Doctrine of Functionality Applies to Unregistered Trademarks, Federal Court of Appeal Rules


DOCTRINEOFFUNCTIONALITYAPPLIESTOUNREGISTEREDTRADE-MARKS,
FEDERALCOURTOFAPPEALRULES

By
StellaSyrianos
LEGERROBICRICHARD,Lawyers
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.:(514)9876242-Fax:(514)8457874
www.robic.ca-info@robic.com

ArecentdecisionoftheFederalCourtofAppealheldthatthedoctrineof
functionalityappliestounregisteredtrade-marksandwentontodismissthe
Applicant’spassing-offactiononthebasisthatitsLEGOindiciatrade-mark
wasnotvalidunderthedoctrineoffunctionalitybecauseitisprimarily
functional.(KirkbiAGandLegoCanadaInc.vs.RitvikHoldingsInc./Gestions
RitvikInc.A-395-02,July14
th,2003,Sexton,J.A.).
TheFacts
TheAppellants
TheAppellant,KIRKBIAGwithaheadofficeisinSwitzerland,isaholding
companywhosebusinessisthemanagementofassets,includingtrade-
marks.Itwasaplaintiffinthetrialactionalongwithco-Appellant,LEGO
CanadaInc.,incorporatedinMay1988.BoththeseAppellantsaremembers
oftheLEGOGroupofCompanies,aworld-widegroupofwhichKIRKBIAG
andLEGOCanadaInc.arebuttwo.
TheAppellants(hereinafter“Lego”)wereownersofseveralpatentsaround
theworld,includingCanada,fortoybuildingblockswhichweredescribedas
self-lockingbricksandsoldundertheLEGObrand.Legohadsuccessfully
extendedtheirCanadianpatentmonopolyontheinterlockingfunctionsor
systemsfortheseconstructionbricksforabout50yearsuntilthelastLEGO
patent,issuedin1971,expiredin1988.Uponexpirationofthispatent,LEGO
attemptedtoacquireintellectualpropertyprotectionthroughtheguiseofa
trade-markreferredtoasthe“LEGOindiciatrade-mark”(hereinafter“LEGO
indicia”).


Ascitedfromthedecision,“the”LEGOIndiciatrade-mark”isusuallydescribed
astheuppersurfaceoftheLEGOtoybuildingblock,havingeight(8)
protuberancesorstudsonthesurface.Allorsomeoftheknobsorstudsof
oneLEGOpiecemaybeconnectedtoallorsomepartoftheundersideof
anotherLEGOpiece.The”clutchpower”betweenconnectingpiecesis
developedbythefrictionbetweentheknobsontheonepieceandthetubes
and/orwallsoftheundersideoftheotherpiece.Thestudsoftheupper
surfaceoftheLEGObrickhaveremainedanunmodifiedprominentfeature
ofallLEGObrickssince1949.Sinceatleast1958,”LEGO”hasbeeninscribed
onthetopsurfaceofeachstud.Thestudsandtheirpatternarewidely
featuredinpromotionalmaterialsusedbyLEGOCanadainCanada,
includingtelevisionadvertisements,point-of-salematerialsandpackaging.”
TheAppellantsassertedthatthisshapingoftheknobconfigurationoftheir
LEGOproductsconstitutesa”distinguishingguise”andthusatrade-mark
undertheTrade-marksAct.Itisonthebasisoftheseallegedtrade-mark
rightsthattheAppellantsfiledtheirpassing-offactionagainstRitvik.Itistobe
notedthatthetrade-markatissueisnotregistered.
TheRespondent
TheRespondent,RitvikHoldingsInc.,isacompanyincorporatedunderthe
lawsofCanadawithitsheadofficeinSt.Laurent,Quebec.Untilitsdissolution
in1998,itwasRitvikToysInc.whoin1991begantomanufactureandsellthe
MICROlineofMEGABLOKSbrandconstructiontoysinCanada,aimed
specificallyatinfants,saidlinebeingthesubjectmatterofthiscase.Ritvik
HoldingsInc.(hereinafter”Ritvik”)assumedtheformersassetsandliabilities,
includingtheliabilityinthisactionuponthedissolutionofRitvikToysInc.
Ritvik’stoysarecomprisedofoversizedbrickswitheachbrickhaving
cylindricalprojectionsorknobsononesidewhichconnectintotheopposite
sideofanotherbrickwithoutclutchpower.Thislineofbuildingblocksnow
representsaboutone-halfofRitvik©sworldsales,andin2001Ritvikwasthe
largesttoymakerinCanada.
DecisionoftheFederalCourtofCanada
TheTrialJudgeheldthatLegohadaproprietaryinterestintheLEGOindicia.
However,theCourtfurtherconcludedthattheLEGOindiciawasnotavalid
trade-markundertheTrade-marksActsinceitisprimarilyfunctionalinthatit
“isafunctionalelementoftheLEGObrandbricks,contributingtothe”clutch


power”thatcouldbesaidtobetheessenceoftheLEGObuildingblock
system.AllthefeaturesoftheLEGOIndiciaMarkaredictatedbyfunction,
andtheshapeofthetopsurfaceoftheLEGObasicbrickispurelyutilitarian.”
LegohadarguedthatfunctionalityintheschemeoftheTrade-marksAct
goesonlytotheissuesofregistrabilityandexpungementundersection13
andthatitwasParliament©sintentiontoeliminatefunctionalityasabartoa
markconstitutinga”distinguishableguise”.TheCourtrejectedthisargument
citingtheFederalCourtofAppealdecisioninRemingtonRand(64C.P.R.(3d)
467)andthelonglineofcaseauthoritiesonwhichitisbased.
Despitedismissingtheactiononthebasisoffunctionality,theCourtwenton
toaddresstherestoftheissuesinthecaseprimarilydealingwiththe
applicationofthefactstothetestforpassing-off.
TheAppealtotheFederalCourtofCanada
IntheCourt’sviewthecaseturnedontheissueoftheapplicabilityand
validityofthedoctrineoffunctionalityandcouldbedisposedofonthistopic
alone;itfounditunnecessarytocommentonthosepartsofthereasonsof
theTrialJudgewhichdealtwithotherissuessuchastheelementsrequiredto
succeedinapassing-offaction.Ineffect,theappealraisedtwoquestions:
1.DidtheTrialJudge,inconcludingthattheLEGOIndiciawere
primarilyfunctional,makeapalpableandoverridingerror?
2.Canamarkwhichisprimarilyfunctionalbeatrade-markwithin
themeaningoftheTrade-marksAct?
Astothestandardofreview,theCourtheldthatthefindingofwhetherthe
LEGOindiciaareprimarilyfunctionalisaquestionoffactandtherefore
reviewableonthebasisofwhetherthereisapalpableandoverridingerror
butthatthequestionofwhetheratrade-markisvalidwhenitisprimarily
functionalisaquestionoflawandtherefore,thestandardofreviewonthat
issueisthatofcorrectness.
AstoLego’sarguments,itwasassertedthattheLEGOIndiciaisa
“distinguishingguise”andthusa”trade-mark”asdefinedinsection2ofthe
Trade-marksAct.Legoalsoarguedthatthelanguageofsection2ofthe
Trade-marksActdoesnotexpresslyorimpliedlylimitthedefinitionsof”trade-
mark”or”distinguishingguise”byreasonoffunctionalityandtherefore,a
“distinguishingguise”mayhaveutilitarianfeatures.


TheFunctionalityAnalysis
Legoarguedthatfunctionalityhasbeeneliminatedasafactorfromthe
analysisoftrade-markvalidityandthedefinitionofatrade-markunder
section2oftheTrade-marksActinthattheconsiderationoffunctionalityhas
nowbeenshiftedtotheregistrationandexpungementanalysisundersection
13andisonlyimportantatthatstage.TheCourtrefusedthislineofreasoning
andheldthatsection13oftheTrade-marksActreinforcestheconceptthat
thedoctrineoffunctionalityinvalidatesamarkwhichisprimarilyfunctional.
TheCourtalsostatedthatahistoricalanalysisoftherelevantcaselaw
supportsthepolicybehindthedoctrineoffunctionality(i.e.toavoid
monopoliesandobtainingpatentprotectionthroughtheguiseofatrade-
mark)andcitedseveralcasessuchasConsumersDistributingCompany
Limitedv.SeikoTimeCanadaLtd.,[1984]1R.C.S.583(S.C.C.),Thomas&Betts,
Ltd.v.PanduitCorp.etal.(2000),4C.P.R.(4
th)498(F.C.A.),ImperialTobacco
Co.v.RegistrarofTradeMarks,[1939]2D.L.R.65(Ex.Ct.),Parke,Davis&Co.
v.EmpireLaboratoriesLtd.(1963),41C.P.R.121(Ex.Ct.);affirmedby[1964]
S.C.R.351(S.C.C.)andElginHandlesLtd.v.WellandValeManufacturingCo.
Ltd.(1964),43C.P.R.20(Ex.Ct.).
Legofurthersubmittedthatthepolicyunderlyingthefunctionalitydoctrine
onlyappliestoregisteredtrade-marksandnottounregisteredtrade-marks,
suchastheLEGOindicia.TheCourtalsorejectedthisargumentbystating
thattheTrade-marksActdoesnotprovideanydifferentcriteriafordefining
trade-marks,whethertheybeunregisteredorregistered.TheCourtfurther
addedthatnoreasonhadbeensuggestedastowhythedoctrineof
functionalityshouldapplytoregisteredtrade-marksinpassingoffactions
underparagraph7(b),butnottounregisteredtrade-marksinpassingoff
actionsunderparagraph7(b).
Inreviewingtherelevantdoctrine,theCourtalsoaptlyheldthatatcommon
law,anunregisteredtrade-markownerhadamonopolyandtherightto
exclusiveuseofhismarkandthatthepassageoftrade-marklegislation
providingforregistrationdidnoteradicatethecommonlawrightattachedto
unregisteredmarks.Rather,itsimplyfacilitatedprooffortheowner.
FunctionalityandtheLEGOIndicia
Inlightoftheabove,theCourtappliedthedoctrineoffunctionalityand
dismissedtheappealbyconcludingthattheLEGOindiciaisnotavalidtrade-
mark,primarilybecauseitispurelyfunctionalinnaturesaveinrespectofthe


inscription”LEGO”onthetopsurfaceofeachstud.TheCourtopinedthat
Legowasattemptingonceagain(astheyhaddoneinothercasesheardin
theUnitedStatesandtheU.K.)toextendthe50yearmonopolytheyonce
hadovertheirconstructionbricksandthatiftheyweretoacquireatrade-
markfortheLEGOindicia,theywouldbeacquiringapatent-likemonopoly
eventhoughtheirpatenthadexpired.

ItisworthnotingthatJusticePelletierrenderedadissentingopinionwhich
heldthatthedoctrineoffunctionalitydidnotdepriveLego’sLEGOindiciaof
thestatusofatrade-markandthatitwascapableofsupportingapassing-off
actionundersubsection7(b)oftheTrade-marksAct.Hethenwentonto
analysetheelementsrequiredforsuchanactionsoastoentitleLegoto
somerelief.
Conclusion
TheCourtofAppeal’sdecisionshedslittlelightonthelong-standingprinciple
thatthedoctrineoffunctionalityexiststopreventpatentownersfrom
extendingtheirexpiredpatentrightsthroughtheguiseofatrade-mark.
However,itappearstoclarifyanyambiguitywhichmayhaveexistedasto
theapplicabilityofthisdoctrinetobothregisteredandunregisteredtrade-
marks.Therefore,theownerofanunregisteredtrade-markmayprevailina
passing-offactioninsofarasitcandemonstrateitisnotprimarilyfunctional
andthereforevalidundertheTrade-marksAct.

LEGERROBICRICHARD,2003.
Publishedat(2003),17-9WorldIntellectualPropetyReport6-8underthetitleDoctrineof
FunctionalityAppliestoUnregisteredTrademarks.Publication142.152.



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