LEGO blocks are among the most readily identifiable childhood toys. Intuitively then, many consumers might find it difficult to believe that courts would allow another manufacturer to produce and sell an outright copy.
Nevertheless, the Federal Court of Appeal in Kirkbi and Lego Canada v. Ritvik Holdings produced exactly that result. The decision brings Canada in line with decisions by courts in other countries, including the United States and England, which have considered the blocks.
Kirkbi and Lego Canada are both members of the Lego Group of Companies. Lego markets construction blocks characterized by cylindrical studs on their upper surfaces which enable the blocks to attach to each other. Ritvik sells substantially identical blocks in association with the trade-mark MEGA BLOKS that can be used interchangeably with the LEGO product. Kirkbi and Lego commenced an action against Ritvik under paragraph 7(b) of the Trade-marks Act ("Act") alleging that Ritvik was passing-off its blocks for those of Lego. Lego claimed that it had acquired trade-mark rights in the look of the upper surface of its toy block. The trial judge agreed that the appearance of Lego’s blocks had become distinctive of Lego, but concluded that function dictated form. Following previous jurisprudence, which held that a trade-mark on a product shape cannot be a primarily functional feature of that product (termed by some the "doctrine of functionality"), the judge dismissed Lego’s action. Lego appealed.
On appeal, Lego did not dispute that its mark was primarily functional. Instead, it argued, as it had at trial, against the rejection of protection for primarily functional, unregistered marks. It sought to limit the "doctrine of functionality" to trade-marks registered under the Act. Because Lego had not registered its alleged mark, Lego claimed that the doctrine of functionality did not apply.
By a 2:1 majority, the court reiterated that a primarily functional element of a product cannot act as a trade-mark. The upper surface of the LEGO block cannot be a trade-mark because it serves an obvious function for the block. The majority’s lengthy review of the jurisprudence in this area provides some further guidance:
- Any combination of elements that forms a part of a product and that is primarily designed to perform a function (other than simply acting as a trade-mark) is not a trade-mark in which rights are enforceable. The opposite result would prevent others from exploiting the functional elements of that product.
- "Peripheral" or "secondary" functionality is allowed. The court used the example of a valid trade-mark consisting of a working phone number used by a pizza restaurant. The phone number is functional, but it is not functional in the sense of being a part of the pizza itself.
- The existence of a prior patent that covers the feature claimed to be a trade-mark is evidence that the feature is primarily functional.
- Functionality is a pure question of fact.
According to the court, the policy consideration behind the prohibition on functionality is "to ensure that no one directly or indirectly achieves the status of patent holder through the guise of a trade-mark." Lego had managed to maintain a monopoly on its toy blocks for a period of approximately 50 years through a succession of patents, with the last Canadian patent having expired in 1988. The court felt that Lego should not be able to obtain perpetual or "evergreen" protection by way of trade-mark rights of features which had been claimed in the patents.
The dissenting judge accepted Lego’s argument that the doctrine of functionality should apply only to registered, and not unregistered, trade-marks. He would have allowed Lego’s action for passing off, finding that the LEGO trade-mark is enforceable.
The dissenting judge said that a registered trade-mark has greater substantive rights than an unregistered mark. In his opinion, only a registered trade-mark gives a trade-mark holder the right to exclusive use of that mark. In contrast, he said, a competitor is entitled to use another’s unregistered mark provided that the competitor uses additional material to sufficiently distinguish its product from that of the trade-mark owner. In the latter case, there would be no harm in allowing an unregistered mark to be primarily functional because a competitor could still use those functional elements by ensuring that its product is sufficiently distinguishable in other ways. The majority disagreed with this approach, noting that it would lead to the illogical result of parties electing not to register trade-marks where their marks have functional elements.
It is now clear that a primarily functional element of a product cannot be an enforceable trade-mark in Canada. Businesses should be wary of developing a brand based on a mark having functional elements. Even if others can design around the shape of the product to achieve the same function (for example, square studs instead of round), there is still a risk of having the mark found unenforceable.
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