ARSENAL FOOTBALL CLUB PLC v MATTHEW REED [2001] EWHC 440 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
[2001] EWHC 440 (Ch)Case No Case No: HC 1999-0038Venue Royal Courts of Justice, Strand, London, WC2A 2LL
Between
ARSENAL FOOTBALL CLUB PLCClaimantMATTHEW REEDDefendant
Before
Mr Justice LaddieMr S Thorley QC and Mr T Mitcheson (instructed by Lawrence Jones for the Claimant)Mr A Roughton and Mr Malynicz (instructed by Stunt & Son for the Defendant)Date 6 April 2001
[1]Mr Justice Laddie: Introduction The claimant, Arsenal Football Club ("AFC"), hardly needs any introduction. As Mr John Hazell, its commercial manager and a witness in this action has explained, it was founded in 1886 and has consistently been one of the leading football clubs in the UK over the past century and, since the 1960s, in Europe. It has never been relegated from Division 1 of the Football League since being promoted to it in 1919, or from the Premier League, of which it is a founder member, since that League was established in 1992/93. It has won the FA Cup on seven occasions, most recently in 1997/1998, and has been League Champion of the Football League and the Premier League on six occasions most recently in the season 1997/1998. AFC has also experienced success in Europe, winning the European Cup Winners Cup in 1994 and being runners-up in the same competition the following year. It has also qualified for the UEFA Champions League for the past three seasons and reached the final of the UEFA Cup in the season 1999/2000. It has a dedicated following of supporters.[2]AFC is known not only as "Arsenal" but also by its nickname, "the Gunners". For a long time it has also been associated with two graphics or logos. The first consists of a shield, referred to as the "Crest Device", the other, referred to as the "Cannon Device", depicts an artillery piece. They are as follows: The Crest Device: [ Diagram or picture not reproduced in HTML version - see original .rtf file to view diagram or picture ] The Cannon Device: [ Diagram or picture not reproduced in HTML version - see original .rtf file to view diagram or picture ] I shall refer to these two words and two devices together as the "Arsenal Signs".[3]The defendant, Mr Matthew Reed, is, and since the early 1960s has been, an Arsenal fan. He describes himself as a self-employed proprietor of a wholesale and retail football merchandise company. Over thirty years ago he began a business of selling football souvenirs and memorabilia. He has been in that business ever since. Amongst the articles he sells are souvenirs and memorabilia which are likely to appeal to Arsenal supporters. By these proceedings, AFC is attempting to stop or curtail sale of some of these articles.[4]The sale of souvenirs and memorabilia has become very lucrative. AFC now derives considerable income from it. Over the last ten years or so AFC has taken steps to try to ensure that as many as possible of the products which refer to Arsenal and are bought by or for its fans are sold by it or are acquired, directly or indirectly, from its licensees. In support of this endeavour, it has acquired various intellectual property rights and has sought to use them against those who sell souvenirs and memorabilia which are not made for or under licence from it. Hence this action. In its original pleadings, AFC made allegations of registered trade mark infringement, passing off and copyright infringement against Mr Reed. The last allegation was abandoned some little while ago with the result that this case now is limited to trade mark infringement and passing off only.[5]Many of AFC's major competitors in the Football League have taken similar steps to use intellectual property rights to control the market in, and derive income from, the sale of souvenirs and memorabilia relating to their own teams. In this action, evidence of those endeavours was given on behalf of Manchester United FC and Tottenham Hotspur FC. This case raises important points of principle which could affect the scope of the rights owned not only by AFC but by many other trade mark owners and not just in the field of sport. The History of selling Arsenal memorabilia and souvenirs[6]It is difficult to know when Arsenal memorabilia and souvenirs were first placed on the market. It is likely that for very many decades supporters have signified their allegiance to the club either by wearing its shield or by holding signs bearing its name. In any event, it is clear from Mr Reed's evidence that souvenirs have been sold for at least three decades. Mr Reed does not claim to have been the originator of this trade and it may well have existed for many years before he started in 1970.[7]Details of AFC's own trade in souvenirs and memorabilia is sketchy, at least in respect of the early years. Mr Hazell has been with the club since 1989. He has given evidence that the commercial and marketing side of Arsenal's business has expanded dramatically since about 1992. He says that before 1990 there was a small single shop run by or on behalf of AFC located just inside its stadium at Highbury on the Avenall Road frontage. It was called the Gunners Shop. Apparently, at that time, there was also a small mail-order business. Since 1990, AFC has dramatically expanded its retail premises. It now has a large shop called "Arsenal World of Sport" adjacent Finsbury Park station, the new Gunners Shop within the stadium and a smaller North Bank Shop within the new North Bank Stand. AFC not only makes sales through its own retail outlets but it also operates a substantial mail-order business, which includes very substantial sales made over the Internet. Its current sales of souvenirs and memorabilia has achieved a total turnover of nearly £5 million per annum. Mr Hazell explains that AFC has a database of about 240,000 customers to whom it mails its merchandise catalogues and other related material. I have been supplied with copies of two recent AFC catalogues. The range of products available is very large and includes articles of clothing for adults, children and even newborn babies, pennants, cups, desk sets, combs, sticky labels, watches and a host of other items each of which prominently bears one or more of the Arsenal Signs.[8]Mr Hazell explains that AFC either sources and supplies its own merchandise or arranges for the production and supply of the products through its licensees. He says that prior to 1990 AFC occasionally granted licences for the use of the Arsenal Signs. However it appears that the majority of the licensing activity has taken place in the last few years. Needless to say, each of the licensees is required to mark its products in a way which complies with AFC's current labelling requirements, a matter I will consider further below.

(a) Direct legal action

[9]AFC has employed a variety of civil and criminal procedures in an attempt to stop or restrict the activities of unlicensed vendors of Arsenal souvenirs and memorabilia. These have included supporting actions brought by local Trading Standards Officers under the provisions of the Trade Marks Act 1994 and the Trade Descriptions Act 1968. It is apparent from the exhibits to Mr Hazell's first witness statement, that these activities have been extensive and spread geographically. I have been told that AFC has been unable to use this avenue against unlicensed vendors operating in and around its grounds at Highbury because the local authority, the London Borough of Islington, has not been willing to use its Trading Standards Officers for this purpose. Where this type of prosecution has been pursued, those who have pleaded or been found guilty have been punished in a variety of ways including by being subject to fines, community service orders, being placed on probation and having their stocks forfeited and destroyed.[10]As far as civil proceedings are concerned, AFC appears to have relied upon registered trade marks, passing off and copyright. Amongst other things it has used the provisions of section 100 of the Copyright, Designs and Patents Act 1988 Act to seize in advance of any court order products which it considers consist of or include unlicensed copies of its own copyright material. It could not use any rights acquired by registration of trade marks until such registration of the Arsenal Signs had been achieved at the beginning of the 1990s. It does not appear that AFC has used passing off proceedings before it had secured trade mark registrations.

(b) Competition/licensing

[11]Although AFC may not have put a great deal of effort into merchandising before the early 1990s, it has done so in the recent past. One of the ways it has attempted to secure a larger part of the souvenir and memorabilia market is to try to sell its own products to the vendors located outside its Highbury grounds. To this end it has very recently employed a company, KT Sports, which has a licence to sell "official" merchandise to such vendors. It does not appear that all vendors are given the opportunity to purchase. Mr Reed's evidence was that he had tried to purchase licensed products but that he appears to have been "blacklisted". The result is that he has only been able to obtain comparatively small quantities of licensed goods on an intermittent basis. I did not understand this evidence to be challenged. Apparently KT Sports has no licence to sell to vendors outside any other grounds. This means that for that half of all AFC's matches which are played away from home, there is no attempt to ensure that the local vendors are supplied with licensed products. (c) Warnings to the public / warnings on stalls.[12]In paragraph 35 of his first witness statement, Mr Hazell states as follows:
"Over the years, the Club has taken various steps to educate the public in its buying habits. Aside from making sure Arsenal's merchandise is retailed in a suitable and distinctive way where one or more of the Trade Marks is given sufficient prominence, the Club includes articles in its match day programs about the action taken by Arsenal to curb the activities of unlawful vendors with a request that fans should only consider purchasing merchandise from Club shops or those of its licensees."
[13]The reference in this paragraph to the marking of goods is explained earlier in the same witness statement. Mr Hazell states that merchandise sourced by AFC, will always carry an indication either by way of a swing ticket or neck label or header card to show the product is manufactured on its behalf. It can be seen, both from the catalogues which I have been shown and also from a variety of exhibits, that AFC goes out of its way to ensure that supporters can recognise those goods which are marketed by or with its licence. Annexed to this judgment as Annexes I, II and III are illustrations of the neck labels, swing ticket and pack labelling used on licensed goods. The word "Official" is used extensively and prominently. Furthermore if one purchases at one of the three AFC shops, the goods are supplied in an attractive plastic carrier bag which bears the name of the shop together with the legend "FOR OFFICIAL ARSENAL FC MERCHANDISE".[14]As Mr Hazell states, AFC's match programmes sometimes also contain articles advertising the steps taken against those selling unlicensed goods. The latter are referred to as counterfeit or illegal. For example in the match programme for the game against Derby County FC on 6 March 1999, there was a passage under the heading "UNOFFICIAL MERCHANDISE" which states that AFC and Nike, the sportswear company, had brought successful High Court proceedings against a trader "for trade mark and copyright abuse". It ends with the following passage:
"For your own interests, and those of the Club, we urge you to buy club merchandise only from stalls displaying the following sign: 'ONLY OFFICIAL ARSENAL MERCHANDISE SOLD HERE' "
[15]Consistent with the spirit of this message, some of the vendors outside the Highbury grounds display large signs declaring that they are a source of "official" goods. A photograph of one of these is attached to the end of this judgment as Annex IV. The wording of this sign differs from that referred to in the programme, presumably because vendors do not restrict their stock only to official merchandise;.[16]The message that official products are available has been conveyed by other means as well. The most recent catalogues bear on their front cover the words "Official Arsenal Merchandise Catalogue [date]". AFC has also exhibited extracts from a number of its catalogues from the 1980s each of which contains the following warning notice: [ Diagram or picture not reproduced in HTML version - see original .rtf file to view diagram or picture ] (d) other methods.[17]In addition, AFC has taken direct action against street vendors. Mr Reed gave evidence, which was not seriously challenged, that for at least 15 years he and his workers sold their wares from within AFC's grounds. He said he was invited in by the stewards. Whether this is so or not is of little consequence. In the early 1980s AFC decided to remove all the vendors, or at least all the unofficial vendors, from within the grounds.[18]As I have mentioned, AFC has asserted two causes of action against Mr Reed; passing off and registered trade mark infringement. It is convenient to consider passing off first.

(A) PASSING OFF

[19]AFC advances two cases of passing off against Mr Reed. The first is a broad allegation that sales by him of certain unlicensed souvenirs or memorabilia will mislead members of the public into the belief that those goods are the products of AFC or are goods associated or connected with or licensed by AFC because they bear one or more of the Arsenal Signs. The allegation is directed particularly at the acknowledged sale from one of Mr Reed's stalls of three scarves, in three different colours, which bear the words "ARSENAL" and "THE GUNNERS" and designs which are said to be identical or substantially similar to the Crest and Cannon Devices. A photograph of one of the scarves is set out in Annex V to this judgment. However the allegation would apply with equal force to commercial dealings in any of Mr Reed's other product bearing one or more of the Arsenal Signs.[20]The second case is much narrower. It is an allegation that a particular employee working for Mr Reed attempted deliberately to deceive customers by falsely representing that unlicensed products are 'official' products, i.e. are made by or with the licence of AFC. This is based on a single trap purchase of a knitted hat, called a Bronx Hat, a photograph of which is set out in Annex VI to this judgment. (a) Passing off by virtue of the use of the words "ARSENAL", "GUNNERS", the Crest or Cannon Devices on memorabilia.[21]On this issue there appears to be no difference between the parties on the law or on most of the facts. Both Mr Thorley QC for AFC and Mr Roughton for Mr Reed, agree that for AFC to succeed, amongst other things it must show that there has been a misrepresentation to members of the public which has caused or is likely to cause a not insignificant part of that public to believe that Mr Reed's goods are goods of AFC or are licensed by or commercially associated with it. It is no defence for Mr Reed to prove that his intentions were unblemished. If such deception has occurred or is likely to occur, AFC will have negotiated this hurdle. Furthermore there is no dispute as to the nature of Mr Reed's trade. He accepts that the three scarves which are used as the basis for AFC's claims are typical of the unlicensed products which he is selling and has been selling for years. He accepts that they bear the words "ARSENAL" and "GUNNERS" and carry designs which are substantially identical to the Crest and Cannon Devices. The real issue is whether or not there has been or is likely to be deception or relevant damage. Mr Thorley acknowledges that the onus of proving these lies on his client. Although these issues are normally the subject of evidence, he says that the assessment of likelihood of confusion is a matter for the court. It can come to a conclusion on this subject without evidence.[22]AFC says that this issue can be disposed of easily. AFC is a famous football club and its name, nickname and the Devices it uses, not only in relation to itself and its team but on its goods, are also famous. The court should draw the inference that a not insignificant number of members of the public would see or buy Mr Reed's goods thinking that they were produced by AFC or were licensed by it. They would believe that they were contributing by such purchases to the resources of AFC. For Mr Reed, Mr Roughton argues that this is not the inference the court should draw at all. On the contrary, he says that those who care about the origin or provenance of the goods would know that Mr Reed's goods are not associated with AFC in any way. Further, most purchasers would have no interest in that origin or provenance. The latter are only concerned to own and display products which proclaim their support for their football team. Scarves bearing the Arsenal Signs are garments bearing badges of allegiance and no more.[23]Passing off is concerned with what is happening and what is likely to happen in the marketplace. It is designed to prevent damage being caused by deception to the goodwill of the claimant and the business which benefits from that goodwill. This is why, in Warnink BV v J Townend & Sons [1980] RPC 31, Lord Diplock said it was necessary to demonstrate:
"… actual damage to a business or goodwill of the trade by whom the action is brought or (in a quia timet action) will probably do so."
(p 93) and Lord Fraser said that the claimant must prove:
"That he has suffered, or is really likely to suffer, substantial damage to his property in the goodwill by reason of the defendants selling goods which are falsely described by the trade name to which the goodwill attaches."
(p 106)[24]These statements have repercussions in this case. Where the claimant brings proceedings at or before the commencement of the defendant's trade, the court must assess as best it can what is going to happen in the real world of the marketplace. That may not be easy and the court may sometimes get it wrong, but the speed with which the claimant comes to court – something which is frequently necessary to avoid substantial damage – makes this inevitable. On the other hand, where the defendant has been carrying on his trade for some time, the court can expect to be relieved of the need to speculate as to the likelihood of confusion and damage. In most cases, it will be able to see what has actually happened. If the claimant has suffered substantial damage, one can expect it to be apparent. Absence of evidence of confusion becomes more telling and more demanding of explanation by the claimant the longer, more open and more extensive the defendant's activities are. The purchasing public may be more or less observant and less or more easily misled than might be thought when the issues are being ventilated in the rather clinical atmosphere in court.[25]Furthermore, what is at issue is confusion among the relevant sector of the market. As Mr Thorley accepts, rightly in my view, what counts is whether there is confusion amongst that part of public which cares. The significance of that here is that Mr Hazell and Mr Thorley both accepted that there will be a group of potential customers who purchased memorabilia bearing the words "Arsenal", "gunners" or Devices only because those words or signs are of interest as signs of allegiance. They will have no interest in who makes or markets the goods. Anyone who has seen a modern football game will have seen large numbers of supporters waving their scarves – emblazoned with their club's name – above their heads. I accept AFC's argument that it is likely that some supporters will wish to obtain memorabilia which are produced by or under licence from AFC so as to support financially their club. As AFC argues, when such fans buy such merchandise they may feel that they are contributing towards improvements in the stadium and the facilities and conditions at the Club and the buying power of AFC in the player transfer market. However, even in respect of them, the support of AFC is only part of the reason for purchase. I have no doubt that they will also purchase because the Arsenal Signs are a badge of support and allegiance. The evidence before me throws no light on the relative size of these two distinct groups of potential purchasers.[26]Mr Reed has been trading in memorabilia for 31 years. His primary interest is and has always been in memorabilia relating to Arsenal. In all that time, no instance of confusion has come to AFC's attention. Furthermore, AFC asserts that it has been vigilant in attempting to use all powers at its disposal to stop unlicensed competitors. In particular, it has been in dispute with Mr Reed for at least ten years. It is likely that throughout that time it would have been astute to find and record any instance of confusion but, apparently, none was detected. In fact Mr Hazell gave evidence that in the 10 years he has been the commercial manager with Arsenal, only about 6 instances of confusion of any sort have come to his attention, the most recent being about two years ago. None of these is said to have related to any activity of Mr Reed. Mr Hazell could give no details of these instances. It may be, but there is no way of knowing, that someone has somewhere sold an item of memorabilia under an express but false claim that it was made by Arsenal and was official.[27]Mr Thorley argues that this absence of evidence of confusion is not telling for three reasons. First he says that the defendant has not proved that his business is large. Second he says that there is no evidence that the quality of the defendant's goods is so poor as to generate any significant level of complaints. Third, he says that this is not the sort of case where instances of confusion would come to light, so the court can still infer that confusion has occurred. I shall deal with each of these arguments in turn.[28]I have already made general reference to Mr Reed's activities. A little more detail is appropriate. When Mr Reed commenced trading in 1970, he operated from a box-and-board. This is a portable device used to display the goods which were for sale. His evidence is that in the early days his main products consisted of scarves, hats, badges and rosettes. At first he began to cover all the London grounds and then would travel all over the country to sell his goods. At one time he employed about 40 people. I have mentioned already that for about 15 years he and his workers sold their Arsenal merchandise from within AFC's grounds. In 1979 he set up a large stall on the corner of Highbury Hill and Gillespie Road, just outside the grounds, although his workers continued to work inside the grounds for a few more years. Mr Reed's main stall is located in the front garden of a private house and continues to be operated there to this day. Mr Reed considers it to be in a prime position. It is the stall from which the products which are in issue in these proceedings were purchased. A photograph of the stall, taken on the day of the trap purchases, is annexed to this judgment as Annex VII. Mr Reed also has two other stalls operating outside AFC's grounds.[29]As far as Mr Reed's turnover is concerned, his evidence was that 90% of all sales were of products referring to Arsenal, the rest of his stock, such as scarves marked with the word "HOLLAND", only being sold in small numbers. He was also asked about his current turnover in money terms. He appeared to be reluctant to disclose this, but said that the average turnover per game at his three stalls for Premier League home games was somewhere in the region of £1500. I think it is safe to assume that his average turnover for Premier League games in this cash-only business was not less than the figure he gives. It was not put to him that his figure was an overestimate. He also said that for other major games, such as games in the Champions League, turnover could double. His evidence was that, on average there would be about 25 to 28 home games each year, 19 of them being Premier League fixtures. Even on his figures, recent turnover of unlicensed Arsenal memorabilia must have exceeded £50,000 per annum. If that level of sales had been achieved over the 31 years that he has been in business, Mr Reed would have sold over £1.5M worth of Arsenal memorabilia. Over the last 10 years, during which time Mr Reed has been under attack from AFC, he will have sold about £0.5M of such products.[30]Mr Thorley says that it is unsafe to assume that Mr Reed's business has been maintained at this sort of level over the last 31 years. He says that no direct evidence of sales in the past has been given by Mr Reed and that, therefore, it should be assumed that sales in earlier years must have been much smaller. I must confess that I find this argument somewhat surprising. It seems to me that the evidential burden was on AFC. It has known all along that Mr Reed denied that his activity caused confusion and that there was no direct evidence from the marketplace that confusion existed. If AFC were going to argue that Mr Reed's activities were small, this is a matter which I would have expected to have been put to Mr Reed during cross-examination. It was not. In fact the only evidence given by Mr Reed in relation to past sales was that things were much better for him in earlier years. Furthermore, there is nothing in the material disclosed in this case which supports Mr Thorley's argument. Direct evidence of what took place in the 1970s and 1980s is not available. The warning notice included in the match brochures referred to in paragraph 16 above, suggests that the activities of unlicensed vendors of Arsenal memorabilia as a whole must have been quite substantial in that decade. If one concentrates on the 1990s only, it appears that Mr Reed has always had a substantial business. As I have mentioned already, in 1991 AFC twice seized stock from one of Mr Reed's stalls. The documents relating to those seizures have been disclosed in the court bundle. On 1 December of that year, the following goods were seized, on AFC's behalf, from Mr Reed's stall: 1 address book, 8 pennants, 7 sweat bands, 2 head bands, 235 T-shirts, 4 tea towels, 108 scarves, 119 hats, 22 bibs, 17 baby grows, 12 (pairs of) gloves, 23 baseball hats, 13 cups and 3 key rings. It is reasonable to assume that all, or almost all, of that stock bore one or more of the Arsenal Signs. In mid-1995, Essex Trading Standards Officers carried out a raid on Mr Reed's property in Southend. They seized something of the order of £100,000 of stock. Some of that was of concern to AFC. Mr Hazell supplied evidence for the prosecuting authority. The prosecution was brought under the provisions of s 92 of the Trade Marks Act 1994. However eventually the prosecution was abandoned in April 1999, a few months after the present proceedings had been commenced. I understand that Mr Reed has not yet recovered any of this stock. These incidents are consistent with Mr Reed being in a not insubstantial way of business.[31]In relation to Mr Thorley's argument that the quality of Mr Reed's goods may not be sufficiently poor to generate any significant level of complaint, once again it is noticeable that this was not examined in evidence at all. The only reference to quality in the evidence took the form of general complaints made on behalf of AFC that unlicensed goods were of inferior quality and that supporters should be protected from this type of merchandise. There is nothing in this case which suggests that Mr Reed's products are so well made that they are, essentially, defect-free. It would not be right to assume that against Mr Reed in the absence of the issue having been put to him. I do not think there is anything in this point.[32]I can therefore turn to Mr Thorley's third argument namely that this is not the sort of case where instances of confusion would come to light. If this argument were correct, it would make it all the more important for AFC to have tried to find alternative means of proving the likelihood of confusion. This is a matter I will consider in a moment. However I do not accept that the argument is correct. Mr Reed sells competing goods which are cheaper than AFC's goods on AFC's doorstep. This is just the sort of case where it would be expected that some confused customers would have complained to AFC that they were being over-charged because the "same" goods were available only a few yards away at a lower price.[33]In the absence of direct evidence of confusion, the onus was on AFC to prove its case by alternative means. At any time, and particularly over the last ten years during which it has been pursuing Mr Reed, AFC could have interviewed members of the public outside the grounds to find potential witnesses or to find out what the public's view was. I assume that it has not done so. It would have been possible to set up a mock stall with the type of products sold by Mr Reed and then interview customers to discover their motive and beliefs when purchasing Arsenal memorabilia. I assume that this was not done either. It would have been possible to have interviewed a selection of AFC fans. It should be remembered that AFC has a database of 240000 customers for its catalogues and it believes it has between 1 and 2 million supporters.[34]It appears that AFC was alert to the desirability of producing evidence demonstrating the likelihood of confusion. It addressed this in two ways. First it produced evidence from employees of Premier League teams, such as Mr Hazell himself, in which they expressed views as to what they believe members of the public think. Such evidence has little weight and, understandably, Mr Thorley did not place any reliance on it. Secondly AFC produced a Mr Bilon who gave direct evidence on this issue. Mr Bilon is the Assistant Director of Trading Standards for the London Boroughs of Brent & Harrow. He has been a Trading Standards Officer for over 20 years. In his witness statement he says that, having inspected one of Mr Reed's scarves, he is of the opinion that it comes from AFC. He explains the reason for coming to this view namely "because the scarf contains trademarks I associate with [AFC]". Mr Bilon has over the last few years participated in a number of actions by Brent & Harrow Trading Standards Officers against unlicensed vendors of Arsenal memorabilia. Under cross-examination, he said the following: Q. You were shown a scarf. You said, "I know it comes from Arsenal"? A. Yes. What I am saying is that I know that any garment bearing Arsenal's trade marks will come from Arsenal, unless somebody tells me differently. Q. So just on the basis of the marks that are there? A. Yes. Q. What I think you should say is that you think it should come from Arsenal? A. It is perfectly correct, yes. Q. Is that based on your experience as a trading standard officer? A. Yes. . Q. And your understanding of the Trade Marks Act? A. Yes.[35]Because of his experience over some years investigating and pursuing vendors of unlicensed football memorabilia, Mr Bilon must have known that, for example, the word "ARSENAL" on a scarf did not necessarily mean that the scarf was made by or under licence from AFC. It appeared to me from the evidence he gave in the witness box that what he was saying was that, because of what he thought the law of trade marks was and his experience as a Trading Standards Officer, he thought "ARSENAL" could only legally appear on memorabilia if licensed by AFC. I did not find his evidence of any assistance in determining what the ordinary Arsenal fan, or customer, would think. Mr Thorley did not rely on Mr Bilon's evidence.[36]In my view, not only has AFC failed to produce evidence to support its case of likelihood of confusion, there is much here which suggests that confusion is unlikely. For reasons set out above, it is necessary to consider the reaction of an Arsenal fan or potential customer who wishes to contribute to AFC's financial strength by buying official goods and who sees the scarves on Mr Reed's stall. Are they likely to be confused as to the origin or trade association of those goods?[37]From the material already referred to in this judgment, it will be appreciated that AFC goes to great lengths to ensure that its supporters are aware that memorabilia is available both from it and from unlicensed vendors. It explains to the supporters how they can ensure that they only purchase goods which emanate from or are licensed by AFC. Supporters are made aware that AFC-derived goods are described as "official". Not only is this word used on licensed products, but it is used on the carrier bags into which such products are put in AFC's own shops and on the mail order catalogue.[38]I have already referred to the activities of KT Sports. Mr Hazell said in relation to them:
"At the start of the football season 1998/1999, Arsenal entered into an agreement with KT Sports by which they were licensed to sell and supply for sale a wide range of official Arsenal merchandise for sale in the vicinity of Arsenal Stadium to the vendors who operate pitches around the ground. In agreeing to accept supplies from KT Sports, the traders would then be able to indicate that they were suppliers of licensed Club merchandise by the use of a large sign displayed at the site stating that 'Only Official Merchandise is Sold Here'."
[39]The exact arrangement entered into between KT Sports and vendors is not spelt out in this paragraph, but the last sentence suggests that the quid pro quo of taking official goods is that the vendor must not sell any unofficial goods, hence the phraseology required by AFC on the large sign displayed on site. As mentioned already, the type of sign depicted in Annex IV appears to be in partial compliance with this requirement. If one looks at the right hand side of the photograph of Mr Reed's stall in Annex VI, it will be seen that Mr Reed's neighbour prominently displays the type of sign depicted in Annex IV.[40]Mr Reed also seeks to educate his customers. He has on his stall a large sign which carries the following message:
"THE WORD OR LOGO(S) ON THE GOODS OFFERED FOR SALE, ARE USED SOLELY TO ADORN THE PRODUCT AND DOES NOT IMPLY OR INDICATE ANY AFFILIATION OR RELATIONSHIP WITH THE MANUFACTURERS OR DISTRIBUTORS OF ANY OTHER PRODUCT, ONLY GOODS WITH OFFICIAL ARSENAL MERCHANDISE TAGS ARE OFFICIAL ARSENAL MERCHANDISE"
[41]Furthermore, on those occasions when he has acquired official merchandise, he makes clear to customers what is and what is not official. For example, he put up signs which state the price of official scarves, identified as such, and the price of other scarves. One of the signs on his stall which was photographed on behalf of AFC states that scarves are for sale at £3 whereas official scarves are £5. In addition to this, the goods on his stalls frequently carry luminous orange labels in the shape of stars on which are written customer information. The evidence given at trial was that when licensed AFC products are displayed on his stalls, these labels carry the word "official". None of these points is determinative of the issue of confusion by itself. For example, Mr Reed's disclaimer set out in paragraph 40 above, may not be noticed by some customers and sometimes may be partly obscured. By itself it would not protect against all instances of confusion if such confusion were otherwise likely to occur on a significant scale. Similarly, it is possible that some customers do not notice the word "Official" on AFC's own merchandise and carrier bags or have not purchased match programmes or read the warnings in them. Nevertheless they form part of the commercial environment in which Mr Reed and AFC carry on their respective trades. In my view, on a balance of probabilities, the reason that AFC has been unable to produce instances of actual confusion caused by Mr Reed's sales over the last 31 years is that no such confusion has taken place. I find it difficult to believe that any significant number of customers wanting to purchase licensed goods could reasonably think that Mr Reed was selling them, save when they are expressly so marked.[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.[43]Since AFC has failed to prove relevant confusion, it has also failed to show that it has suffered relevant damage as a result of Mr Reed's activities. The only loss suffered is attributable to the fact that Mr Reed and AFC are in competition in the sale of memorabilia. The broad claim of passing off fails.

(a) Passing off by deceptive use of the word "Official"

[44]The allegation made by AFC is that on 28 December 1999, an inquiry agent, Mr Douglas Brian Reynolds senior, was supplied with the Bronx hat depicted in Annex VI. Mr Reynolds gave evidence at the trial. According to him, he approached one of Mr Reed's stalls which was being manned by two of Mr Reed's employees. He says that he asked the two gentlemen whether they were selling anything "official". One of those employees, who has now been identified as Mr David John Adams, reached under the counter and produced a small shirt. He explained that it was official but only available in a child's size. Mr Reynolds purchased it. Mr Reynolds says that he then asked whether they had anything else official. At this point, the other employee on the stall handed the Bronx hat to Mr Adams. It is not alleged that this other employee heard the reference to "official". He was standing some feet away from Mr Adams. Mr Reynolds' evidence is that he said to Mr Adams "it is official isn't it?" and that Mr Adams responded "yes". Mr Reynolds then purchased the Bronx hat.[45]There is no dispute that the small shirt was a licensed product. AFC does not complain about the sale of this article. The allegation is that the Bronx hat, which is not a licensed product, was sold as "official". Although there is no dispute that both the shirt and the Bronx hat were sold to Mr Reynolds, Mr Adams strenuously denied in the witness box and in his witness statement that he ever sold the Bronx hat as "official".[46]I have seen both Mr Adams and Mr Reynolds in the witness box. I have no reason to doubt the honesty of either man. As far as Mr Adams is concerned, I came to the conclusion that he was completely guileless. Mr Thorley agrees with this assessment. It was clear that Mr Adams was aware that the Bronx hat was not licensed product. His evidence was that he was very aware of the importance of distinguishing between licensed and unlicensed products because of the problems that his employer was having with AFC. Mr Reed's evidence was that his workers are instructed "absolutely and categorically" not to sell anything which is not official as official. This evidence was not challenged. This ties in with the evidence of Mr Adams who said, and I accept, that he knew very well that Mr Reed would be very angry if he, Mr Adams, were to sell as "official" something which was not. If he had been trying to make a sale of unlicensed goods by pretending that it was "official", it is difficult to see why he produced the child's shirt to Mr Reynolds since this was a product which it was unlikely that Mr Reynolds would wish to buy. Furthermore, for this allegation to be made out, it would mean that Mr Adams was trying deliberately to deceive Mr Reynolds. Nothing about Mr Adams' demeanour in the witness box suggests that he would willingly have tried to deceive a customer.[47]In my view the claimant has failed to make out this allegation. Not only did Mr Adams strike me as an honest witness, but there were a number of factors which suggest that a misunderstanding could have taken place. First, it was noticeable that Mr Reynolds spoke with a very quiet voice. At times I could hardly hear him. I think it would have been very difficult for anyone working on the stall in a fairly busy road full of noisy football fans to have heard Mr Reynolds clearly. Furthermore, at the crucial time that the deception was allegedly practised, two items were being held, probably by Mr Adams. One was the Bronx hat, the other was the official child's shirt. If Mr Reynolds had asked the question "it is official isn't it" in an audible voice, it is quite possible that Mr Adams would have taken that to be a reference to the child's shirt which was official.[48]I should only add that it was revealed by Mr Reynolds Junior (who employed Mr Reynolds Senior) in the witness box that a further test purchase to prove misuse of the word "official" was undertaken in March 2000. It failed. Mr Reed knew nothing of this exercise until it was disclosed during the first day of the trial.[49]For the above reasons, the claims in passing off fail. (A) REGISTERED TRADE MARKS.[50]AFC has registered the words "ARSENAL" and "GUNNERS" and the Crest and Cannon devices as trade marks in classes 06, 09, 14, 16, 18, 20, 21, 24, 25, 26, 27 and 28. Therefore the registrations cover a very large range of goods. In particular AFC has the following registrations, all dating from mid 1989, in class 25 in respect of articles of outer clothing, articles of sports clothing and footwear: No. 1383343 for "ARSENAL", No. 1387461 for the Cannon Device, No. 1387589 for the Crest Device and No. 1393203 for "ARSENAL GUNNERS". In this class, the word "GUNNERS" alone could not be registered because of a prior registration owned by another company.[51]AFC alleges that Mr Reed has infringed all of these registrations by sale of his Arsenal scarves. Its claim is simply stated. Ss 10(1) and (2)(b) of the Trade Marks Act 1994 provide respectively 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 or services which are identical with those for which it is registered." and "a sign where because … 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.."[52]It says that Mr Reed's products bear upon them words and designs which are either identical or sufficiently similar to the registered marks. Those words and designs are 'signs' and are being used in relation to the relevant class of goods. It follows that there is infringement.[53]Mr Reed's defence has a number of strands. He accepts that the words or designs he uses are identical or sufficiently similar to AFC's registered marks to constitute infringements if all other parts of the statutory provisions are complied with. However he says that there is no infringement because, on a proper construction of s 10, the defendant's sign must be used as a trade mark for the relevant goods. He says that in his case the words and devices are not used as trade marks at all. They are badges of allegiance. Second, he says that the trade marks are all invalid and should be revoked either under s 46 because they have not been used within a relevant 5 year period, or under s 47 because they are incapable of distinguishing AFC's goods in a trade mark sense and therefore offend against the provisions of s 1(1) and 3(1)(a) of the Act.

(i) Infringement

[54]By far and away the most important and difficult point in this case is the defendant's argument that for there to be infringement the use of the offending sign must be a trade mark use, that is to say a use which indicates trade origin. If registration of a sign as a trade mark in respect of a particular class of goods gives a right to restrain any use of that sign in relation those goods, whether that use is in a trade mark sense or not, the Act, and the Trade Mark Directive (89/104/EEC) on which it was based, will have created a new and very wide monopoly. Unlike a copyright it will not be dependent on copying to establish infringement and it will be of open-ended duration. That will have repercussion beyond the mere private rights of competing traders. Essentially the same terminology which is used in s 10 to define infringement is also used in s 92 to define various criminal offences. The latter are not trivial provisions. They include wide powers of punishment, including up to 10 years imprisonment. Furthermore they are not a mere statutory curiosity. As the documents in this case demonstrate, these criminal provisions have been used widely. Convictions have been secured, individuals have acquired criminal records and punishments ranging from fines to orders for probation and community service have been imposed. It may well be that many if not all of those convictions in relation to football memorabilia would have failed if the defendant's argument for a narrower construction of the Trade Marks Act is correct.[55]Mr Thorley has two responses to this. First he says that I do not need to consider this point. He says that even were the defendant right as a matter of law, AFC would still succeed. This is because the use which is being made of the Arsenal Signs on Mr Reed's products is clearly trade mark use, that is to say a use in relation to the scarves in a way which designates manufacturing or merchanting origin. Mr Roughton disputes this. On this point at least, the parties appeared to be agreed on the law. In Euromarket Designs Inc v Peters [2000] IP & T 1290, Jacob J said:
"57. In this connection it should be borne in mind that the directive does not include an all-embracing definition of 'use', still less of 'use in relation to goods'. There is a list of what may inter alia be specified as infringement (art 5(3) of the directive, corresponding to s 10(4) of the 1994 Act) and a different list of what may, inter alia, constitute use of a trade mark for the purpose of defeating a non-use attack (art 10(2), equivalent to s 46(2)). It may well be that the concept of 'use in relation to goods' is different for different purposes. Much may turn on the public conception of the use. For instance, if you buy Kodak film in Boots and it is put into a bag labelled 'Boots', only a trade mark lawyer might say that that Boots is being used as a trade mark for film. Mere physical proximity between sign and goods may not make the use of the sign 'in relation to' the goods. Perception matters too. That is yet another reason why, in this case, the fact that some goods were sent from the Crate & Barrel US shops to the UK in Crate & Barrel packaging is at least arguably not use of the mark in relation to the goods inside the packaging. And all the more so if, as I expect, the actual goods bear their own trade mark. The perception as to the effect of use in this sort of ambiguous case may well call for evidence."
[56]In that passage, the interrelationship between "use in relation to" and "use as a trade mark" is apparent. On much the same point, Mr Roughton referred me to Unidoor Limited v Marks and Spencer Plc [1988] RPC 275, an interlocutory decision of Whitford J. Similarly in Mothercare UK Ltd v Penguin Books Ltd [1988] RPC 113, the Court of Appeal held that it was not even arguable that the words "Mother Care" in the title of a book about the problems facing working mothers could be regarded as use in a trade mark sense. In coming to that conclusion, the Court had regard to what was likely to be the impact of the use of the title on reasonably literate customers. Although the latter two cases are concerned with the pre-1994 law, the issue of whether a particular use was trade mark use was the same as the point I now have to consider. In any event, both Mr Thorley and Mr Roughton accept that when deciding whether or not a particular sign has been used in a trade mark sense, what counts is the likely impact of the use on the customer, that is to say, what would the customer's perception be.[57]The mere fact that the words or designs are used on an item of clothing does not mean that they are used as a trade mark. Mr Thorley accepts that. At Annex VIII to this judgment is a picture of a shirt in the AFC catalogue bearing the word "SEGA". This is the well known trade mark of the Japanese electronics company of that name. Similarly, during a period when AFC had a commercial relationship with the electronics company JVC, its players wore shirts bearing the letters "JVC". Mr Thorley accepts, rightly in my view, that that sort of use was not use as a trade mark for shirts. As he says, it was a form of advertising for an electronics company.[58]In my view, and consistent with the views expressed at paragraph 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 s 10.[59]Mr Thorley says that non-trade mark use can infringe the rights acquired by registration. If that is correct, certain inconsistencies exist in the Trade Marks Act. Among these may be mentioned the following. First, of course, the requirement of trade mark distinctiveness which is essential to acquiring rights by way of registration would give rise to a monopoly over use of the same sign in ways which were themselves not distinctive. Second, s 18(1)(a) and (b) sets a time limit of six years within which an order for delivery up of infringing goods and materials may be made. However both of these limits run from the date on which "the trade mark was applied" by the defendant. If infringement covers use of signs by the defendant which are not trade marks, does this mean that there is, in such cases, no limitation period? Third, under s 21(a)(b) and (c) threats relating to certain applications or uses of "the mark" are not to be treated as actionable as the suit of the threatenee. Presumably equivalent threats against users of the registered sign in a non-trade mark manner remain actionable. Fourth, s 46 provides that there can be revocation of a registration if the "trade mark" has not been used for a sufficient time. The fact that the proprietor may have used it as a non-trade mark sign and can stop others using in that way would be irrelevant. Fifth, s 48 erects a statutory defence of acquiescence where the owner of an earlier trade mark or right has failed to take action for 5 years against a subsequent infringer. However, the owner of the earlier mark or right is prohibited from opposing the use of the later trade mark in relation to the goods or services in relation to which it has been so used. The statutory defence does not apply to all those infringements which consist of the use in a non-trade mark way of the same sign.[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. This is expanded in paragraph 13-13 and 13-14 of Kerly's Law of Trade Marks and Trade Names (13 th ed). However, there is difficulty created by the form of drafting adopted both by the Directive and our Act. In particular, s 10 defines infringement in terms of the use of a "sign" by the defendant, not the use of a "trade mark". The effect of this drafting has been considered on a number of occasions in the English courts. In British Sugar Plc v James Robertson & Sons Ltd [1996] RPC 281 , Jacob J expressed the view that use of a sign in a non-trade mark way could infringe a registration. He appears to have had doubts as to the correctness of that view in Philips Electronics Ltd v Remington Consumer Products [1998] RPC 283. However, the same conclusion was arrived at by the Court of Appeal in the latter case: see [1999] RPC 809.[61]Mr Roughton has invited me to ignore the Court of Appeal decision and to find for his client. He says that on this point the Court of Appeal's view was mere obiter because there was another ground on which the Court disposed of the case. He also takes comfort from the fact that the Court of Appeal referred this issue to the European Court of Justice. Therefore, at most its decision could only have been an interim one and cannot bind me if, as he suggests, it is wrong. He suggests that, free of authority in the Court of Appeal, all the signs are that a different construction would be adopted by the European Court of Justice. He cites recent cases which he says, though not determining the point in his favour, show that the European Court of Justice is moving in his direction. No doubt he had in mind the sentiment expressed by Advocate General Jacobs in the Foreword to the latest edition of Kerly :
"The [European Court of Justice] applies principles of interpretation which may differ from those of national law and from those traditionally followed by English courts."
[62]Notwithstanding Mr Roughton's arguments, I am not persuaded that I should take a different course to that adopted by the Court of Appeal in Philips . The Court gave full consideration to the issue of whether infringing use had to be use in a trade mark sense and came to a conclusion that it did not. It is not for the High Court to ignore this decision. If a different view is to prevail it must be expressed by the House of Lords or, preferably, the European Court of Justice.[63]The law on this important point is not yet settled. It appears that the courts in other Member States have had to face the same issue and have made references in relation to it to the European Court of Justice. None of those has yet been the subject of decision. Unfortunately, in the Philips case Advocate General Colomer has suggested that the Court does not need to resolve this vital point on that reference because there is a much simpler but different issue on which that case can be determined. On this point, therefore, the law is unclear and, if the Advocate General's opinion is followed by the European Court of Justice, will remain so until the point is considered in another reference.[64]If the view of the Court of Appeal in Philips prevails, there is no doubt that Mr Reed infringes. On the other hand, if a sign must be used as a trade mark before it can infringe, Mr Reed does not infringe. The final outcome of the claim of infringement (subject to the question of validity considered below) must depend on the final resolution of this point of law by the European Court of Justice.[65]In his judgment in Philips , Aldous LJ said: "[Counsel] have enabled me to come to a provisional view that the judge was right to hold the trade mark invalid. However most of the issues between the parties raise difficult questions of construction of the Trade Marks Directive, 89/104/EEC of December 21, 1988, such that a reference to the European Court of Justice … is necessary before a final decision should be reached. That conclusion is borne out by the fact that similar issues arose in a case (Ide Line AG v Philips Electronics NP), at present pending before the Swedish Court of Appeal, in which the Swedish District Court [1997] ETMR 377 construed the Directive differently to Jacob J. I have therefore attempted to set out in my judgment the issues, the facts and my view on the law in a form which is understandable and convenient for the parties and the European Court of Justice." [p 812] The same necessity for guidance from the European Court of Justice applies here as well. (ii) Validity[66]This only leaves the issues of validity. In my view they can be disposed of quite briefly. Mr Roughton argues first that AFC have not used their registered marks as trade marks in the relevant period of 5 years. They have used the signs which are the subject of registration only in a non-trade mark way. Once again, both Mr Roughton and Mr Thorley accept that the determination of whether there had been use as a trade mark is a matter of perception, the court looking through the eyes of the average normally observant customer.[67]If AFC had only used the signs in the way that they have been used on Mr Reed's products, I would have held that there has been no relevant trade mark use. On this, it is not necessary to repeat what I have said above. However AFC's use of the signs is not so limited. As exemplified in Annexes I to III, it has used the signs on swing tickets, packaging and neck labels in just the way that one would expect a trade mark to be used. I have little doubt that they have been used in this way because AFC wants to ensure that they are used in a standard, readily-identifiable trade mark manner. The relevant customer would perceive that to be trade mark use. The argument of non-use fails.[68]I have come to the conclusion that Mr Roughton's alternative argument also fails. He says that any trade mark use of the Arsenal Signs is swamped by their overwhelming acquired meaning as signs of allegiance to the football team. Therefore they are not and have never been distinctive. He says that this argument applies with particular force to the word "ARSENAL". I think this fails on the facts. I do not see any reason why the use of these signs in a trade mark sense should not be capable of being distinctive. When used, for example, on swing tickets and neck labels, they do what trade marks are supposed to do, namely act as an indication of trade origin and would be recognised as such. There is no evidence before me which demonstrates that when so used they are not distinctive of goods made for or under the licence of AFC. The fact that the signs can be used in other, non-trade mark, ways does not automatically render them non-distinctive.[69]For the above reasons, the claims in passing off fail as does the attack on the validity of the registered marks. I have also come to the conclusion that the use of the four signs on Mr Reed's products does not amount to trade mark use. However, whether or not non-trade mark use can constitute infringement of registered trade mark rights is a matter which needs to be resolved by the European Court of Justice. It is that determination which will allow me to decide finally whether or not Mr Reed has infringed any of AFC's registered rights.[70]I will hear counsel on the form of order and, in particular, whether I should make a reference to the European Court of Justice and, if so, the terms of any reference or whether this is a matter which should be considered by the Court of Appeal first.

Cited in 1 later judgment