Background
Last year Arsenal lost its case to stop street trader Matthew Reed from selling unofficial merchandise outside its Highbury stadium.
Notwithstanding the fact that Mr Reed was selling scarves and hats that featured logos and words that were identical to Arsenal's registered trade marks, the judge rejected Arsenal's claim that Reed's sales of unofficial Arsenal-branded merchandise constituted passing off.
Tort of passing off
The tort of passing off protects the whole business, not simply the trademark but the burden of proof is high -- a right of action arises where one trader makes a false representation to the public which damages goodwill in which the public hold another trader's goods and services. This could be done innocently or by chance rather than being a deliberate act. Taking action under passing off can be more costly than relying on a registered trade mark action.
Issue of trademark infringement
The question of whether or not infringement of Arsenal's trade marks had taken place was left unresolved and the matter was referred to the European Court of Justice for clarification.
The High Court ruling, which was unprecedented in its strength of criticism of the rights holder, threw into confusion the value of trademark protection and the application of the common law of passing off.
The argument, advanced by Reed's lawyers, was that the Arsenal logo was used merely as a "badge of allegiance" and therefore in this way did not constitute passing off his goods as those of the official variety.
And incredibly they got away with such an argument.
Ruling of European Court of Justice
However, the European Court of Justice was in no such mood to be charitable to Reed, despite his protestations that he had been selling this goods outside the stadium for over 31 years and that he had always made clear that the stuff was unofficial.
The European Court of Justice ruled that trademarks must "play an essential part in the system of competition" and must constitute a guarantee of origin and quality and therefore ruled that there was infringement of Arsenal's trademarks.
In earlier rulings, the European Court of Justice observed that the essential function of a trade mark is "to guarantee the identity of the origin of the marked product to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the product or service from others which have another origin".
Common sense dictates that the point of a trademark is that it provides the consumer, whether that be the public or trade buyers, with a way of knowing who it is that is responsible for producing goods or services.
The Trade Marks Act 1994 Section 1(1) defines a trademark as "any sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings. A trademark may, in particular, consist of words (including personal names), designs, letters, numerals, or the shape of goods or their packaging.
Clearly customers of Mr Reed could have been confused as to the origin of the merchandise and as to its quality. So the big question is why did the High Court originally find in favour of Mr Reed?
Why did Mr Reed initially succeed in defending the High Court action brought by Arsenal in 2001?
The key issue in Arsenal's passing-off argument was the allegation that Mr Reed's goods caused confusion among the relevant sector of the market -- fans were deceived into thinking the merchandise was "official".
This allegation was rejected by the judge, partly because of a lack of evidence that Mr Reed's use of Arsenal's trade marks did actually cause the necessary confusion.
The judge, Mr Justice Laddie, said: "I find it difficult to believe that any significant number of customers wanting to purchase licensed goods could reasonably think that Reed was selling them... It seems to me that the use of the Arsenal signs on Reed's products carries no message of trade origin."
Justice Laddie stressed that the failure to provide evidence of confusion was a key issue and therefore the case can be distinguished on its facts in this respect rather than becoming a "counterfeiters' charter".
The judge said that had Arsenal used a mock-up stall filled with various official and unofficial merchandise to find out the perception of the fans, or carried out market research of the 240,000 fans on its database, the club might have provided sufficient evidence to support the case of a likelihood of confusion.
Lessons from case for other rights holders?
Arsenal were slow to take legal action against Mr Reed and then did not prepare sufficiently well for the legal action, particularly in trying to prove confusion.
The courts will not automatically grant an injunction to rights holders and therefore they need to see the evidence of infringement and passing off, preferably independently verifiable evidence.
Checklist for protecting intellectual property Rights
1. Marketers must consider boundaries, territories, and categories for the protection of their intellectual property rights
2. Do not seek to register a trade mark under too many classes
3. Consider Community Trade Mark registration as a way of protecting intellectual property rights
4. Weigh up the relative strengths and weaknesses of copyright, trade marks and passing off protections - remember that litigation is risky, expensive and time consuming
5. Words, designs, letters, numerals, shapes, smells can all be protected
6. Avoid too descriptive or ordinary language
7. Always keep meticulous notes and records - from conception to inception and execution - as the legal burden of proof for establishing intellectual property rights and evidence of behaviour of the parties is high
8. Do not rely on legal searches, for example, the Trade Marks register, but also carry out common law searches for companies and brands in telephone directories and the internet in order to avoid difficulties with 'own name' use
9. Beware that once intellectual property rights have been established they need to be used. Failure to do so may allow a competitor to rip off the marketing campaign as a trade mark could be removed from the Trade Marks Register for non use
10 Beware use of independent market research evidence in passing off actions -- get independent statements from interviewers; independent witnesses of the interview techniques and in particular names and addresses of any interviewees who are willing to give evidence.
11. It may be preferable to try to protect intellectual property rights under "clear cut" trade marks law rather than the law of passing off as the Arsenal case illustrates.
Ardi Kolah is author of 'Essential Law for Marketers' (Butterworth Heinemann, 拢25.00).
Read the review of the book on Brand Republic and order your copy online
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