The New Zealand Court of Appeal (Court) has delivered its judgment finding toymaker Zuru New Zealand Limited (Zuru) did not infringe on LEGO’s trade mark when it included “LEGO® Brick Compatible” on the packaging of its plastic brick toy “MAX Build More For Less.” This decision, which differs substantively to the High Court’s approach, will have implications in the world of advertising and intellectual property law.
A short background
In 2018, Zuru started including a statement on the packaging of its “MAX Build More For Less” plastic brick toys stating they were “LEGO® Brick Compatible”. In response, the Lego Group sent several cease and desist letters, resulting in the removal of stock from shelves and the introduction of new packaging which stated that the toys were “compatible with major brick brands” instead.
In 2021, Zuru recommitted to including the “LEGO® Brick Compatible” notice on its packaging and sought the Lego Group’s consent. When the Lego Group rejected the request, Zuru applied to the High Court for declaratory relief on the legality of its packaging.
The High Court decided that Zuru’s compatibility statement constituted trade mark infringement under the Trade Marks Act 2002 (TMA). The High Court found that Zuru could not rely on a comparative advertising defence or the exception for use of a trade mark to indicate the quality or purpose of the goods because Zuru had not engaged in honest practice and was taking advantage of the brand identity associated with the LEGO word mark.
The High Court did, however, dismiss the Lego Group’s counterclaim that Zuru’s packaging “constituted passing off or were false, confusing or liable to mislead the public”. The High Court found that the compatibility statement did not mislead the public into thinking that Zuru’s goods were made or endorsed by the Lego Group. Zuru appealed the High Court’s finding of trade mark infringement and its refusal to grant declaratory relief.
Court of Appeal’s Findings
The Court was unanimous in allowing Zuru’s appeal and providing declaratory relief.
Function of a trade mark
The function of a trade mark was defined as a “badge of origin” for the registered owner’s goods or services, which essentially indicates the origin of goods or services. After considering the positioning of the compatibility statement, and the size of the “MAX Build More For Less” mark, the majority of the Court determined that Zuru’s use of the LEGO sign had not been used as a “badge of origin”. Instead, the Court found that Zuru had used the LEGO sign descriptively to indicate the compatibility of the MAX bricks.
While on the face of it, the use of any registered trade mark might look like infringement, the mark is required to be used as a trade mark. Since the Court found Zuru had not used the LEGO sign as a trade mark, Zuru could not have committed trade mark infringement.
Comparative Advertising
The Court also considered the High Court’s view on what constituted comparative advertising. It found the High Court took a narrow definition of comparative advertising and rejected the requirement of direct comparison and superiority claims. The Court found “LEGO” was used as comparator for, or to describe, a feature of the Zuru bricks. It found compatibility could be a form of comparison and that the “LEGO® BRICK COMPATIBLE” statement would fall under the comparative advertising regime under the TMA.
The Court’s judgment went on to consider the “honest practices” element of comparative advertising, with a focus on whether the statement is true and non-misleading. The Court did not consider that a competitor’s aggressive marketing strategy, in itself, would constitute dishonest practice.
Given the Courts’ conclusion that Zuru had not used the Lego sign as a trade mark, it did not need to decide the comparative advertising point. It did however confirm that if it was wrong in relation to the use as a trade mark, it would have found that Zuru could have relied on the comparative advertising defence.
Conclusion
The Court determined that Zuru did not infringe Lego’s trade mark. The Lego Group had cross-appealed the rejection of passing off arguments by the High Court. The Court of Appeal found that consumers are not easily fooled and would not reasonably consider Zuru products to be made by, or associated with, Lego.
If you are considering including reference to a third party product in your next advertising campaign this case builds a good base for assessing when such use may be permitted or where it may turn into trade mark infringement. If you have any questions about New Zealand trade mark law please get in touch with our Corporate & Commercial Team or your usual contact at Hesketh Henry.
Julika and Daniel gratefully acknowledge Bryn Dingemans (summer clerk) as co-author of this article.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
