|Volume 10 Number 8c august 11, 2003|
Kirkbi AG et al. v. Ritvik Holdings Inc.
On May 24, 2002, Honourable Justice Gibson of the Federal Court, Trial Division, dismissed the action for trade mark infringement filed by Kirkbi AG and Lego Canada Inc. ("Lego") against Ritvik Holdings Inc., manufacturers of the MEGA BLOKS construction toys(1). Justice Gibson concluded that the "LEGO Indicia trade mark" in issue was not a valid trade mark due to the doctrine of functionality. Lego appealed the decision and the Federal Court of Appeal rendered judgment on July 14, 2003.
The appeal raised two questions:
Reasons for judgment were delivered by Honourable Justice Sexton, to which concurred Honourable Justice Rothstein. Honourable Justice Pelletier delivered dissenting reasons.
Honourable Justice Sexton briefly reminds the facts that led to litigation.
Both Appellants are members of the Lego Group, a world-wide group of companies owned by the Kristiansen family of Denmark. Respondent, Ritvik Holdings Inc. ("Ritvik"), is the successor of Ritvik Toys Inc., a Canadian company who made and sold the MEGA BLOKS toys. Ritvik has changed its corporate name to Mega Bloks Inc. ("Mega Bloks").
The first generation of the LEGO bricks, in the 1940s, were derived from construction toys with cylindrical knobs designed, manufactured and sold by Mr. Page under the brand name KIDDICRAFT. Mr. Page patented his self-locking bricks in the United Kingdom, France and Canada (the "Page patents"). Through the acquisition of the Page patents and by obtaining improvement patents, Lego retained a monopoly on the interlocking system for construction bricks for approximately 50 years, from the 1940s to 1988, when the last Lego patent expired.
Lego then began attempting to acquire another form of protection through the law relating to trade marks. The top part of the LEGO brick, the most well known configuration of which presents 8 cylindrical uniform knobs, is now referred to as the "LEGO Indicia trade mark". The trade mark is not registered.
The first issue addressed by the Federal Court of Appeal is the standard of review. The Court states that the question of determining whether the LEGO Indicia are primarily functional is a plain finding of fact and thus, the standard of review of palpable and overriding error must apply. The question of whether a trade mark is valid when it is primarily functional is a question of law and the standard of review on that issue is that of correctness.
The Federal Court of Appeal states that there is no palpable and overriding error in the finding of the Trial Judge that the LEGO Indicia are purely functional in all respects save for the inscription of the mark LEGO on each stud.
The Court then moves on to the analysis of the doctrine of functionality and reminds the purpose or policy applying to this doctrine of functionality, which is to ensure that no one indirectly achieves the status of patent holder through the guise of a trade mark. After an extensive review of the case law, the Court is of the opinion that Lego has contravened this policy and that the Trial Judge was correct in finding that the LEGO Indicia was invalid for this purpose.
The majority dismisses the appeal.
Honourable Justice Pelletier, dissenting:
Honourable Justice Pelletier distinguishes between registered and unregistered trade marks. While the former confers a monopoly on the use of the trade mark as provided in the Trade Marks Act, the latter does not allow its owner to claim the exclusive right to use the trade mark. The rights of the owner of an unregistered trade mark are limited to ensuring that the trade mark is not used in such a way as to create confusion as to the origin of the goods. Such owner would not have an enforceable right to prevent non-confusing use of its trade mark by others. This limited right does not amount to "evergreening", i.e. the extension of patent rights by the use of trade mark law.
With respect to functionality, Honourable Justice Pelletier states that neither the statutory nor the common law definition of a trade mark preclude trade marks which are primarily functional. The doctrine of functionality arises in the jurisprudence. The cases which proscribe functional trade marks arise in the context of registered trade marks, and proceed from a concern that trade mark law not be used to acquire monopoly rights with respect to functional elements. Since one only acquires monopoly rights by registration, there is no need to apply the policies against monopolies to unregistered trade marks.
As a result, Honourable Justice Pelletier finds that the doctrine of functionality does not deprive the LEGO Indicia of the status of a trade mark. The LEGO Indicia is thus capable of supporting an action under subsection 7(b) of the Trade Marks Act.
The learned judge then turns to a consideration of whether the three elements of such an action, i.e. the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage to plaintiff, have been shown.
The Trial Judge concluded that Lego has goodwill that derives in some measure from the LEGO Indicia. This is a finding of fact and there is no basis upon which an appellate court could interfere with the Trial Judge’s conclusions on this point.
On the issue of misrepresentation, the Trial Judge found that consumers were confused by Ritvik’s use of the LEGO Indicia but that such confusion was not the result of a deliberate strategy on Ritvik’s part, and that, therefore, misrepresentation had not been established. The question as to whether misrepresentation must be deliberate or intentional is a question of law. Based on doctrine and case law, Honourable Justice Pelletier states that misrepresentation in an action for passing off need not be the result of an intentional scheme. This element was therefore established upon proof of confusion.
Finally, on the issue of loss, Honourable Justice Pelletier cites the findings of the Trial Judge that "it is beyond doubt that the plaintiffs, and more broadly, the Lego group, have suffered damages by reason of the entry of Ritvik into the Canadian construction toy market with its MICRO MEGA BLOKS line of construction toys."
As all three elements of cause of action have been satisfied, Honourable Justice Pelletier would allow the appeal.
(1) 2002 FTC 585; (2002) 20 C.P.R. (4th) 224;  F.C.J. No. 793. A summary of the decision was published in TeleMark volume 9, number 6b, 7 June 2002.
Kirkbi AG and Lego Canada Inc. v. Ritvik Holdings Inc. (now operating as Mega Bloks Inc.), Federal Court of Appeal, 2003 FCA 297, Docket A-395-02, 14 July 2003, Honourable Justices Rothstein, Sexton, Pelletier.