Rangers facing legal challenge as they cancel Sports Direct merchandise deal

But fans group Sons of Struth has refused to call off its boycott of club merchandise which was launched in protest against the deal with the Mike Ashley company.

Craig Houston, co-founder of the Sons of Struth, said the challenge to Mr Ashley's influence was just beginning.

"I would expect Ashley to challenge this legally," he said. "This is the start of the battle, it's not the end of it.

"In the future there may be merchandise to buy where the money goes to the club, but as it stands now, nothing changes, as Rangers effectively don't have a merchandise deal, so anyone that does manage to buy merchandise is not going to be helping Rangers Football Club.

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"If nobody buys any merchandise, and Rangers don't have a merchandise deal, Rangers will actually be no worse off than they have been for the last three years because we are making no money from it anyway.

"I would expect Ashley to challenge this legally. This is the start of the battle, it's not the end of it."

It is believed the move by Rangers is the first major step to remove Mr Ashley's influence over club merchandising and it is anticipated that it is an issue that will be resolved in court. It is understood the current deal means the Old Firm club make about 4p from every pound spent in its Ibrox store.

Despite the announcement, a Sports Direct logo remained listed as as an "official retail partner" on the Rangers official website with a link to sportsdirect.com.  Merchandise was still available for sale through an official website link to rangersmegastore.com. 

The trademarks agreements were a cornerstone of Rangers' merchandising joint venture with Ashley's company confirmed by then chief executive Charles Green in August 2012.

The joint agreement between Ashley and the Scottish Championship winners requires a seven-year notice period, unless Sports Direct agrees to end it, or further legal action seeks to tear up the contract.

It is understood there is also a clause allowing Sports Direct to force the club out of its shareholding in Rangers Retail, which runs the club's entire retail operation, if the relationship between the club and the retailer is “deadlocked”.

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There is also a controlling vote for Sports Direct on “financial matters” concerning Rangers Retail.

Club chairman Dave King has tried on several occasions to renegotiate the retail deal but has been rebuffed at every turn by Ashley, who is also owner of Newcastle United and has a near nine per cent stake in the Rangers.

But Ashley may be forced to ease his control of the club's commercial activities following Newcastle's relegation to the Sky Bet Championship as the governing body, the Football League operates stricter rules on dual ownership than in the English Premier League.

The club's strong stance came in a statement in which it said: "The Rangers Football Club Limited has today served notice on Rangers Retail Limited terminating the IP Licence and Rights Agreement with that company with immediate effect.

"The club now needs to speak to its commercial partners to agree the next steps flowing from the termination....

"The club will endeavour to communicate further with its supporters and customers for Rangers Kit and other Rangers products as soon as it is in a position to do so."

Intellectual Property Office records confirm that licences for club-related trademarks and logos remain with Rangers Retail at present.

Intellectual property experts said that the move looks destined to head to the courts to resolve.

Solicitor Georgie Collins, a leading expert in intellectual property from Irwin Mitchell said she felt the courts could end up deciding on any dispute.

"Unless it is clear cut they can terminate with immediate effect, then it sounds like there is going to be an issue about when they can terminate," she said.

Irfan Baluch, an intellectual property expert with solicitors Cripps said: "Usually a trademark licence will contain provisions that allow the licensor to terminate on reasonable notice, for example for convenience, AND other provisions that allow the licensor to terminate on immediate notice in the event that serious breaches of the licence were to occur, for example a derogatory use of the trademark or insolvency type events.

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"In giving notice, whether immediate or otherwise to terminate, it is usual to make reference to the particular clause of the contract which is being invoked to effect the termination. If the licensee did not agree with this rationale they could make an application to court...."

In February the Herald revealed that Rangers had regained the legal ownership of a host of Rangers and club-related trademarks and logos including the club name, Ibrox and The Gers, which were held by Mr Ashley and Sports Direct as security against a now repaid £5 million emergency loan taken by the club at the start of last year.

The development did not, however, stop Mr Ashley's Sports Direct having control over rights to exploit the valuable trademarks.

Ownership gives the holder the right to control what happens to the trademarks. In Rangers' case exclusive licences gave Rangers Retail controlled by Mike Ashley the right to exploit the relevant intellectual property rights.

Mr Ashley, however, remained the power within Rangers Retail.

In November it emerged Mr Ashley, joined the Rangers Retail board with club chairman Dave King. He remains on the board.

That meant Sports Direct had a majority influence over the company as Mr Ashley's allies outnumbered Dave King and director Paul Murray by three to two at boardroom level.

In March, Rangers gave Sports Direct formal notice that they intended to end the relationship with Ashley's firm. King said the retail deal contained "poorly negotiated agreements" signed by club representatives with a “clear conflict of interest”.

The Rangers Retail set up has been a long-lasting area of controversy and at the end of 2014 the Rangers Supporters Trust launched an alternative shirt for fans as they took on Mr Ashley - and said all profits would be ploughed back into an increased shareholding in their club.

The previous 10-year licence agreement with sports retailer JJB Sports rubber stamped in 2006, was worth a minimum of £48 million to the club. The club got an initial payment of £18 million when they launched an Umbro home kit and were guaranteed a minimum annual royalty of £3 million in each year of the licence.

Sports Direct were approached for comment but did not respond.

Watch: Dave King talks about the club's relationship with Sports Direct and Mike Ashley in May, last year. "The fans are not going to buy kit like they used to do unless they feel sufficient proceeds are going back into the club."