By Sue Ironside and Vicky Latta

Two recent cases on opposite sides of the world have highlighted the increased importance of merchandising to sporting organisations over recent years and the need for increasing vigilance to protect their "rights".

The case of Arsenal Football Club plc v. Matthew Reed (Chancery Division, 6 April 2001, Laddie J.) in the United Kingdom and The New Zealand Rugby Football Union (Inc) v. Canterbury International Ltd (High Court, Wellington, 10 July 2001, Doogue J.) in New Zealand have provided at least a temporary check on the ever-widening net cast by those involved in the merchandising of goods.

With regard to the first case, it was acknowledged that what was raised were "important points of principle that could affect the scope of rights owned not only by [Arsenal] but by many other trade mark owners and not just in the field of sport". Similarly, the NZRFU were unsuccessful in their attempt to obtain an injunction to prevent Canterbury selling their INVINCIBLES jersey by claiming passing off and trade mark infringement, although there is evidence that there will be more action.

Many sporting organisations have seized the opportunity created by the increasing profile of sport to merchandise goods bearing the club or organisation's logo as a means of generating revenue. This revenue stream is increasingly fiercely protected. Any traders of "unofficial" merchandise have been hotly pursued either for trade mark infringement, breach of copyright, or under the tort of passing off.

In the Arsenal case, Mr Reed, a longtime supporter of the club, had been selling unofficial Arsenal merchandise to fans for 31 years. Initially Mr Reed operated stalls both inside and outside the club's grounds but over the last 15 years from outside the club's grounds as his activities encroached upon those of the club. The club sought to protect its income from the sale of merchandise, worth around £5 million per year, by registering trade marks for the name ARSENAL, its nickname GUNNERS and, its crest and cannon devices.

The Trading Standards Authority were not prepared to assist Arsenal pursue Mr Reed and the Club commenced civil proceedings. Two avenues were pursued - passing off and trade mark infringement.

Regarding the claim of passing off, Arsenal alleged that a significant number of members of the public would be misled into believing that they were purchasing goods produced by or on behalf of the Club when purchasing Mr Reed's goods.

The origin of the goods as emanating from the Club was considered important as purchasers wanted to show their support for the team but also to contribute financially to their success. The confusion as to origin would result in a loss to the Club.

Mr Reed argued that purchasers of his goods were not interested in the origin of the goods but wished to show their allegiance for the team. There was no confusion as to the origin of the goods.

Passing off requires a misrepresentation by a trader in the course of trade that his goods are those of another trader which results in damage to the goodwill of that other trader. In this case, the judge did not consider there was likelihood of confusion, therefore there was no misrepresentation. The official merchandise was clearly labelled and Mr Reed made a practice of drawing it to the attention of his customers that his merchandise was not official.

As Arsenal had been unable to provide any examples of confusion arising over the period of Mr Reed's trading, the Club were unsuccessful on that count. Any damage the Club suffered would be from competing products being available in the marketplace, not from Mr Reed's misrepresentation.

The Club also claimed infringement of their trade marks. They had trade marks for a wide range of goods including clothing and footwear. Mr Reed was selling goods that were identical to goods for which Arsenal had trade mark protection.

It claimed infringement under the Trade Marks Act 1994 (UK) either as the use of 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" or as "a sign …similar to the trade marks and is used in relation to goods or services identical with or similar to those for which the trade mark is registered, [and] there exists a likelihood of confusion on the part of the public, which includes a likelihood of association with the trade mark."

Mr Reed argued that the Trade Marks Act 1994 (UK) required the trade marks to be used as trade marks for infringement to occur. He claimed he was not using the marks as trade marks, i.e. indicating trade origin (which historically has been the basis for trade mark laws), but as badges of allegiance to the club. For the Trade Marks Act to cover non-trade mark use, it was argued, it would provide a complete monopoly over the use of "signs" which would go beyond the protection intended under the Act.

The judge accepted that the use was not trade mark use. The question of whether non-trade mark use could also infringe a registered trade mark was left unanswered. This issue has been referred to the European Court of Justice (ECJ) already and the judge considered that until that court determined the issue, he was unable to determine that point.

It is curious however that the issue of honest concurrent use was not raised. Clearly Mr Reed had been operating his business and using the marks long before Arsenal sought trade mark protection.

It was acknowledged that the case raised "important points of principle that could affect the scope of rights owned not only by [Arsenal] but by many other trade mark owners and not just in the field of sport."

The Arsenal case itself has been referred also to the ECJ and Arsenal have applied for leave to appeal the decision to the Court of Appeal.

If the ECJ finds non-trade mark use does not infringe, then it will certainly provide a setback to sporting organisations and those in the entertainment field. There will still be protection under the laws of passing off or copyright infringement in some cases but there will not be the free rein given in the past few years to the increasing scope of protection.

It will be interesting to see the outcome of the case, as the stakes are high for those sitting on both sides of the fence.

There is a similarity with the situation in New Zealand with the current dispute over Canterbury's INVINCIBLES jersey. The New Zealand Rugby Football Union (NZRFU) attempted to obtain an injunction to prevent Canterbury selling their INVINCIBLES jersey claiming passing off and trade mark infringement.

The trade mark infringement claim in relation to this jersey was dismissed as Canterbury were manufacturing the jerseys under licence from the owner of the trade mark therefore they were not infringing the trade mark of the NZRFU.

The Arsenal case and NZRFU cases differ in respect of the trade mark issues involved however both cases question the extent of trademark rights.

The passing off claim in the NZRFU case was rejected. Doogue J. held that there was no similarity between the NZRFU jersey and the Canterbury INVINCIBLES jersey to substantiate a claim of confusion. It was acknowledged that though there may be confusion from a distance, it was inevitable given that both were black rugby jerseys with logos incorporating stylised silver fern devices. The NZRFU did not have a monopoly of black jerseys with silver fern type logos.

The images of the All Blacks or slogans used by Canterbury, of the 1924 All Blacks, were not considered to imply an association with the NZRFU or the current All Blacks. That claim of misrepresentation then was also rejected. The judge considered the NZRFU's claim would indicate it had the right to control the use of any All Black images as implying an association with the NZRFU. That interpretation was not supported.

There are indications the NZRFU case will go to a substantive hearing, so it appears there is plenty more action to come.

In the light of the handling of these cases to date, it will be interesting to see if the tide is starting to turn against the continual extension of "rights" sought by rightsholders and allow smaller operators to compete without being forced out of existence.

It may be that the public will be given the opportunity to determine what they want to buy rather than have the decision made for them. There are sure to be plenty who will want to purchase "official" merchandise to feel they have contributed to a particular team or cause.

Equally there will be a number whose support is more general or the "unofficial" logo or goods are more appealing to them.

If the reaction of many to the report alleging adidas has demanded retailers to elect between stocking the Canterbury's INVINCIBLES jersey or the "official" All Black jersey, it would appear to indicate the public consider the choice should belong to them. It goes against the grain for many to have that right taken away when it basically comes down to one trader wanting to gain a greater share of the profit.

It will be interesting to see how these cases develop but irrespective of which side finally wins the day at this juncture, it provides a timely reminder to those seeking to protect their commercial interests that registration of a trade mark alone may not provide sufficient protection.

The overall picture needs to be considered from the choice of marks to the protection available for intellectual property and how to maximise intellectual property rights without infringing competition laws or the rights of others.

This is a general summary only and should not be taken as a substitute for specific advice.

Web site: Baldwin Shelston Waters
Email: email@bsw.com

September 2001