The European Court of Justice's (ECJ) advocate general Damaso Ruiz-Jarabo said on Thursday that the trader, Matthew Reed, was not entitled to use Arsenal's trade marked logos for commercial purposes.
"Use of a trade mark by anyone other than the proprietor with the purpose of supplying goods in the market... constitutes commercial use," the advocate general said.
Mr Ruiz-Jarabo's opinion, which will be considered by the court when it meets to make its final decision, increases Arsenal's chances of winning the case.
Customers warned
The full court follows the advocate general's opinion in 80% of cases, the ECJ said.
Mr Reed has been selling merchandise bearing Arsenal's crest and cannon logo outside the club's north London stadium for more than 20 years.
He had argued in court that he was using the Arsenal logos not as trademarks, but as "badges of allegiance".
He added that he had prominently displayed notices informing customers that the products on sale were not official Arsenal merchandise.
Arsenal football club makes an estimated £5m a year through merchandise sales.
The ECJ will make its final decision later this year.
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