The Judgment of the European Court of Justice (“ECJ”) in relation to a reference made by the English High Court in the case of Arsenal Football Club plc v Matthew Reed was handed down on 12 November 2002.
The case was referred by Laddie J who sought clarification as to the construction of s10 Trade Marks Act 1994 (“the Act”) and Article 5(1)(a) of the First Council Directive of 21 December 1988 to approximate the laws of the Member States relating to trade marks 89/104/EEC (“the Directive”).
The Relevant Legislation
S10(1) of the Act provides that “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 and services which are identical with those for which it is registered.”
Section 10(1) Act implemented Article 5 (1)(a) of the Directive.[i]
The 10th recital to the Directive provides that “the protection afforded by the registered trade mark, the function of which is in particular to guarantee the trade mark as an indication of origin, is absolute in the case of identity between the mark and the sign and goods or services;…the protection applies also in case of similarity between the mark and the sign and the goods or services;….it is indispensable to give an interpretation of the concept of similarity in relation to the likelihood of confusion”
Article 5(1) provides that:
“The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade-
(a) Any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;
(b) Any sign where, because of identity with, or similarity to, the trade mark and the identity or similarity of the goods and services covered by the trade mark , there exists a likelihood of confusion on the part of the public”.
Reference to the ECJ
The reference arose out of an action brought by Arsenal Football Club in the English High Court for, inter alia, trade mark infringement through the unlicensed sale by Mr Reed of football souvenirs and memorabilia bearing Arsenal’s registered trade marks – “Arsenal”, “the Gunners” and a Crest and Cannon device (“the Trade Marks”). The Trade Marks were registered for this class of goods.
The Defendant accepted that the words or designs he used were identical or sufficiently similar to the Trade Marks to constitute infringement if all other parts of the statutory provisions were complied with. However, he contended, inter alia, that there was no infringement because on a proper construction of s10(1) of the Act, the defendants' sign must be used as a trade mark for the relevant goods. He argued that he did not so use the words or devices - they were badges of allegiance.
Laddie J sought guidance as to how section 10(1) of the Act should be construed, referring the following questions to the European Court of Justice:
1. Where a third party uses a registered trade mark in the course of trade in relation to identical goods to those registered (in respect of which no other defence in available) 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)?
2. If yes, 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 decision of the ECJ
The Court found that the use of the Trade Marks on scarves and other memorabilia was use in the course of trade since it took place in the context of commercial activity with a view to economic advantage and not as a private matter and that it was use of a sign in respect of identical goods to those for which it was registered.
The Court acknowledged the key importance of trade marks in a system of undistorted competition. Undertakings had to be able to attract and retain customers by the quality of their goods and services and they could only do that by using trade marks which allowed consumers to distinguish their goods from others.
Thus the Court said that the essential function of trade marks is “to guarantee the identity of origin”. The trade mark was a guarantee that a single undertaking had been responsible for the quality of the goods and services in question. This was confirmed by the fact that Article 2 of the Directive requires that in order to be registered a sign must be capable of distinguishing the goods or services of one undertaking with those of others. In order for the guarantee of origin 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 bearing it illegally.”
It was in this sense that the 10th recital to the Directive provided that there was absolute protection of the trade mark in cases of identical marks used in relation to identical goods. The trade mark owner could not, therefore, seek to prevent use unless it affects or is liable to affect the functions of the trade mark, in particular the essential function of designating origin. “The exclusive nature of the right can be justified only within the limits of the application of the article”. Hence, uses of the trade mark for purely descriptive purposes did not fall foul of Article 5(1).[ii]
However, the Court found that the use of the Trade Marks in this case did constitute trade mark use because it was “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.” The conclusion was not affected by the fact that the Defendant posted a notice at his stall stating that the goods in issue were not official Arsenal FC products because “there is a clear possibility….that some consumers, in particular if they had 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.” Further, in the case of the goods sold by Mr Reed there was no guarantee that all goods designated by the trade mark would be manufactured or supplied under a single undertaking which is responsible for their quality. In this context it was immaterial that the Trade Marks were perceived as a badge of support, loyalty or affiliation.
In summary, therefore the EC answered the questions thus:
In circumstances such as those in the present case, where the trade mark is used so as to affect or be liable to affect one of the functions of the mark, the trade mark owned can rely on Article 5(1) and it is immaterial that the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor.
The case is a seminal one insofar as it resolves a debate as to the meaning of s10(1) of the Act which has perplexed the English courts for many years (and long before the inception of the European Union under an equivalent provision in the Act’s predecessor, the Trade Mark Act 1938).
The Court’s decision seeks to hold together the tapestry of the Directive by reading into the notion of “absolute protection” in the 10th recital and the apparently absolute words of Article 5(1)(a) – which refers to the trade mark owner’s “exclusive rights” and, in contrast to Article 5(1) (b) do not appear to require any confusion or likelihood of confusion in the mind of the consumer – an underlying requirement that the use should affect the interests of the trade mark proprietor. One could query whether this is entirely convincing. It could be argued that no such limitation was intended. Article 5(1)(a) did intend to create precisely such a monopoly. Any use which was purely descriptive could be said to be adequately covered by Article 6(1)(b) of the Directive which provides, that the trade mark shall not entitle the proprietor to prohibit a third party using, in the course of trade, inter alia, indications concerning the kind, quality, intended purpose or other characteristics of the goods or services.[iii] Indeed, the net effect of the ECJ’s finding is arguably to read a form of confusion test into Article 5(1)(a), since the Judgment would appear to indicate that it is sufficient if there is a clear possibility that at least sum consumers would think the goods originated from Arsenal.
However, from a policy point of view one can only conclude that the decision is sensible. To hold otherwise would mean that, to take an example, that use of “Mothercare/Othercare” as the title of a book concerning working mothers would infringe the mark MOTHERCARE for books.[iv]
As Laddie J commented in the English proceedings, if the Directive allowed a trade mark owner to restrain use of his mark in relation to goods, whether in a trade mark sense or not, that would create a “new and very wide monopoly” (giving rise to civil and criminal penalties), which, unlike copyright would not be dependent on copying and would be of open-ended duration. Further, if infringement could occur even where the mark was not used as a trade mark, this would appear to be inconsistent with other provisions of the Act – for example, it would mean that distinctiveness was required in order to secure a trade mark, but that mark would then allow a monopoly over uses of the same sign which were not distinctive.
The underlying reason why cases such as this one are challenging the frontiers of what constitutes trade mark use may be because trade marks are no longer exclusively the domain of commercial enterprises but also of charities and sports clubs, to name a few. The trade marks of such entities are now being registered and deemed to be capable of distinguishing the goods or services of one undertaking from those of other undertakings. The means by which trade marks are exploited is also changing. It is arguably this to which Laddie J objected in the first place - he commented that, if Arsenal had only used the trade marks on scarves, memorabilia etc in the way the Defendant had he would have held that there was no relevant trade mark use. However, he considered that there was evidence of trade mark use because Arsenal had used the signs on swing tickets, packaging and neck labels in the way one would expect a trade mark to be used. So used they did indicate origin.
The Court’s approach as to what constitutes trade mark use is more flexible – able to expand to cover uses of a trade mark which are not identical to what has gone before. Indeed, it could be said to be a judicial sleight of hand to bring within a narrowly construed Article 5(1)(a) use of a mark which many consumers may not immediately connect with Arsenal in terms of the undertaking from whom they originated or were manufactured by focussing on the notional consumers who will. However, it seems clear that the decision is doing no more than acknowledging the commercial realities of today’s market place. The use of the Arsenal trade marks is no different, arguably, to the Louis Vitton trade mark on bags, wearing a Rolex watch, sporting a Burberry scarf– trade marks are increasingly more than mere indicators of origin or quality (although they are certainly this as well). At a more subconscious level they are a means by which consumers can show their allegiance to a team, a brand, an aspiration as to a perceived lifestyle and luxury – none of which makes it any less trade mark use. However, arguably, the ultimate source for the consumer’s assumptions and the attractive force is a perceived common origin, even if they cannot name the exact company, even if in reality the source may have changed due to mergers or licensing arrangements.
First published in the December 2002 issue of WIPR.
[i] Although directives are binding as to the result to be achieved, it is up to each Member State to implement them.
[ii] The Court cited as an example of descriptive use which did not infringe Article 5(1)(a) the case of Holterhoff  ECR I-4187. It concerned trade marks (Spirit Sun and Context Cut) for precious stones cut in a particular way. The trade mark was not infringed where it was used by a third party to describe the way the stones he was selling were cut in oral negotiations with a professional jeweller and where there was no reference to the marks on the invoice. In the circumstances the reference would not be perceived as indicating origin.
[iii] This, for example, was the view taken by Jacob J in British Sugar plc v James Robertson & Sons Ltd  RPC 281 when he held that in order to infringe s10(1) of the Act there was no requirement of use as trade mark
[iv] Mothercare (UK) Ltd v Penguin Books Ltd  RPC 113 – the English Court in this case held that the title was being used as a description for the contents of the book and not in a trade mark sense
Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.