The Court of First Instance of the European Communities ("the CFI") this week ruled against Lego, the Danish toy company, in its long running dispute with rival toy manufacturer Mega Brands. The CFI cancelled Lego's Community Trade Mark registration for its iconic Lego brick, holding that the Lego brick was not entitled to trade mark protection as it was excluded as a sign the shape of which was exclusively necessary to obtain a technical result.

Business Impact

The case confirms that those wishing to obtain trade mark protection for functional shape marks still have to overcome the high hurdle of Article 7(1)(e)(ii) of Council Regulation 40/94 which prevents the registration of shape marks where the sign results exclusively from the shape of the goods necessary to obtain a technical result.

Brand owners seeking protection for trade marks depicting functional goods will need carefully to consider the court's decision, together with other types of protection that may be available (such as designs).

The relevant stand point from which to assess the functionality of the elements of a shape is that of an expert, not the consumer.

Background - the relevant law

Council Regulation 40/94 sets out in Article 7 the absolute grounds for refusal of registration of a Community Trade Mark (CTM). In addition to the general provisions of Article 7, in relation to shape marks, Article 7(1)(e) specifies an additional 3 grounds for refusal of registration. Each of the grounds applies where the sign under consideration consists exclusively of a particular type of shape, namely -

  • A shape resulting from the nature of the goods themselves (Article 7(1)(e)(i)) 
  • A shape of goods which is necessary to obtain a technical effect (Article 7(1)(e)(ii)) 
  • A shape which gives substantial value to the goods (Article 7(1)(e)(iii))

The Court had previously considered the application of Article 7, and specifically article 7(1)(e) in Case C-299/99 Philips [2002]ECR I-5475 (A case concerning a three-headed electric shaver) For our previous e-bulletin on this, please click here.

Facts of the Lego case

On 1 April 1996 Lego filed an application for a CTM at OHIM. The trade mark was a red three-dimensional sign.

The registration was granted in October 1999 in classes 9 and 28. Two days after its registration, Mega Brands (a Canadian competitor, manufacturer of Mega Bloks, a comparable product to Lego bricks) applied to OHIM for a declaration that the registration in class 28 (games and playthings) was invalid pursuant to Article 51(1)(a) of Council Regulation No 40/94 as the registration was contrary to Article 7. The grounds included a claim under Article 7(1)(e)(ii), that the registration was invalid as the mark was exclusively the shape of the goods necessary to obtain a technical result.

The proceedings were stayed pending the Philips judgment C-299/99, and were then resumed in 2002. In 2004, in a rare sitting, the Grand Board of Appeal of OHIM ("the Board"), declared the registration invalid for construction toys in class 28 finding that the mark at issue consisted exclusively of the shape of goods which was necessary to obtain a technical result. The Board said that Lego could not be given a trade mark because the brick's shape performed a technical function. Lego took its appeal to the CFI.

Lego put forward a number of arguments contesting the Board's judgement, both on the interpretation of Article 7(1)(e)(ii) and also on the assessment the Board made of the Lego brick which was the subject of the registration. 

  1. Interpretation of Article 7(1)(e)(ii)

The thrust of Lego's arguments were that the Board had misinterpreted the scope of Article 7(1)(e)(ii), in particular the terms "exclusively" and "necessary", which did not require interpretation in an extensive manner. Lego argued that the Board had erred by not taking into account the existence of functionally equivalent alternative shapes using the same technical solution. Lego said the rule on functionality was "not intended to exclude functional shapes per se from registration as a trade mark, but only signs which consist ‘exclusively’ of the shape of goods which is ‘necessary’ to obtain a technical result". Therefore, the only shapes falling within the provision would be those without any non-functional features, and which therefore create a monopoly on a technical solution if the registration were granted. In making these arguments, Lego sought to draw analogies with the US functionality doctrine and also concepts of patented inventions in patent law.

The CFI rejected all Lego's arguments on the Interpretation of Article 7(1)(e)(ii) (the "Article"). It stated that the Article should be read in the light of the expression "essential characteristics which perform a technical function" as used in the Philips decision. In doing so, the CFI thought it was then apparent from that expression that the addition of non-essential characteristics having no technical function would not prevent a shape falling foul of the Article if, in fact, all the essential characteristics of the shape performed such a function. Further the CFI did not accept that only those shapes the registration of which would create a monopoly, should be caught by the Article. It was sufficient that the essential characteristics of the shape of the goods caused the intended technical result, even if the result could be achieved by other shapes using the same or another technical solution. The CFI therefore confirmed the Board's interpretation of the Article. 

  1. Assessment of the essential characteristics of the Lego brick mark

The second limb to Lego's argument was that the Board had failed to identify correctly the essential characteristics of the Lego brick as depicted in the mark, and erred in assessing their functional nature. Lego argued that the Board had failed to identify the design and proportion of the studs on top of the brick (alone) as essential characteristics of the brick, but had rather viewed the brick as a whole, missing the point that the registration limited Lego's rights to bricks that had a similar arrangement and proportion of studs when building bricks could come with a wide variety of these. In addition, Lego submitted that the essential characteristics of a shape should be determined from the point of view of the relevant consumer, not by experts on a technical analysis and furthermore that evidence of actual consumer perception from surveys should be considered.

Again, the CFI rejected Lego's arguments confirming that the Board had looked at the essential characteristics of the Lego brick and had determined that they all had specific technical functions. The CFI also stated that the view of the consumer is not relevant when analysing the functionality of the essential characteristics of a shape as they "may not have the technical knowledge necessary to assess the essential characteristics of a shape". Such an assessment should therefore be made by an expert.

Comment

The CFI clearly supported the Board in its approach that a shape in which (as found here) the essential characteristics are all functional, should not be afforded trade mark protection, regardless of whether there are other means of achieving the same technical result that would not infringe the registration if granted. Lego still disagrees and has indicated to the Associated Press news agency that it is expecting to appeal the decision.

Pending appeal, however, the decision is useful not least for its confirmation that the relevant stand point when assessing the essential characteristics and the functionality of the shape in issue, is that of an expert, rather than the consumer.

Also worth nothing is that the CFI made a passing reference in its decision to Lego's prior patents, as discussed before the Board, which Lego admitted described (unhelpfully for Lego for present purposes) the functional elements of the Lego brick. This is a reminder that, as with most shape trade marks, the rights obtained by trade mark registration are not the only intellectual property rights available to protect the innovation and care needs to be taken that what is said in relation to the securing of one intellectual property right, does not later prove problematic in the securing of another.