Lego Called a Ruthless Monopolist


     
     LOS ANGELES (CN) – A competing toy company claims Lego uses underhanded tactics to stay top dog in construction toys, and misled U.S. Customs to block importation of its closest rival’s products.



     
     UPDATE: Lego spokesman Michael McNally told Courthouse News that Mega Brands’ lawsuit was withdrawn on Jan. 20.     
     “Lego Juris A/S and Lego Group informed Mega Brands that the Lego Group had not made a direct claim against them and that U.S. Customs and Border Protection will not interfere with the importation of Mega Brands products,” McNally said in a statement.

     
     In a federal antitrust complaint, Mega Brands, of Canada, says Lego falsely claimed “exclusive rights to the functional cylindrical stud element that is commonly used in construction blocks,” even though courts have ruled that Lego “cannot re-monopolize a once patented invention under the guise of trademark law.”
     “Mega Brands brings this action to stop Lego’s illegal efforts to monopolize the construction toy market through illegal anti-competitive practices including, but not limited to, use of fraudulently obtained IP [intellectual property] rights to interfere with Mega Brands’ right to continue to import certain competitive products into the United States,” the complaint states.
     Mega Brands and Mega Brands America sued Lego Juris A/S and Lego Group.
     Mega Brands describes itself as the second-largest construction toy company in the world and Lego’s “strongest and most innovative” rival.
     Lego commands more than 85 percent of the U.S. market for older children, according to the complaint.
     “Before their use by Lego or Mega Brands, cylindrical studs (alternatively referred to as ‘pins’ or ‘projections’) were used as a key functional element on toy construction bricks developed by Harry Fisher Page of Kiddiecraft (a U.K. Company) in the 1940s,” the complaint states. “Mr. Page was granted patent protection for the brick in the UK, France and elsewhere. Unbeknownst to Mr. Page, Lego copied the Kiddiecraft product configuration in a jurisdiction (Denmark) where there was no active patent protection. Lego further improved the brick in the 1950s by adding ‘tubes’ or secondary projections in the hollow cavity of the brick. Lego was also granted patent rights in the improved brick and enjoyed these rights until the patents expired in the 1980s.” (Parentheses in complaint.)
     Mega Brands says it has used the studs as a functional component since it entered the market with competing construction toys in 1991.
     In 1988, a U.S. judge threw out Lego’s first attempt to win trademark protection for its brick design, Mega Brands says.
     “Courts throughout the world have likewise held that Lego cannot maintain a monopoly on a once-patented technical invention under the guise of trademark law. Lego has failed in its efforts to claim exclusive rights to the functional cylindrical stud element in various actions around the world. Although Lego has aggressively pursued infringement litigation against its competitors (including Mega Brands), courts repeatedly have rejected Lego’s efforts to claim exclusive rights to the functional elements of its building blocks for at least 10 years,” the complaint states.
     “Specifically, Lego has attempted without avail to assert exclusive rights to its cylindrical studs against Mega Brands and/or its local distributors in France, Canada, Belgium, Germany, Greece, Portugal, Spain, the Philippines, the Netherlands, the Czech Republic and Italy. Moreover, Lego’s Community trademark registration for the shape of the 2×4 brick, which features 8 pins, was canceled by Europe’s highest court (the Court of Justice of the European Union) in a judgment dated September 14, 2010 specifically on the basis of the functionality of the pins. Lego’s trademark claims were also dismissed by the Supreme Court of Canada in a judgment dated November 17, 2005 as well as by the Supreme Court of France in 1997, the Supreme Court of Germany in 2004, the Supreme Court of Spain in 2007, the Supreme Court of Italy in 2008 and the Supreme Court of The Netherlands in 2009. Lego’s recent attempt to enforce equally invalid rights in the United States should be rejected just as it has been rejected in other jurisdictions.” (Parentheses in complaint.)
     Mega Brands says that its business depends on exports to U.S. customers, including Toys-R-Us, which was warned this month that Mega Brands’ products might be detained by U.S. Customs “because of a complaint by Lego.”
     The complaint states: “On information and belief, Lego engaged in ex parte communication (including one or more meetings) with the United States Customs and Border Protection Agency (‘Customs’) during which Lego improperly asserted exclusive rights to the functional cylindrical stud element that is commonly used in construction blocks based on a trademark registered with the Customs (Lego’s Trademark Registration No. 2,273,314 for a ‘cylindrical surface feature’ (the ‘Lego trademark’)).
     “Lego obtained the Lego trademark and used the registration to mislead the Customs service into believing that Lego had exclusive rights to the functional cylindrical stud element despite knowing that there was no objective basis for the assertion because, among other things, the configuration of the Lego block has already been adjudged to be ‘wholly functional’ and that courts in various actions throughout the world have rejected Lego’s claim to exclusive rights to the functional cylindrical stud element. “Customs has advised Mega Brands and its customer that it will not clear certain products that Mega Brands lawfully seeks to import on the suspicion that those products infringe the Lego trademark. The Lego trademark upon which Customs’ determination is based is invalid because of misrepresentations made by Lego and its predecessor-in-interest to procure and impermissibly expand the scope of the trademark. Lego’s use of a fraudulently procured trademark together with misrepresentations to Customs to assert exclusive rights it knows it does not have is nothing more than the latest effort by Lego to monopolize the construction toy market and sabotage the success of its biggest competitor, Mega Brands. In this instance, Lego is attacking Mega Brands’ highly successful ‘Halo’ product line based on the Halo franchise owned by Microsoft Corporation.”
     Mega Brands says Lego predecessor Kirkbi AG formerly held the patents for Lego blocks, which were assigned to Lego.
     “An examination of Lego’s registration confirms that the subject of the registration was obtained and maintained under false pretenses because Lego knew that it could not legitimately assert exclusive rights in the cylindrical stud that is an essential functional element of construction toy building blocks,” the complaint states. “Among other things, Lego evaded a direct inquiry concerning designs used by competitors – withholding the highly material history and ubiquity of the functional cylindrical stud element. Moreover, Lego led the United States Patent and Trademark Office (‘Trademark Office’) to believe that Lego was not seeking protection for the cylindrical stud functional element, but that, instead, it was seeking protection only for its use as an element of product packaging. …
     “To date, Customs has not sent a formal notice of detention or seizure to Mega Brands, leaving Mega Brands’ products in a state of limbo and leaving Mega Brands without any certainty that it will be able to obtain and deliver its products to retailers.”
     Mega Brands seeks declaration that its products do not infringe upon Lego’s “valid trademarks,” an injunction to stop Lego from interfering with the importation of its products, damages for monopolization and attempted monopolization, unlawful and unfair competition, intentional interference with prospective economic advantage, and treble damages for Sherman Act violations.
     It is represented by Ben Davidson with the Davidson Law Group.
     The law firm and Lego both declined to comment.

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