The TeleMark

The official publication dealing with Canadian corporate and commercial law

June 7, 2002

VOLUME 9, NUMBER 6b

Summary

Jurisprudence in intellectual property law

KIRKBI AG and LEGO CANADA INC. v. RITVIK HOLDINGS INC.

COMPLETE TEXT OF THE JUDGEMENTS:
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JURISPRUDENCE IN INTELLECTUAL PROPERTY LAW

KIRKBI AG and LEGO CANADA INC. v. RITVIK HOLDINGS INC.

2002 FTC 585
Docket T-2799-96
Date: May 24, 2002
Justice Gibson

Can the “LEGO Indicia”, i.e. the top part of the LEGO brick with the 8 protuberances, be considered a trade-mark and has Ritvik infringed LEGO’s trade mark rights under Section 7(b) of the Trademark Act?

THE PARTIES

Kirkbi AG is a company incorporated in Switzerland. Lego Canada Inc. was incorporated under the laws of Ontario in May 1988. Both are part of a group of companies commonly referred to as the “Lego Group”, which also includes INTERLEGO A.G., INTER LEGO A/S, LEGO SYSTEMS INC. All companies of the Lego Group are owned, directly or indirectly, by the Kirk Kristiansen family. 


Ritvik Holdings Inc. is a company incorporated under the laws of Canada. Its head office and manufacturing facilities are located in Ville St-Laurent, Quebec. Ritvik Toys Inc. was incorporated in 1967 by Victor J. Bertrand and his wife Rita (the name “Ritvik” is derived from the combination of “Rita” and “Victor”), the parents of the current chief officers of the company. Ritvik Toys Inc. was dissolved in 1998 and all its assets and liabilities were assumed by Ritvik Holdings Inc. (“Ritvik”) 


THE TOYS

In 1947 or 1948, Ole Kirk Christiansen and his son Godtfred Kirk Christiansen, respectively grandfather and father of Kirk Kristiansen, obtained samples of KIDDICRAFT self-locking toys and these samples led them to make the first LEGO toys. KIDDICRAFT brick construction sets with cylindrical knobs were designed, manufactured and sold by Mr. Harry Fisher Page, a British citizen, and protected by patents in the United Kingdom, Canada and France . These patents were obtained between 1940 and 1952. 

LEGO plastic construction toys have been sold in Canada since 1949 and the exterior appearance of the 2 x 4 LEGO bricks has remained essentially the same since at least 1961. The trade mark LEGO is registered in Canada. 

In 1985, Ritvik began making and selling in Canada construction toys under the trade mark MEGA BLOKS. These toys comprised oversized bricks intended specifically for infants. Since 1991, these bricks have been sold under the trade mark MAXI MEGA BLOKS. In 1989, Ritvik introduced a smaller block now sold under the trade mark MINI MEGA BLOKS. In 1991, Ritvik began making and selling its MICRO MEGA BLOKS construction toys. The latter line of products is the subject matter of this action. The trade marks RITVIK, MEGA BLOKS and MICRO MEGA BLOKS are registered in Canada.

Ritvik’s MICRO MEGA BLOKS bricks are made from high impact polystyrene plastic and other materials. LEGO’s bricks are made of ABS plastic. LEGO brand construction toys and MEGA BLOKS brand construction toys are sold through the same channels of trade and are found in the same section in large retailers stores such as The Bay, Zellers, Toys ‘R’ Us, Sears, Wal-Mart and Price Club.

THE RELIEFS SOUGHT

Lego seeks to prove that Ritvik has directed public attention to its wares in such a way as to cause or to be likely to cause confusion in Canada. It is seeking from the Court:

1. A declaration that the Plaintiff Kirkbi is the owner of the LEGO indicia trade mark;

2. A declaration that Ritvik has infringed its rights in the trade mark, contrary to law and Section 7(b) of the Trade-marks Act;

3. A permanent injunction restraining Ritvik from
a. making, using, selling or offering for sale any product in association with the LEGO Indicia mark, or any trade mark or representation which is confusingly similar thereto; and
b. directing public attention to their wares or business in a way to cause or be likely to cause confusion with the wares or business of Lego;

4. A mandatory injunction to deliver up under oath, or under the supervision of the Court, all toys, including building bricks and other parts, moulds for production of same, and all packages, labels, advertising and other materials and to take steps to discontinue all other use of the LEGO indicia trade mark, including on software and on the Internet or, in the alternative, an Order that such materials be destroyed under oath or under the supervision of the Court;

5. Damages in the amount of $25,000,000.00 for passing off or, alternatively, an accounting of profit, as Lego may elect;


6. Pre and postjudgment interest;

7. All applicable taxes and costs;

8. Such further and other relief the Court may seem just.

In its counterclaim, Ritvik seeks:

1. A declaration that it is entitled to continue to make, offer for sale and sell in Canada its MICRO MEGA BLOKS bricks and its MINI MEGA BLOKS bricks;

2. Costs of counterclaim on a solicitor client basis or, alternatively, according to the higher end of Column V of Tariff B with all taxes;

3. Such further and other order the Court may seem just.

THE ISSUES

This case presents 5 main issues which can be summarized as follows:

1. Do the Plaintiffs have a legal interest in any trade-mark rights that they assert in Canada in respect of the “Lego Indicia”? (The Court concludes to the affirmative as “ownership” of a trade-mark is “acquired by adoption and use”).

2. Is the “Lego Indicia” a trade mark able to support an action under section 7(b) of the Trade-mark Act? (This trade mark is not registered in Canada)

3. Have the Defendants acted in a way to cause confusion in Canada between their toys and those sold by Lego?

4. Are the Plaintiffs disentitled to any or all of the relief claimed as a result of estoppel, laches or acquiescence?

5. Are the Defendants able to claim a limitation period and, if so, what is the applicable period?

THE LEGO INDICIA

The core of this action revolves around what is referred to as the “LEGO Indicia”. It is defined as “a rectilinear array of uniform, smooth-sided, flat-topped, cylindrical, co-planar protuberances, the proportions of height, diameter and center-to-center spacing of which are approximately 2:5:8. Where there is more than one row of protuberances, they are arranged in mutually orthogonal rows and columns.” A more simple definition can be phrased as the top part of the LEGO brick, the most well-known configuration of which presents 8 studs. This configuration is generally referred to as the “2 x 4 LEGO brick”.

LEGO asserts that the knob configuration is a “distinguishing guise” as defined in Section 2 of the Trade-mark Act, a trade-mark. Ritvik asserts that the “LEGO Indicia” is not a valid trade-mark for one or more of the following reasons:

1. it is functional;
2. it is claimed and/or disclosed in expired patents;
3. it is non distinctive; or
4. it was never used by LEGO as a trade-mark.

THE EVIDENCE

Substantial evidence was submitted by the parties. Lego called 17 witnesses, 9 of whom testified to the business of the LEGO group, 2 of whom testified as survey experts, 1 of whom testified as expert of LEGO’s and Ritvik’s marketing practices in Canada, and the remaining 5 testified to their experience in the purchase of toy building block product, more particularly on the issue of “confusion”.

Ritvik called 10 witnesses, 5 of whom testified as to the business of Ritvik. The remaining 5 provided expert testimony as to marketing, brand identification, brand management, surveys, engineering and development, etc…

A joint book of 17 volumes was presented to the Court. Lego filed 101 exhibits and 140 were filed on behalf of Ritvik.


THE “FUNCTIONALITY” CHARACTER AND THE LEGO INDICIA

Extensive evidence was submitted to the effect that the LEGO Indicia is a functional element of the LEGO bricks. All or some of the studs of a LEGO brick may be connected to all or some part of the underside of another LEGO brick. The friction between the studs on top and the underside is referred to as the “clutch power”. This “clutch power” enables the assembly of complex constructions.

The Court relied on the testimony of Mr. Donald E. Martin, who gave expert evidence on behalf of Ritvik. From 1977 to 1997, when he retired, Mr. Martin was employed as VP Engineering by TYCO Industries Inc. (“TYCO”). TYCO was the third largest toy maker in the United States. One of Mr. Martin’s achievements was the design and implementation of the manufacture of TYCO’s interlocking toy construction bricks.

The Court cites an excerpt of Mr. Martin’s testimony pertaining to functionality:

“I have carefully considered the so-called Lego Indicia Mark and, in my opinion, all its features are dictated by functional considerations and are necessary to achieve the required function of an interlocking brick. The shape of the top surface of the Lego basic brick is purely utilitarian. It is this feature that allows complex structures to be built.

All the features of the so-called Lego Indicia Mark are basic, rudimentary and functional. There is nothing arbitrary about the Lego Indicia Mark, or indeed to the basic brick. The Lego Indicia Mark embodies the simplest and most basic geometrical shape to achieve the desired functional result. Cylinders are the obvious engineering choice for the connecting knobs and are the first shapes that come to mind to a competent engineer.”

The Court states that if the LEGO indicia is a trade mark at all, either in the statutory or common law sense of that term, then it is such by reason of the fact that it is a distinguishing guise. The Court reviews the authorities submitted by Counsel for Ritvik and, more specifically, the decision in Remington Rand Corp v. Philips Electronics N.V., [(1995) 64 C.P.R. (3d) 467 (F.C.A.); leave to appeal refused (1996) 67 C.P.R. (3d) VI (note) (S.C.C.)]. The Court quotes Mr. Justice Mac Guigan in Remington:

“The essence of a distinguishing guise is thus identical with that of a design mark in that it serves to distinguish the wares of a registered owner from those sold by others.

It is clear that every form of trade mark, including a distinguishing guise, is characterized by its distinctiveness. A distinguishing guise, therefore, not being different in essence from a design mark, must be governed by the same considerations of functionality as a design mark, since the public policy basis is the same, viz., to distinguish wares from those of competitors, by monopolizing, not the wares, but the mark as used in relation to them. The trial judge may have been correct in stating that ‘a distinguishing guise necessarily possesses a functional element or component’ […] but to the extent that such functionality relates primarily or essentially to the wares themselves it will invalidate the trademark.

[…] A mark which goes beyond distinguishing the wares of its owner to the functional structure of the wares themselves is transgressing the legitimate bounds of a trademark.”

The Court concludes that the LEGO Indicia is functional in all respects save for the inscription of the mark LEGO on each stud and that functionality relates primarily or essentially to the wares themselves. 

DISTINCTIVENESS AND USE OF THE LEGO INDICIA AS A TRADE MARK

Distinctiveness may be inherent or acquired. Generally speaking, the shape of an article is not inherently distinctive. To become distinctive and achieve a reputation, the shape must acquire a secondary meaning in the minds of consumers and potential consumers so as to act as an indicator of source rather than as an indicator of product.

After reviewing the general criteria for a passing off action, the Court cites the decision of Mr. Justice Neuberger in an appeal from a refusal by the United Kingdom Trademarks Office to register the LEGO brick as a trade-mark in Interlego A.G.’s Trademark Applications [1998] R.P.C. 69 (H.C.J. – Ch. Div.):

“Here, there was, in light of the patent and in light of the evidence, a monopoly which was respectively both de jure and de facto up to the beginning of 1975; […]

The evidence filed on behalf of Interlego does not suggest that a single member of the public has confused any of the toy building bricks brought onto the market […] with Lego bricks. Thus, there is no evidence that members of the public or retailers, whether in this country or elsewhere, have been misled into thinking that Tyco (or other competitor) toy building bricks were in fact manufactured by the manufacturers of Lego bricks […]

The fact, which I have mentioned, that the public undoubtedly associates toy building bricks (with knobs on top and tubes on the underside) with Lego does not mean that either the knobs, whether taken alone or together with the tubes on bricks are trade marks.”

The Court does a further analysis of the issue of distinctiveness and use of the LEGO Indicia as a trade mark in its analysis of the elements of a passing off action.

PASSING-OFF

The Court reminds the 3 criteria for a passing-off action as summarized in Reckitt & Coleman Products Limited v. Borden Inc. and Ors, [1990] R.P.C. 341 (H.L.).

1. Plaintiff must establish a reputation or goodwill attached to the goods or services he supplies in the mind of the purchasing public by association with the identifying “get up” such as the “get up” is recognized by the public as distinctive of the plaintiff’s goods or services;

2. Plaintiff must demonstrate a misrepresentation by the defendant to the public leading or likely to lead the public to believe that defendant’s goods or services are those of the plaintiff;

3. Plaintiff must demonstrate that he suffers or is likely to suffer damages by reason of the erroneous belief of the purchasing public.

For the first criteria, after reviewing the experts’ testimonies, the Court finds that the LEGO Group has “goodwill” in the sense of benefit and advantage of the good name, reputation and connection of its business. However, the Court concludes that Lego’s goodwill is derived from the brand built around the Lego name and the Lego logo and not from the LEGO Indicia. The Judge concludes that, based on the evidence before him, the LEGO Indicia is not inherently distinctive and thus inherently capable of contributing to the LEGO group’s goodwill. He also notes that Lego did not give notice of claimed trade-mark rights in association with the LEGO Indicia.

With respect to the second criteria, deception of the public due to a misrepresentation, the Court must first determine if there is confusion or not. Against the test of “an ordinary person using ordinary care” in the market for construction toys and bearing in mind that consumer purchases in that market are heavily weighted to the pre-Christmas season, the Court concludes that there is a likelihood of confusion between the LEGO products and the MEGA BLOKS products. However, after reviewing the evidence, the judge is of the opinion that confusion was not a result of a deliberate strategy on the part of Ritvik and that Lego has failed to establish that confusion in the market place results from a misrepresentation by Ritvik.

ESTOPPEL, LACHES AND ACQUIESCENCE

The Court indicates that, based upon its previous findings, this point is now moot. The judge however reminds that the key factors are the length of the delay and the nature of the acts done in the interval. In this case, the Court is of the opinion that the evidence is insufficient to support a conclusion that Lego made any representation to Ritvik on which the latter relied to its detriment.

LIMITATION

Section 39 of the Federal Court Act, (R.S.C. 1985, c. F-7), provides that:

(1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in that province.
(2) A proceeding in the Court in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.”

The question in this case is to determine if the “cause of action” arises in a particular province or otherwise than in a province. If the conclusion is that the cause of action arose in a province, this province is Quebec and the applicable limitation period is 3 years. Otherwise, the 6 year period of Section 39(2) applies. 

The Court concludes that all sales by Ritvik are throughout Canada, its advertising and promotional programs are conducted throughout Canada, the point-of-sale displays are used throughout Canada and that confusion arose largely, if not entirely, in the minds of retail purchasers throughout Canada rather than in the minds of those who purchase at wholesale from Ritvik. Therefore, it cannot be said that all of the elements of the cause of action arose in Quebec or in any other particular province.