Kirkbi AG v. Ritvik Holdings Inc., 2003 FCA 297 (2003)

Parts:Kirkbi AG v. Ritvik Holdings Inc.
Reporting Judge:ROTHSTEIN J.A.
Docket Number:A-395-02
 
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Date: 20030714

Docket: A-395-02

Citation: 2003 FCA 297

CORAM: ROTHSTEIN J.A.

SEXTON J.A.

PELLETIER J.A.

BETWEEN:

KIRKBI AG and LEGO CANADA INC.

Appellants/Plaintiffs

and

RITVIK HOLDINGS INC./GESTIONS RITVIK INC.

(now operating as MEGA BLOKS INC.)

Respondent/Defendant

Heard at Toronto, Ontario, on March 5, 2003.

Judgment delivered at Ottawa, Ontario, on July 14, 2003.

REASONS FOR JUDGMENT BY: SEXTON J.A.

CONCURRED IN BY: ROTHSTEIN J.A.

DISSENTING REASONS BY: PELLETIER J.A.

Date: 20030714

Docket: A-395-02

Neutral citation: 2003 FCA 297

CORAM: ROTHSTEIN J.A.

SEXTON J.A.

PELLETIER J.A.

BETWEEN:

KIRKBI AG and LEGO CANADA INC.

Appellants/Plaintiffs

and

RITVIK HOLDINGS INC./GESTIONS RITVIK INC.

(now operating as MEGA BLOKS INC.)

Respondent

REASONS FOR JUDGMENT

Sexton J.A.

[1] This is an appeal from the decision of Gibson J., which dismissed the Appellants' trade-mark infringement ("passing off") action, pursuant to paragraph 7(b) of the Trade-marks Act , R.S.C. 1985, c. T-13, as amended ("the Act ") because the "LEGO Indicia trade-mark" in issue was not a valid trade-mark due to the doctrine of functionality. This decision is reported at (2002), 20 C.P.R. (4 th ) 224; [2002] F.C.J. No. 793.

[2] The issue in this case, therefore, is whether a trade-mark which is primarily functional in nature can sustain an action for passing-off under paragraph 7(b) of the Act .

Facts

[3] The Appellant, KIRKBI AG, is a Swiss corporation with its head office in Switzerland. It is a holding company whose business is the management of assets, including trade-marks. It was a plaintiff in the trial action.

[4] The Appellant, LEGO Canada Inc., was incorporated under the laws of Ontario in May 1988, and has its head office in Richmond Hill, Ontario. It, too, was a plaintiff in the main action.

[5] Both Appellants are members of the LEGO Group of Companies, a world-wide group of which KIRKBI AG and LEGO Canada Inc. are but two. The LEGO Group also includes INTERLEGO A.G., INTER LEGO A/S, and LEGO Systems Inc. KIRKBI AG is owned by Mr. Kjeld Kirk Kristiansen and his sister, and LEGO Canada Inc. is owned by INTERLEGO A.G., which is wholly owned by Mr. Kjeld Kirk Kristiansen.

[6] The Respondent, Ritvik Holdings Inc., is a company incorporated under the laws of Canada with its head office in St. Laurent, Quebec. Ritvik Toys Inc., once on the style of cause of this action and since deleted and discontinued, made and sold the MICRO line of MEGA BLOKS toys in Canada until its dissolution in 1998. Since Ritvik Toys Inc.'s dissolution, Ritvik Holdings Inc. has made and sold the MICRO line of MEGA BLOKS toys in Canada. All of the assets and liabilities, including the liability in this action, of Ritvik Toys Inc. have been assumed by Ritvik Holdings Inc. ("Ritvik").

[7] The first generation of LEGO bricks were derived from construction toys with cylindrical knobs, designed, manufactured and sold by Mr. Henry Page under the brand name KIDDICRAFT. Mr. Page patented his self-locking bricks in the United Kingdom, Canada, and France. A historical examination of this patent protection is necessary, as it demonstrates the extent to which the Appellants, LEGO, have successfully extended their patent monopoly through the years. LEGO retained a monopoly on the interlocking functions or system for construction bricks for approximately 50 years - from the 1940s until 1988, when the last patent expired. While an improvement patent legally only protected the patentee for the improvement and not for the original invention, as a practical matter, it may be difficult to separate the two. The Page UK Patent No. 529,580 was issued on November 25, 1940. This patent related "to toy building blocks and like constructional elements and has for its object to improve the interlocking between the assembled blocks and the stability of the built up structure". The Page UK Patent No. 587,206 was issued on April 17, 1947, and was in force for 16 years. This patent related "to toy building blocks and consist[ed] in an improvement in or modification of the invention claimed in the Specification of my prior Patent No. 529,580". The Page Canadian Patent No. 443,019 was issued on July 22, 1947, and described at one point the patent claims as follows:

Toy building block comprising a hollow parallel-sided thin walled body with the cavity open at the face of the block, symmetrically disposed spaced apart projections on the face opposite the open face with said projections in pairs in one direction and at least two projections in each row, with the overall dimension of the bosses in either direction closely approximately the dimension of the cavity in that direction.

The Page UK Patent No. 633,055 was issued on December 12, 1949 and claimed "to provide an improved form of building block" with windows and doors. The Page UK Patent No. 673,857 was issued on June 11, 1952, and modified the invention by providing for a supporting sheet or base to make the lowest row of bricks rigid. These Page patents were acquired by LEGO. In fact, LEGO toys were sold in Canada during the term of the Page Canadian Patent No. 443,019. The Christiansen Canadian Patent No. 629,732 for LEGO was issued on October 24, 1961, and the Christiansen Canadian Patent No. 880,418 was issued on September 7, 1971. This 1971 patent was for "box-shaped building elements, each of which is provided on the upper surface with coupling studs serving to couple the element to a corresponding element by engagement between the side walls of the latter element". The studs were "spaced equally" and were of the "same dimensions". According to subsection 45(1) of the Patent Act , R.S.C. 1985, c. P-4, the term for patents based on applications filed on or before October 1, 1989 was limited to "seventeen years from the date on which the patent was issued". Therefore, the last LEGO patent issued in 1971 expired in 1988.

[8] As it will appear later, when this patent expired, LEGO began attempting to acquire another form of protection through the law relating to trade-marks. This is referred to as the "Lego Indicia trade-mark".

[9] In 1991, Ritvik began making and selling its MICRO line of MEGA BLOKS construction toys. The toys comprise oversized bricks intended specifically for infants, each brick having cylindrical projections or knobs on one side which connect into the opposite side of another brick without clutch power. It is this MICRO line that is the subject matter of this action. This line of building blocks now represents about one-half of Ritvik's world sales, and in 2001 Ritvik was the largest toy maker in Canada.

[10] It should be noted that LEGO brand construction toys and MEGA BLOKS brand construction toys are sold through the same channels of trade. Large retailers usually display all the construction toys together, and both brands in issue are usually found in the same section of a store.

[11] The "LEGO Indicia trade-mark" is usually described as the upper surface of the LEGO toy building block, having eight (8) protuberances or studs on the surface. All or some of the knobs or studs of one LEGO piece may be connected to all or some part of the underside of another LEGO piece. The "clutch power" between connecting pieces is developed by the friction between the knobs on the one piece and the tubes and/or walls of the underside of the other piece.

[12] The studs of the upper surface of the LEGO brick have remained an unmodified prominent feature of all LEGO bricks since 1949. Since at least 1958, "LEGO" has been inscribed on the top surface of each stud. The studs and their pattern are widely featured in promotional materials used by LEGO Canada in Canada, including television advertisements, point-of-sale materials and packaging.

[13] The Appellants assert that this shaping of the knob configuration of LEGO products constitutes a "distinguishing guise" and thus a trade-mark under the Act . The trade-mark is not registered.

Decision Below

[14] The Trial Judge held that KIRKBI AG has a proprietary interest in the LEGO Indicia. He also held that KIRKBI AG and LEGO Canada Inc. each have a sufficient "ownership" interest, in Canada, in the LEGO Indicia to qualify as plaintiffs in this action, and that if the LEGO Indicia is a trade-mark, then paragraph 7(b) of the Act is a valid legislative provision conferring on this Court jurisdiction to entertain this action.

[15] The Trial Judge further concluded that the LEGO Indicia is primarily functional and, therefore, not a valid trade-mark under the Act . He came to this conclusion in the following manner. The LEGO Indicia is a functional element of LEGO bricks, contributing to the "clutch power" that could be said to be the essence of the LEGO building block system. All the features of the LEGO Indica Mark are dictated by function, and the shape of the top surface of the LEGO basic brick is purely utilitarian.

[16] Explaining 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 (S.C.C.), the Trial Judge went on to state that the essence of a trade-mark is to distinguish the wares of an owner from those sold by others. Every form of trade-mark, including a distinguishing guise upon which the alleged LEGO Indicia trade-mark is based, is characterized by its distinctiveness. The Trial Judge agreed that a distinguishing guise may possess a functional element or component, but to the extent that such functionality relates primarily or essentially to the wares themselves it will invalidate the trade-mark. The following statement from Remington Rand was approved: "A mark which goes beyond distinguishing the ware of its owner to the functional structure of the wares themselves is transgressing the legitimate bounds of a trade-mark."

[17] The Trial Judge rejected the arguments...

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