did conclude as a fact that, in the circumstances found by the judge,
use by Mr Reed was liable to jeopardise the guarantee of origin which constituted
the essential function of the trade mark rights owned by Arsenal. That was, I
believe, a finding of fact that was inevitable in the circumstances. As found
by the judge, the trade marks, when applied to the goods, were purchased and worn
as badges of support, loyalty and affiliation to Arsenal, but that did not mean
that the use by a third party would not be liable to jeopardise the functions
of the trade marks, namely the ability to guarantee origin. To the contrary, the
wider and more extensive the use, the less likely the trade marks would be able
to perform their function. 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.
I therefore conclude that the result reached by the ECJ was inevitable once their
judgment had made it clear that the material consideration was whether the use
complained of was liable to jeopardise the guarantee of origin, not whether the
use was trade mark use. The judge should have followed the ruling and decided
the case in Arsenal’s favour.
- For
those reasons I would allow the appeal and give judgment for Arsenal. That being
so, it is not strictly necessary to deal with the second issue, whether the judge
was correct that Mr Reed’s use was not trade mark use, but I will do so as it
was argued in full.
- Was
Mr Reed’s use trade mark use? Mr Thorley referred us to the evidence and
submitted that there was no basis for the conclusion reached by the judge. I will
come to Mr Wyand’s submissions, but before doing so will summarise the relevant
evidence.
- Mr
Hazell had been the commercial manager of Arsenal since 1989. He explained how
Arsenal’s marketing had expanded and had played an important part in the club’s
activities. He said that it was apparent from the turnover that had been generated
that demand by members of the public for licensed goods bearing the Arsenal trade
mark was high. He believed that people wished to buy Arsenal merchandise partly
because they were contributing towards the activities and success of the club.
He said that from time to time the club’s retail outlets received complaints about
counterfeit merchandise displaying one or more of the Arsenal trade marks and
he was pressed upon that in cross-examination. He said that since 1989 he had
had half a dozen instances of confusion brought to his attention. He was asked
by the judge (Evidence 1 page 99 line 11):
"MR
JUSTICE LADDIE: … You said perhaps about half a dozen instances of confusion you’ve
heard about, because everybody is terribly busy, and what you are talking about
is what people in your shop report to you?
A:
I think all, if not all, six or seven or whatever, but all of those customers
that came back into the shop were most annoyed, they probably brought a garment
the week before and bought it back the following home game. Most of those people
have asked to see the commercial manager. I’ve been brought on match day to speak
to those people personally.
Q:
You said it was a bit vague because the shop was so busy?
A:
Yes.
Q:
You also said in answer to an earlier question "I think there is an element
of confusion out there. Some customers bought back goods they were under the impression
came from us"?
A:
Yes.
Q:
How – you have never spoken to any of these customers?
A:
Yes, about half a dozen of them.
Q:
You personally?
A:
They would have called me on a match day to say they wanted to speak to the commercial
manager.
Q:
You spoke to the customer?
A:
Yes.
Q:
You say you thought they were under the impression. How did they get that impression?
A:
Because it had a club crest on. The garment, I think one or more were T shirts,
one or two were sweat shirts.
Q:
How do you know it was their impression?
A:
Because they told me."
- Mr
Ireland had held the position of company secretary for Tottenham Hotspur. He explained
to the judge that the club’s merchandising activities were a major commercial
success and the demand for official Spurs’ merchandise bearing their trade marks
was very high. He said their fans had come to expect the club to market its own
range of goods and he believed that the success of Spurs’ merchandising activities
was partly due to the high quality of the materials being sold. He said that by
buying Spurs’ branded clothing the fans knew that they were contributing to the
club’s finances. In cross-examination he was asked about unofficial goods being
sold bearing the Tottenham Hotspur trade marks and whether the fans understood
the difference between official and unofficial goods. At Evidence 1 page 35 line
19 he said:
"They
understand if they buy something with one of our trade marks, that that indicates
that it is a Tottenham Hotspur item of merchandise, because no-one else is allowed
to use our trade marks. There is an unofficial market in stalls outside the ground
on match days where people sell a blue and white scarf, or they sell T shirts
with images of Sol Campbell, or they sell T shirts, sadly quite distasteful T
shirts, making comments about Arsenal Football Club."
- He
went on to refute the suggestion that fans knew that both official and unofficial
goods were on the market. In his view "any use of our trade marks on any
clothing means it’s from the club".
- Mr
O’Donovan was the national and international trade mark manager of Manchester
United. He had held that position since 1990. He explained how the merchandising
of Manchester United goods had expanded over the years and stated that it had
become increasingly important to the success of the club. He said that Manchester
United supporters were very aware that the success of the merchandising efforts
generated the funds available to improve the stadium and its approaches, to provide
car parking facilities, to provide academy and training facilities and to provide
funds to enable the club to expend money on players as necessary. In cross-examination
he was asked whether people wearing Manchester United clothing did so to show
that they were supporters. He said that he assumed that to be the position, but
also said that it was to show that the person had "bought the items manufactured
by Manchester United".
- Miss
Bouchard had been at Arsenal and was at the time that she gave evidence with West
Ham. She was asked by the judge why warnings were given to supporters that there
were inferior products about. She said (Evidence 1 page 69 line 12):
"A:
The problem we had, and to some degree still have, is that people assume that
something if it is carrying the official club crest or logo on it, it is produced
by the club. We have had an instance where people have purchased items outside
the shop and have brought them into the official club shop and said this is rubbish
we want it replaced. We have said, but it is not an official club product, and
they say it is bearing your logo. We say that may be but it is not official club
merchandise. The public assume that anything bearing the club logo is often official.
…
MR
JUSTICE LADDIE: Do you keep a log of these complaints?
A:
We do at West Ham now.
Q:
At West Ham you do?
A:
Yes.
Q:
Can you say what is the turn over at West Ham of their club shop?
A:
Currently between £4.5 and £5 million.
Q:
Per annum?
A:
Yes, per annum.
Q:
How many complaints like this, wrongly ascribing non-licensed goods to you, how
many of those do you get a year?
A:
On an average probably about 20.
Q:
Did you keep a similar log when you were with Arsenal?
A:
No. I mean I was relatively a junior member of staff at that time, and my then
shop manager, Jack Kelsey, who is unfortunately deceased now, I do not believe
he kept a record.
Q:
Maybe things have changed, but did you receive complaints in those days when you
were with Arsenal?
A:
Yes, we did.
Q:
In the same sort of frequency we’re talking about?
A:
Possibly more so. Supporters, somewhat in their naivety do sometimes assume when
they are buying something from a market, because it bears the official club crest
believe that it is an official club product. Often they are of inferior quality.
The clubs do feel that it is not a good reflection."
- Mr
Reed made it clear in his evidence that he sold his goods as badges of allegiance
and that everybody who purchased items from him knew full well that if it was
marked official then it was a product that originated from Arsenal or an approved
source and if not, it was not an official product. That was made clear in cross-examination
when he identified the difference between official and unofficial goods as being
that the official goods had labels or swing tickets whereas the unofficial goods
had nothing. He accepted that absent such a label there was no way that consumers
could differentiate between his products and those which were official.
- Mr
Adams gave evidence that a particular instance of alleged passing off had not
occurred as there had been no misrepresentation. He accepted in cross-examination
(Evidence 2 page 191) that "an official product is something produced and
sold by the Arsenal Football Club". When asked how he distinguished between
what was an official and unofficial product he explained that he was told which
was which by Mr Reed. If he was unsure, he would go and ask, then he would put
a sign on the various goods saying which were official. He explained that the
official goods, being those coming from Arsenal, were stated to be official and
that a sign was put on them stating that fact. That was the only way that consumers
could tell the difference. He knew that Mr Reed would be angry if he sold something
as official which was not and that on every occasion a sign was put up to differentiate
between the two.
- Mr
Matthews also dealt with the alleged instance of passing off. He said in his witness
statement that sometimes people did ask if goods on the stall were official. In
the main it was foreigners who asked the question, and that it was probably half
a dozen times a year that the question was asked. His standard answer was that
nothing was official unless it actually said so on the product. He also made it
clear that if he was in doubt he asked Mr Reed which were official goods and which
were not. He would always ask if he was not sure, whether there were tags or not.
It was his view that official goods had tags on and they were the means by which
they were differentiated.
- Mr
Stephens also gave evidence as to the alleged incidence of passing off. In cross-examination
he was shown two hats bearing an Arsenal trade mark and was asked which one was
official. He accepted that a hat which just had the club crest on it might be
official and that if he was working for Mr Reed he would ask him whether it was
official or not.
- Mr
Reed and those who helped him were in no doubt that there was a market for what
they referred to as official goods. Such goods bore the trade marks. In their
view what differentiated those goods from the alleged infringing goods were tags
or swing tickets which stated that the official goods emanated from Arsenal.
- Mr
Wyand submitted that the evidence established that the use by Mr Reed did not
indicate a connection in the course of trade between Mr Reed’s goods and Arsenal.
He submitted that that was the result of the acts of Arsenal over 30 years. As
Arsenal had started to expand their merchandising, they needed to distinguish
their goods from those of others, in particular those of Mr Reed. It was Arsenal
who had educated consumers that if they wished to support the club they should
buy their goods from Arsenal. Arsenal themselves had told the public that they
could not rely upon the word "Arsenal" on the goods as indicating that
they came from Arsenal.
- That
submission is correct in part. No doubt Arsenal have been at pains to tell the
public to purchase goods from them and not to purchase copies. However that message
cannot have reached consumers at large. It is those who attend matches who could
get the message, not the thousands of others who support or are interested in
Arsenal and goods bearing the trade marks. Further the fact that consumers know
that there are copies about does not mean that the word "Arsenal" on
goods does not indicate origin. It could do so, but with the worry that it might
be a wrong indication.
- As
to the instances of confusion, Mr Wyand supported the judge’s conclusion that
they were de minimis. He also submitted that such instances could have been the
result of a false description of a scarf as an official scarf by somebody other
than Mr Reed.
- No
attempt was made to differentiate between the use of the word "Arsenal"
and the other trade marks. That seems to have been the result of the reputation
of the other trade marks. It is therefore acceptable to consider whether Mr Reed’s
use was trade mark use, taking as an example use of the word "Arsenal"
on a scarf or other item of clothing.
- The
use of the word "Arsenal" on a scarf or other item of clothing could
in theory denote three things. First that the owner was a supporter of Arsenal;
second that the goods came from Arsenal or third a combination of the two. I suspect
that to certain persons the first meaning would be the correct one. Mr Reed is
an example of such a person. The crucial question is whether the other two meanings
would occur to a substantial number of consumers.
- As
Mr Reed’s goods are in substance identical to those of Arsenal’s, there is nothing
to differentiate them from Arsenal’s goods once the swing ticket or tag is removed.
That was accepted by the witnesses called on behalf of Mr Reed. It was for that
reason that they went to the length that they did to differentiate Mr Reed’s goods
from those coming from Arsenal.
- It
is apparent from the evidence that a substantial number of consumers want to purchase
goods bearing the sign "Arsenal" from Arsenal. That was the evidence
of Mr Hazell which was supported by analogy by the evidence of Mr Ireland and
Mr O’Donovan. Further, there was evidence of instances of confusion. Those instances
of confusion were thought by the judge to be de minimis. But it is reasonable
to conclude that the instances were just the tip of an iceberg as those that are
confused will not complain without ground for complaint. However the importance
of the evidence is not that there was confusion, but that consumers seeing the
signs identical to the Arsenal registered trade mark on the goods turned to Arsenal
to complain. As Mr Hazell said, they complained to Arsenal because the goods had
on them the Arsenal crest. Miss Bouchard’s evidence was that people assumed that
goods carrying the trade marks were produced by Arsenal. That appears to have
been the position at Tottenham and Manchester United and there is nothing in the
evidence that suggests that their fans think differently to fans of Arsenal as
to the meaning of the trade marks on goods.
- Mr
Reed takes considerable care to inform his customers that his goods are not official
in the sense that they do not come from Arsenal. If the use of the word "Arsenal"
did not carry with it such an indication of origin, there would be no need for
Mr Reed to do anything at all. Clearly Mr Reed is suspicious that persons purchasing
from him would, absent an explanation, believe that the goods came from Arsenal.
Why? The answer must be that they bear the name Arsenal and that it denotes origin.
His suspicion supports the evidence of the witnesses called by Arsenal.
- I
accept the judge’s finding that the trade marks upon the goods are considered
to be badges of allegiance, but all the evidence suggests that the trade marks
do also designate origin of the goods to a substantial number of consumers. As
to Mr Reed’s use I accept that he does differentiate his goods from official goods,
but his goods marked with the trade marks were identical to those emanating from
Arsenal and therefore his use of the word Arsenal would, absent an explanation
carry the same inference as similar use of the trades mark by Arsenal. Certainly
the evidence suggests that that would be the inference that consumers would draw,
particularly those that received the goods as a present. In my view the evidence
is all one way, namely that use of the trade mark on goods such as scarves and
hats, whether by Arsenal or others does denote origin.
- Passing
off – I realise that there was no appeal on the conclusion reached by the
judge on the cause of action traditionally called passing off, perhaps best referred
to as unfair competition. However I am not convinced that his reasoning was correct.
The traditional form of passing off as enunciated in such cases as Reddaway
v Banham [1896] AC 199 is no longer definitive of the ambit of the cause of
action.
- As
Cross J said in Vine Products Ltd v Mackenzie & Co Ltd [1969] RPC 1
of the decision in the Spanish Champagne cases (Bollinger, J. and others v
Costa Brava Wine Coy. Ltd [1960] RPC 16 and [1961] RPC 116).
"A
man who does not know where Champagne comes from can have not the slightest reason
for thinking that a bottle labelled "Spanish Champagne" contains a wine
produced in France. But what he may very well think is that he is buying the genuine
article – real Champagne- and that, I have no doubt, was the sort of deception
which the judge had in mind. He thought, as I read his judgment, that if people
were allowed to call sparkling wine not produced in Champagne "Champagne,"
even though preceded by an adjective denoting the country of origin, the distinction
between genuine Champagne and "champagne type" wines produced elsewhere
would become blurred; that the word "Champagne" would come gradually
to mean no more than "sparkling wine;" and that the part of the plaintiff’s
goodwill which consisted in the name would be diluted and gradually destroyed.
If I may say so without impertinence I agree entirely with the decision in the
Spanish Champagne case – but as I see it uncovered a piece of common law
or equity which had till then escaped notice – for in such a case there is not,
in any ordinary sense, any representation that the goods of the defendant are
the goods of the plaintiffs, and evidence that no-one has been confused or deceived
in that way is quite beside the mark. In truth the decision went beyond the well-trodden
paths of passing-off into the unmapped area of "unfair trading" or "unlawful
competition"." [page 23 Vine Products Ltd v Mackenzie & Co Ltd
[1969] RPC 1] (not checked)
- I
would allow the appeal and give judgment in favour of Arsenal and hear counsel
as to the order that should be made.
Lord
Justice Clarke:
- I
agree.
Lord
Justice Jonathan Parker:
- I
also agree.