Lego Loses Trademark Battle in Canada
March 27, 2006

In a unanimous decision (2005 SCC 65) released in November 2005, the Supreme Court of Canada ruled that trademark law cannot be applied to prevent competitors from selling toy building blocks that look like the basic LEGO blocks. The decision emanates from an action brought against a Canadian company, Ritvik Holdings Inc. (now Mega Bloks Inc. (“Mega Bloks”)), by Kirkbi AG (“Kirkbi”), the Danish manufacturer of LEGO toys, and Lego Canada Inc., the Canadian distributor. The action was dismissed by the Federal Court,  and appeals to both the Federal Court of Appeal and the Supreme Court of Canada were unsuccessful.

The well-known LEGO blocks have been manufactured and sold around the world for over 50 years.

As part of the circumstances which appear to have influenced the Court, Kirkbi owned a number of (now expired) patents in Canada and elsewhere for its LEGO blocks which protected the pattern of studs on the top of the blocks. In Canada, the last of Kirkbi's patents expired in 1988. After that date, Mega Bloks began to market a line of competing building blocks, virtually identical in size and shape to the LEGO blocks. Not only do the Mega Bloks blocks compete with the LEGO blocks, they can be used interchangeably with them. Within the past decade, Mega Bloks has become a major competitor to Kirkbi both in Canada and in many other countries.

Kirkbi had tried unsuccessfully to obtain a trademark registration in Canada for the shape or design of its LEGO blocks. Kirkbi also sued Mega Bloks for passing off under section 7(b) of the Trademarks Act, a provision that can be used to protect unregistered trademarks.

There was evidence of actual confusion, where consumers believed that the Mega Bloks products originated from Kirkbi. Thus, if the LEGO blocks were subject to trademark protection, it appeared that Kirkbi would succeed on the basis of passing off. However, a major hurdle was that the Kirkbi design was apparently acknowledged by both parties to be functional.

The issue before the Supreme Court was whether a purely functional design could be the subject of trademark protection in Canada. The Court confirmed that Kirkbi’s design was purely functional and held that "[a] purely functional design may not be the basis of a trademark, registered or unregistered."

The Court was concerned that the "mark" in this case was not a symbol applied to a product, but rather was the product itself. The Court stated that trademark law is "not intended to prevent the competitive use of utilitarian features of products…". Moreover, the Court emphasized that it is necessary for the public to be able to distinguish the mark from the product itself.

It appears to have been particularly damaging to Kirkbi that it had previously obtained patent protection relating to its blocks. The Court suggested that there is a presumption that the features claimed in a patent are purely functional. The Court reasoned that it would be inappropriate to apply trademark protection to those features as it would result in "overextending monopoly rights on the products themselves and impeding competition, in respect of wares sharing the same technical characteristics."

The decision in this case is consistent with a case decided by the Federal Court of Appeal in 1995, Remington Rand Corp. v. Philips Electronics N.V. (1995), 64 C.P.R. (3d) 467 (F.C.A.). In that case, the validity of Philips' trademark registrations was challenged. The registrations depicted three circular heads on an electric shaver oriented to form an equilateral triangle. The Federal Court of Appeal ruled that Philips’ trademark registrations were invalid because they related to features which were primarily functional.

As another ground of defense in the LEGO case, Mega Bloks challenged the constitutional validity of section 7(b) of the Trademarks Act as being outside the jurisdiction of federal legislative power. The Court rejected this argument and upheld the validity of the provision.

While the Supreme Court has confirmed the prevailing view that features that are purely (or primarily) functional will not be protectable as trademarks, the question remains regarding when such features are to be considered purely (or primarily) functional.

Philip D. Lapin, Ottawa

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