Lego loses monopoly in toy bins of nation
DAVID CANTON - For the London Free Press - December 22, 2005 Read this on Canoe
The Supreme Court of Canada recently released its decision in the Lego trade-mark case. The company that produces Lego was trying to stop a competitor from making Mega Bloks on the grounds the post design was a trade-mark.
The Court did not agree with Lego.
Lego held a patent on its toy building blocks that expired in 1988. Mega Bloks saw this as an opportunity to capitalize on the popularity of Lego and brought to market a line of small blocks, identical in size to Lego, which used the same pattern of stubs on top.
They are completely interchangeable with Lego blocks and are essentially different only in name. Mega Bloks have become a significant global competitor of Lego over the past 10 years.
Not surprisingly, Lego was unhappy about giving up market share in a market they had created and held a monopoly on for the last 50 years. With an expired patent, however, their options for legal recourse were limited.
Lego argued to the Supreme Court the Lego shape was a trade-mark and subject to trade-mark protection.
The purpose of patents is to protect new products and processes. In exchange for public disclosure of an invention, patent law grants a time-limited monopoly to the patentee on the use and marketing of the subject matter of the patent. This is different from a trade-mark.
In the case of trade-marks, the focus shifts from the product itself to the distinctiveness of its marketing. Think of a trade-mark as product branding. Trade-marks are meant to indicate the source of the particular product, process or service in a distinctive way so consumers know what they are buying and from whom.
Another difference is there is no time limit to trade-mark protection.
In the Lego case, the Supreme Court of Canada was forced to answer the question of whether the trade-mark can be the product itself.
In answering this question, the court had to consider that to consumers the product called Lego represents small colourful building blocks, with their clever locking system. And so, Lego argued, if Mega Bloks was allowed to manufacture these small blocks which look just like Lego, customers would not easily be able to identify that they are not Lego blocks and the source of the product could not easily be distinguished by consumers.
Lego sought either an injunction permanently preventing Mega Bloks from producing the blocks, or alternatively, to force Mega Bloks to actively disclaim that it manufactures and sells Lego bricks.
The Supreme Court did not agree the design was subject to trade-mark protection. The court affirmed that trade-marks are used to identify the source of a product, not to define or limit a product. In other words, trade-marks relate to brand awareness, not function. Lego was essentially trying to use their trade-mark to achieve the same rights as they had when the design was patent protected.
The Lego name, whether on the product, its packaging or in its advertising remains protected, but its monopoly on the product themselves was over. As the Supreme Court put it, "Lego's monopoly on the bricks is over, and Mega Bloks and Lego bricks may be interchangeable in the bins of the playrooms of the nation -- dragons, castles and knights may be designed with them, without any distinction."
Now that the two products must share space in toy bins and store shelves, so too must the companies learn to share the same market.