A train replica made of LEGO bricks: will it be LEGO-blocked?

LEGO is stacking up court cases like… LEGO bricks. Whose turn is it now? A Dutch toy manufacturer that makes and sells train replicas out of LEGO bricks.

When LEGO comes across an infringement of its trade mark rights, its response is as firm as the click of its bricks. And often successful, too. Usually the target is a toy manufacturer making counterfeit LEGO. This time, though, it concerns genuine LEGO bricks, used by HA Bricks to build train replicas.

Source: DALL-E

According to LEGO, HA Bricks infringes LEGO’s trade mark rights with its train replicas, whereas HA Bricks sees the designs rather as a tribute to the LEGO brand. What is more, HA Bricks argues, LEGO cannot take action here at all, because the rights are exhausted. Let us look at that more closely.

The exhaustion doctrine LEGO, as the owner of the ‘LEGO’ trade mark, has the exclusive right to use its mark. That means LEGO can act against other parties who cause confusion with its brand name, its logo or a combination of the two. And where those other parties try to free-ride on the mark or to damage it, LEGO can put a… LEGO brick in the way.

Under trade mark law, however, LEGO has no right to oppose use of the mark, including the sale of branded products, where those products have already been put on the market (‘in the course of trade’) by LEGO or with LEGO’s consent. This is known as exhaustion of the trade mark right. It is for the trader (that is, the buyer or importer) to prove that the rights are exhausted. In practice, that turns out to be far from easy.

Products already put on the market by LEGO can therefore be resold freely. Note, though, that this applies only within the EU, on account of the free movement of goods. Where the branded products come from, say, the United States or China and are sold in Europe, the trade mark owner can act against that, because this form of parallel importing is prohibited.

 

HA Bricks’ LEGO-blocking tactic Will HA Bricks succeed in invoking the exhaustion doctrine against LEGO? We shall have to await the judgment. But if HA Bricks uses genuine LEGO bricks for its train replicas that have already been put on the market in Europe, my expectation is that the sale of these train replicas does not infringe the trade mark right. That would mean LEGO cannot oppose the further commercialisation of these products, unless LEGO can show that using the mark in this way affects the functions of the mark, for instance by free-riding on the LEGO mark unlawfully. Which will certainly not be as easy as building a LEGO tower. To be continued…

 

Update: there is a judgment

On 28 May 2024, the interim relief judge at The Hague District Court gave judgment in the interim injunction proceedings brought by LEGO Juris A/S against HA Bricks: ECLI:NL:RBDHA:2024:7992. LEGO won.

The reliance on exhaustion failed. What proved decisive was that the bricks were not resold unaltered. Ball bearings were added, and third-party logos and text were printed on bricks and on minifigures, after which the sets were repackaged and sold as premium sets. In the judge’s view, the condition of the goods was thereby changed, which impairs the guarantee of origin and the quality function of the mark. In that situation the trade mark owner may, under article 15(2) of the EU Trade Mark Regulation, still oppose further commercialisation.

The order granted: cessation of the infringement within 48 hours; disclosure of sources, buyers and remaining stock within four weeks; and a recall, with professional buyers to be informed by registered letter within two weeks and offered a refund. The penalty payments are €1,000 per day or €500 per product, subject to a maximum of €100,000. Costs were assessed at €16,001.97.

So it is precisely the exception mentioned above that turned out to be decisive. Exhaustion protects the resale of genuine branded products, but not once the functions of the mark are affected because the product has been materially altered. Anyone who makes something new out of genuine branded products and offers it commercially cannot, therefore, simply hide behind the exhaustion doctrine.

 

Source: LEGO takes Dutchman to court over sale of train replicas | NU.nl (in Dutch)