On 31st March 2009 the Court of The Hague ruled on whether use of a character under licence meant use of the trademark. The case involved the use of the TELETUBBIES trademark on merchandising products. The question at issue was whether such use could be interpreted as use of the trademark with the intention to inform the public as to the origin of the products involved.

Merchandising products
Ragdoll Productions (UK) Ltd is the creator of Teletubbies, a television programme intended for very young children. The main characters are Tinky Winky, Dipsy, Laa-Laa and Po. The programme was a major success and was soon followed by merchandising products offered either by Ragdoll directly or through its licensees. Products included dolls representing the four characters, as well as other toys, books and children’s clothes showing pictures of the four characters.

The court had previously decided that consumers might interpret the word "Teletubbies", as shown on certain merchandising products, as a reference to the characters, and that the popularity of the merchandising products lay in this reference. The judge ruled that the word "Teletubbies" was not used in merchandising activities to differentiate goods and did not serve to inform the public about the origin of the products. A trademark should guarantee consumers that all labelled products have been manufactured by or under the inspection of the same company, which can be held liable for the quality of these products.

According to the judge, if a trademark is used for merchandising purposes the name is not used as a trademark. A trademark can obtain recognition as such only if it is indeed used as a trademark. In short, it was held that using the word "Teletubbies" was not the same as use of a trademark.

Ragdoll successfully appealed this decision. On appeal the court held that if the trademark was attached to products intended for consumer sales, it could be used to differentiate the products if use could give the impression that within the economic environment, a material link existed between the products and the owner. In other words, using the word "Teletubbies" on merchandising products was equivalent to use of a trademark.

Public opinion
This judgment clarified the situation regarding the use of trademarks. The main function of using a trademark is to communicate its origin - and this principle used to be strictly maintained. However, through this judgment the court indicated that in order to decide whether the trademark actually served that purpose, public opinion was significant. This case involved the reasonably informed, cautious and observant average consumer of the merchandising products at issue. If the public interprets the use of the trademark on merchandising products as a guarantee of the original identity of the goods and services, in the sense that the consumer can rely on these without fear of confusing the products and services with products and services from a different source, this constitutes use of a trademark.