Arsenal Football Club Plc v Reed

Under section 10(1) of the Trade Marks Act 1994, use in trade of a sign identical to a registered mark on identical goods infringes where it affects, or is liable to affect, a function of the mark. It need not constitute trade mark use or cause confusion.

The essential function is to guarantee that marked goods originate under the control of a single undertaking responsible for their quality. Unauthorised circulation of identical goods bearing the mark may jeopardise that guarantee. It is immaterial that consumers also perceive the sign as a badge of support, loyalty or affiliation.

Arsenal Football Club Plc owned registered trade marks covering the word “Arsenal”, “Arsenal Gunners” and two devices. Matthew Reed sold unofficial football merchandise bearing signs identical to those marks. He accepted use in the course of trade on identical goods but contended that the signs served as badges of allegiance rather than indicators of trade origin.

Laddie J rejected passing off and referred questions concerning the Trade Mark Directive to the European Court of Justice. Following the preliminary ruling, he held in [2002] EWHC 2695 (CH) that the European Court had exceeded its jurisdiction by making findings inconsistent with his own. He therefore dismissed the infringement claim.

The appeal concerned whether section 10(1) of the Trade Marks Act 1994 required trade mark use, whether the European Court’s ruling had been misunderstood, and whether the admitted use infringed Arsenal’s marks.

1. Appeal allowed unanimously. The judge’s order concerning trade mark infringement was set aside and judgment was entered for Arsenal.

2. A preliminary ruling of the European Court is binding on the national court as to the interpretation of Community law. Its operative part must be read with the preceding reasoning. The European Court may review the legal characterisation of facts and provide guidance, but the national court alone finds the facts and is not bound by factual steering. The judge could therefore have disregarded a conclusion founded on facts inconsistent with his findings. No such inconsistency existed here.

3. Section 10(1) of the Trade Marks Act 1994 does not ask whether the defendant’s conduct is “trade mark use” in the sense of positively designating trade origin. The material question is whether use of an identical sign on identical goods affects, or is liable to affect, a function of the registered mark, particularly its essential function of guaranteeing origin. Confusion is required under section 10(2), but not under section 10(1).

4. The guarantee of origin requires the mark to distinguish goods manufactured or supplied under the control of a single undertaking responsible for their quality. Unchecked, non-descriptive use by a third party can impair that guarantee because goods outside the proprietor’s control circulate bearing the mark. A notice at the point of sale does not remove the risk where consumers later encounter the goods without the explanation.

5. The admitted use inevitably jeopardised that function. Goods which did not originate from Arsenal or its approved resellers entered circulation bearing Arsenal’s marks. Their use as badges of support, loyalty or affiliation did not prevent infringement and was legally immaterial once impairment of the origin function was established.

6. Although unnecessary to the outcome, the evidence also established that the marks designated origin to a substantial number of consumers. A sign may communicate allegiance and origin simultaneously. The judge’s conclusion that the use was not trade mark use was therefore wrong.

Lord Justice Clarke and Lord Justice Jonathan Parker agreed with Lord Justice Aldous.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The infringement order was set aside and judgment entered for Arsenal: [2003] EWCA Civ 696.
2. Chancery Division: Following a preliminary ruling by the European Court of Justice, Laddie J held that the European Court had exceeded its jurisdiction in its application of the law to the facts and dismissed the trade mark infringement claim: [2002] EWHC 2695 (CH).
3. Chancery Division: In the first judgment, Laddie J rejected passing off and referred questions on the interpretation of the Trade Mark Directive to the European Court of Justice.