A London street trader has lost a landmark legal battle to continue selling unofficial Arsenal merchandise.

The European Court of Justice has ruled in favour of the football club to stop trader Matthew Reed selling the merchandise outside its Highbury Stadium.

The verdict will be welcomed by major football clubs and sportswear manufacturers, who feared sponsorship deals could be undermined and millions of pounds lost if Mr Reed had won his case.

Pop group promoters and others who market official merchandise are also likely to welcome the ruling.

I might as well go all the way as this will affect a lot of small traders around the country

Matthew Reed

Mr Reed has been selling goods using the club name, its shield and its cannon emblem outside the stadium for 31 years.

He said he always made clear the goods were unofficial.

His argument that the logo was used as a "badge of allegiance" was accepted by the High Court in London.

But the European court overturned the decision on Tuesday and said Arsenal must be allowed to protect its trademark.

It ruled that trademarks must "play an essential part in the system of competition" and must constitute a guarantee of origin and quality.

The court found that where unofficial merchandise was sold, "a risk of confusion in the minds of supporters as to the origins of the products" could not be ruled out.

Appeal likely

Mr Reed said he will appeal against the decision to the British High Court.

He told BBC News: "I might as well go all the way as this will affect a lot of small traders around the country."

Lawyers for the club, which makes �5m a year from souvenirs, argued that it has exclusive rights to the names 'Arsenal' and 'Arsenal Gunners' and the team's shield-and-cannon designs.

The club registered its name and logos in 1989, by which time Mr Reed had been in business outside the club's Highbury stadium for nearly 20 years.

Despite the ruling, Mr Reed said he would be selling his goods outside the Arsenal ground on Tuesday and would await his solicitor's advice before deciding about the future.