England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		12 December 2002

Mr Justice Laddie:

Introduction

1. This is the continuation of the trial in which Arsenal Football Club ("AFC") has sued Mr Matthew Reed for passing off and trade mark infringement. Mr Reed sells and for some decades has sold football souvenirs and memorabilia including, for example, scarves bearing the names of major football clubs or football nations. AFC's complaint is that the sale of such products bearing its name and logos constitutes passing off and infringes one or more of its four registered trade marks, each of which consists of or includes the prominent use of the word "Arsenal". The action came before me on 20 March 2001 and lasted for three days, during which time I heard extensive evidence and submissions from the parties.

2. By a judgment dated 5th April 2001, I found that there had been no passing off. However, in relation to the issue of trade mark infringement, although I made certain findings of fact, I considered that there were issues of law as to the scope of the provisions of the Trade Mark Directive relating to infringement which needed to be resolved by the European Court of Justice ("ECJ"). As a consequence, the following questions were referred to that Court:

"1. Where a trade mark is validly registered and

(a) a third party uses in the course of trade a sign identical with that trade mark in relation to goods which are identical with those for which the trade mark is registered; and

(b) the third party has no defence to infringement by virtue of Article 6(1) of the Directive; 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)?

3. If so, 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?"

4. The way in which the questions arose for determination at the trial is as follows. Mr Thorley QC, who has appeared throughout for AFC, argued that the use of any of his client's registered marks as "signs" on Mr Reed's goods infringed his client's rights. It did not matter how the marks were used (unless such use came within a specific statutory exception, which was not asserted here) or how they were viewed by potential purchasers. If a sign was used on goods for which it was registered as a trade mark, infringement would follow. Mr Roughton, who appeared for Mr Reed, argued for a more restricted scope to trade mark protection. He said that before there could be infringement the claimant had to prove that the defendant was using the offending sign "as a trade mark". Since, according to Mr Roughton, Mr Reed was not using the Arsenal signs as designations of origin, and they would not be regarded as such by the potential purchasers, they were not being used as trade marks and there could be no infringement.

5. The difference between these two arguments can be illustrated by an example much loved of trade mark lawyers. Assume that a claimant has registered a trade mark in respect of paper goods. The mark is a logo consisting of a question mark. If a third party were to publish a book with the title "How am I doing?", would that be an infringement? On a broad approach, the registered sign "?" has been used for commercial purposes on the relevant products so there is infringement. Since it is not being used descriptively, it does not take the benefit of a statutory exception to infringement. On the defendant's narrower approach, the sign performs no trade mark function, that is to say it does not indicate trade origin, but is merely part of the title of the book, so there is no infringement.

6. The reference sent from this court was designed to resolve this issue. When it came before the ECJ the only materials made available were the submissions of the parties and interveners, a copy of the High Court judgment of 6 April and copies of the English pleadings. I am told that the hearing lasted two hours, during which time the claimant's and defendant's counsel reiterated the positions they had taken before me. The European Commission also made representations as did the EFTA Surveillance Authority. After that hearing, the ECJ received an Opinion from the Advocate General. On 12 November thus year the ECJ gave its judgment which concludes as follows:

"THE COURT, in answer to the questions referred to it by the High Court of Justice of England and Wales, Chancery Division, by order of 4 May 2001, hereby rules:

In a situation which is not covered by Article 6(1) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, where a third party uses in the course of trade a sign which is identical to a validly registered trade mark on goods which are identical to those for which it is registered, the trade mark proprietor of the mark is entitled, in circumstances such as those in the present case, to rely on Article 5(1)(a) of that Directive to prevent that use. It is immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor."

7. In the light of that, Mr Thorley has invited me to make an order finally disposing of this action, including the grant of a permanent injunction against infringement of Arsenal's registered trade marks and an order for delivery up of infringing stock. However Mr Wyand QC, who appears for Mr Reed, objects. He argues that the ECJ has exceeded its jurisdiction and that I should not, and indeed cannot, follow its direction to find infringement. In substance he says that the ECJ has made findings of fact which led to its conclusion that there was infringement "in the circumstances such as those in the present case". He says that the ECJ has no jurisdiction to "interfere". Not only does he say that the ECJ has no jurisdiction to determine issues of fact on a reference from a national court but he argues that it has purported to make findings which are inconsistent with the national court's findings. Mr Wyand says that if he is right, then findings of fact by the ECJ do not bind this court or the parties. In the circumstances he invites me to find for his client on the issue of trade mark infringement just as I have done in relation to the issue of passing off. With commendable understatement, Mr Wyand has said that his arguments put me in an invidious position.

The Jurisdiction of the ECJ.

8. There does not appear to be any dispute between Mr Wyand and Mr Thorley on the issue of jurisdiction. There are different types of proceedings which can be brought before the ECJ. For example it can entertain appeals from the Court of First Instance on appeal from the Office for the Harmonisation of the Internal Market (which is the trade mark registry for the European Union). In such appeals it has jurisdiction to consider, determine and reverse the inferior tribunals on issues of fact. It can also do so in appeals brought from decisions of the Commission. However it has no such jurisdiction when it comes to references from a national court. Indeed, the expression "reference" is apt in the latter class of proceedings. The national court is referring a question of interpretation to the ECJ for determination so that it, the national court, can then apply the law to the facts of the case. Normally the national court decides the facts first because it is easier for the ECJ to determine issues of law in a factual context. In a reference, the ECJ is not exercising a normal appellate function.

9. Mr Wyand says, and Mr Thorley does not dispute, that there are numerous cases to the effect that the resolution of disputes as to facts is a task for the national courts and exclusively so. This is exemplified by the passages from the following three cases which Mr Wyand drew to my attention. In (Case 51/75) E.MI. Records Limited v. C.B.S. United Kingdom Limited [1976] ECR 811, Advocate General Warner said:

"… [I]t is the law that the jurisdiction of this Court, under Article [234] ..., is limited to ruling on questions of Community law. The Court cannot apply that law to the facts of a particular case. This means that the Court cannot determine issues of fact that are relevant not to the ascertainment of that law, but to its application." (p. 854)

In (Case 3 6/79) Denkavit Futtermittel GmbH v. Finanzamt Warendorf [1979] E.C.R. 3439 the ECJ said:

"The Court cannot, within the framework of proceedings brought under Article [234] ... of the Treaty, settle a difference of this kind which, like any other assessment of the facts involved, is within the province of the national court." (paragraph 12 p 3455)

In (Case 253/83) Sektkelleri C.A. Kupferberg & Cie K.G. a.A. v. Hauptzollamt Mainz [1985] E.C.R. 157 the ECJ said :

"Lastly, it should be emphasised that it is not for the Court of Justice but for the national court to establish the facts underlying the dispute..." (paragraph 13 p 184)

10. Thus on a reference the ECJ cannot make findings of fact nor reverse the national court on them. This should come as no surprise. As the ECJ judgment here recounts, references are made to it under the provisions of Article 234 of the Consolidated Treaty on European Union which provides:-

"The Court of Justice shall have jurisdiction to give preliminary rulings concerning... the interpretation of the Treaty."

That includes subordinate legislation of which the Trade Mark Directive, which is in issue in this case, is an example. The purpose of an Article 234 reference is to determine the meaning of legislation, not how it is to be applied in the circumstances of a particular case.

11. This is carried through to the procedure followed on a reference. The referring national court is expected to ask questions concerning the proper interpretation of Community legislation. That is what happened here. The ECJ should not be, and in this case was not, invited to resolve issues of fact. Furthermore the only materials put before the ECJ should be those which enable it to perform its function of giving a definitive and community-wide ruling on the meaning of legislation. It is then for national courts and tribunals to apply the law so clarified to disputes coming before them. Consistent with this, none of the voluminous evidence consisting both of written witness statements and the documents to which they referred nor transcripts of oral testimony were put before or requested by the ECJ and I am informed that neither AFC nor Mr Reed were invited to make submissions as to what findings of fact should be made or were asked to address the issue of whether the findings of fact in the 6 April judgment were correct.

12. Looked at from the perspective of the High Court in England, it is the Court of Appeal and the Court of Appeal alone, which has jurisdiction to overturn or to make alternative or supplementary findings of fact.

The ECJ Judgment in this Case.

13. The structure of the judgment here follows a standard layout. Having identified the proceedings in which and the national court from which the reference was being made (paras. 1 and 2), it sets out the Community legislation (paras. 3-8) and the implementing national legislation (paras. 9-11) which are in issue. It goes on to set out the ECJ's précis of the High Court judgment of 6 April 2001 (paras. 12-26) and the questions put in the reference (para. 27). The ECJ then summarises the contentions of the parties and the interveners (paras. 29-36). The positions on the meaning of infringement, which had been advanced at the trial and which I have referred to at paragraph 3 above, were maintained before the ECJ.

14. As far as the précis of the judgment of last year is concerned, the ECJ noted that I had rejected AFC's argument that the use of the signs by Mr Reed "was perceived by those to whom they were addressed as a badge of origin." In relation to this crucial issue, the April 2001 judgment had included the following:

"42. It seems to me that the use of the Arsenal Signs on Mr Reed's products carries no message of trade origin. … 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."

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." (emphasis added)

15. The ECJ's analysis of the function of trade marks starts at paragraph 37. At paragraph 42 it sets out the issue to be resolved:

"To answer the High Court's questions, it must be determined whether Article 5(1)(a) of the Directive entitles the trade mark proprietor to prohibit any use by a third party in the course of trade of a sign identical to the trade mark for goods identical to those for which the mark is registered, or whether that right of prohibition presupposes the existence of a specific interest of the proprietor as trade mark proprietor, in that use of the sign in question by a third party must affect or be liable to affect one of the functions of the mark." (emphasis added)

16. It will be appreciated that the first of these two alternatives is AFC's argument both in England and before the ECJ – any use of the mark in the course of trade on identical goods would be an infringement. The second is that infringement only occurs where the defendant's use affects or is liable to affect one of the functions of the mark. This, in substance, is the defendant's argument.

17. The Court then considered what are the functions of a trade mark at paragraphs 47 to 52:

"47. Trade mark rights constitute an essential element in the system of undistorted competition which the Treaty is intended to establish and maintain. In such a system, undertakings must be able to attract and retain customers by the quality of their goods or services, which is made possible only by distinctive signs allowing them to be identified (see, inter alia, Case C-10/89 HAG GF [1990] ECR I-3711, paragraph 13, and Case C-517/99 Merz &Krell [2001] ECR I-6959, paragraph 21).

18. In that context, the essential function of a trade mark is to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin. For the trade mark to be able to fulfil its essential role in the system of undistorted competition which the Treaty seeks to establish and maintain, it must offer a guarantee that all the goods or services bearing it have been manufactured or supplied under the control of a single undertaking which is responsible for their quality (see, inter alia, Case 102/77Hoffinan-La Roche [1978] ECR 1139, paragraph 7, and Case C-299/99 Philips [2002] E.C.R. I-0000, paragraph 30).

19. The Community legislature confirmed that essential function of trade marks by providing, in Article 2 of the Directive, that signs which are capable of being represented graphically may constitute a trade mark only if they are capable of distinguishing the goods or services of one undertaking from those of other undertakings (see, inter alia, Merz & Krell, paragraph 23).

20. For that guarantee of origin, which constitutes the essential function of a trade mark, 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 illegally bearing it (see, inter alia, Hoffmann-La Roche, paragraph 7, and Case C-349/95 Loendersloot [1997] E.C.R. I-6227, paragraph 22). In this respect, the 10^th recital of the preamble to the Directive points out the absolute nature of the protection afforded by the trade mark in the case of identity between the mark and the sign and between the goods or services concerned and those for which the mark is registered. It states that the aim of that protection is in particular to guarantee the trade mark as an indication of origin.

21. It follows that the exclusive right under Article 5(1)(a) of the Directive was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions. The exercise of that right must therefore be reserved to cases in which a third party's use of the sign affects or is liable to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods.

22. The exclusive nature of the right conferred by a registered trade mark on its proprietor under Article 5(l)(a) of the Directive can be justified only within the limits of the application of that article."

23. These are important paragraphs since they contain the Court's analysis of the relevant legislation. It appears that that analysis may be summarised as follows. The essential function of a trade mark is to guarantee the identity of origin of the goods or services (paras. 48 1^st sentence, 50 1^st and last sentences, 51 last sentence). This is a guarantee of supply or manufacture from a particular source (para. 48 2^nd sentence). The exclusive right under Art 5(1)(a) is conferred for the purpose of protecting that essential function (para. 51 1^st sentence) but only for that purpose (para. 52). The limitation on the ability of a trade mark proprietor to use his rights is reinforced by paragraph 54 of the judgment:

"The proprietor may not prohibit the use of a sign identical to the trade mark for goods identical to those for which the mark is registered if that use cannot affect his own interests as proprietor of the mark, having regard to its functions. Thus certain uses for purely descriptive purposes are excluded from the scope of Article 5(1) of the Directive because they do not affect any of the interests which that provision aims to protect, and do not therefore fall within the concept of use within the meaning of that provision (see, with respect to a use for purely descriptive purposes relating to the characteristics of the product offered, Case C-2/O0 Hölterhoff [2002] ECR I-4187, paragraph 16)."

24. Mr Thorley accepts that the second sentence of this passage is exemplary, not definitive.

25. It appears from the above analysis that the ECJ held that where the defendant's use of a mark is not intended by him, or understood by the public, to be a designation of origin, there can be no infringement because such use does not prejudice the essential function of the registered mark. If that is so, then the first question in the reference should have been answered in the affirmative. However it will be seen that the ECJ did not answer that question in the affirmative or the negative but only stated that "in the circumstances" of this case, the claimant should succeed.

The dispute between the parties on this hearing

26. Mr Wyand argues that what the ECJ has done is to interpret the Trade Mark Directive substantially in the sense advanced on behalf of his client but has concluded that the claimant should nevertheless win the action by finding that, "in the circumstances of this case", the use of the AFC signs by his client gave rise to a false indication as to the origin of his goods. Besides objecting to the ECJ embarking on a determination of facts, he says that the conclusion reached is incompatible with the findings at the trial which are referred to at paragraph 13 above. Mr Thorley argues that Mr Wyand has misconstrued what the ECJ has done. He says that paragraphs in the judgment on which Mr Wyand relies merely illustrate or exemplify the principles of law which had been discussed earlier in the judgment.

27. The first paragraph Mr Wyand criticises is paragraph 56 which reads as follows:

"56. Having regard to the presentation of the word 'Arsenal' on the goods at issue in the main proceedings and the other secondary markings on them (see paragraph 39 above), the use of that sign is 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."

28. Mr Wyand argues that the impression created by a mark is an issue of fact, not law. Furthermore, as confirmed by earlier and subsequent paragraphs of the judgment, the only link which is "material" is one which indicates trade origin. It follows that this passage constitutes not only a finding of fact but a finding which is inconsistent with those made at the trial and set out at paragraph 13 above. He says that the same approach is to be found in paragraphs 57 of the judgment:

"57. That conclusion is not affected by the presence on Mr Reed's stall of the notice stating that the goods at issue in the main proceedings are not official Arsenal FC products (see paragraph 17 above). Even on the assumption that such a notice may be relied on by a third party as a defence to an action for trade mark infringement, there is a clear possibility in the present case that some consumers, in particular if they 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."

29. Mr Wyand argues that this is the language used in a classic determination of what is likely to happen in the marketplace. The conclusion referred to in the first line of this passage is a reference back to the finding in paragraph 56. What the ECJ is saying is that such a finding is not affected by disclaimers on Mr Reed's stall. Once again this is a determination of an issue of fact, not a question of law. Furthermore the second sentence of this passage is a finding that it is likely that some consumers will interpret the sign as designating origin. This is in direct conflict with paragraph 58 of the April 2001 judgment in the High Court in which I held that the signs "would not be perceived as indicating trade origin". Mr Wyand says that the same approach can also be seen in the next three paragraphs of the judgment:

"58. Moreover, in the present case, there is also no guarantee, as required by the Court's case-law cited in paragraph 48 above, that all the goods designated by the trade mark have been manufactured or supplied under the control of a single undertaking which is responsible for their quality.

In those circumstances, the use of a sign which is identical to the trade mark at issue in the main proceedings is liable to jeopardise the guarantee of origin which constitutes the essential function of the mark, as is apparent from the Court's case-law cited in paragraph 48 above. It is consequently a use which the trade mark proprietor may prevent in accordance with Article 5(1) of the Directive."

30. The argument advanced by Mr Wyand is reinforced by the terms of paragraph 61 of the judgment:

"61. Once it has been found that, in the present case, the use of the sign in question by the third party is liable to affect the guarantee of origin of the goods and that the trade mark proprietor must be able to prevent this, it is immaterial that in the context of that use the sign is perceived as a badge of support for or loyalty or affiliation to the proprietor of the mark."

31. The finding "in the present case" referred to in the first line of that paragraph is one of fact. The nature of the finding is that set out in the first two lines, namely that use of the sign in question is liable to affect the guarantee of origin of the goods. If one inquires in relation to the words "once it has been found", who has made that finding, the answer is the ECJ. That finding is at odds with the finding in the High Court.

32. It appears to me that Mr Wyand's analysis is correct. The ECJ has disagreed with the conclusions of fact reached at the trial and indicated that the claimant should win because Mr Reed's use was such as would be perceived by some customers or users as a designation of origin. If this is so, the ECJ has exceeded its jurisdiction and I am not bound by its final conclusion. I must apply its guidance on the law to the facts as found at the trial.

33. This is a most unattractive outcome. It is in no one's interest, even Mr Reed's, for there to be such a difference between the views expressed by the High Court and the ECJ. The courts of this country cannot challenge rulings of the ECJ within its areas of competence. There is no advantage to be gained by appearing to do so. Furthermore national courts do not make references to the ECJ with the intention of ignoring the result. On the other hand, no matter how tempting it may be to find an easy way out, the High Court has no power to cede to the ECJ a jurisdiction it does not have.

34. In these circumstances there are few options open to me. Mr Thorley suggests that one possibility would be to send another reference to the ECJ. The problem with this is that it is very difficult to see what question could be asked. It is also not realistic to have a further hearing designed to elucidate further facts which can then be applied to the law as clarified by the ECJ. For better or worse, all the relevant facts have already been determined. In my view, the only course is for me to apply the ECJ's guidance on the law to the current findings of fact made in the High Court. This means that the defendant wins on the issue of trade mark infringement. The correct route of appeal is to the Court of Appeal. Unlike the ECJ, it will have all the evidence before it and will give the parties the opportunity to argue what the proper findings of fact should be. It might come to the conclusion that the findings in last year's judgment are incorrect in whole or in part and that Mr Reed's use of the AFC signs, or the use of some of them – for example the logos, would be perceived as indicating trade origin to those who may buy or use his products. If so, the appearance of inconsistency between the English courts and the ECJ will disappear.

35. I should mention that both Mr Wyand and Mr Thorley suggest that the ECJ may well have intended to interpret the Directive in a way which gives rise to a scope of protection for trade marks somewhere between the narrow construction advanced on behalf of Mr Reed and the broad construction advanced on behalf of AFC. Unfortunately, they could not agree on what this intermediate construction is. I do not accept that this is what the Court did. In the circumstances it is not necessary to consider whether it would be necessary to make provision for a further hearing so that each party could, for the first time, advance arguments on the facts as to that middle ground.