Kirkby AG v. Ritvik Holdings Inc. - Using Trademarks to Protect Patentable Inventions

Innovations such as new and inventive devices, materials or processes are best protected by patents.  Patents afford the patent holder an exclusive monopoly over the innovation for a period of 20 years from the filing of the application.  However, it often takes many years for an innovative product to become successful in the marketplace.  Therefore, there is a temptation to try to extend the exclusive monopoly for the innovation using other forms of intellectual property protection.  The two forms of intellectual property which could theoretically be employed to extend the term of protection are copyright and trademark.  Copyright protection is relatively narrow and can be easily circumvented by competitors.  Nevertheless, in a few circumstances, copyright can usefully extend the life of monopoly protection.  For example, in the early days of the computer industry (a scant 25 years ago), Apple Computers tried to maintain its dominance in the computer industry by registering copyright in its circuit board designs and enforcing that copyright against competitors.  This approach met with limited success however, since designing original circuit boards was a straightforward enterprise and since the copyright afforded to Apple's designs was limited to "creative" elements of the design as opposed to functional elements.  Trademarks have proven a more fertile method of extending monopoly protection.

The cases of NutraSweet and Dolby are examples of successfully using trademarks to extend monopoly protection beyond the life of a patent.  In NutraSweet's case, the holder of the Aspartame patent compelled all licensed users to display NutraSweet's registered swirl trademark on all products containing the sweetener.  When the patent for Aspartame expired, the swirl trademark was a desired selling point for products containing the sweetener and only purchasers of the sweetener supplied by NutraSweet were entitled to display the logo.  Likewise, Dolby compelled all licensed users of his patented noise reduction circuitry to display the Dolby logo.  The Dolby trademark became so ubiquitous a trademark that manufacturers continued to license the use of the trademark long after the patents expired.  However, both NutraSweet are exceptional cases, and even their trademarks did not secure an absolute monopoly over the products represented by their respective marks.

Kirkby AG, the creators of the famous LEGO building blocks, enjoyed a patent enforced monopoly on plastic construction blocks for many years.  However, the "Lego" patents expired several years ago, and a new player entered the market with a building block which, while not identical to LEGO brand building blocks, were none the less compatible with them.  Kirkby AG took several steps to shore up their trademark rights in hopes of extending their monopoly past the life of their patents.  Each LEGO branded building block prominently displayed the LEGO trademark and each block had an identical design theme.  Kirkby AG even attempted to register the eight studded design of their building blocks as a three dimensional trademark, but were refused by the registrar of trademarks.  Three dimensional trademarks (often referred to as distinguishing guises) are often granted registration, provided the design is not functional in nature.  The three dimensional design of a Coca-Cola bottle is an example of a distinguishing guise which has been registered as a trademark.

Kirkby AG decided to bring action against its competitor, Ritvik Holdings Inc. (the sellers of MEGABLOCK brand building blocks) on the basis of passing off.  Essentially, Kirkby argued that Ritvik's blocks, being of very similar design and being intended to be fully functional with LEGO brand building blocks, were causing the consumer as to be mislead and confused.  Ritvik, they argued, was attempting to pass off its MEGABLOCKs as LEGO brand blocks.  Kirkby lost at trial, then appealed to the Federal Court of Appeal, and then appealed again to the Supreme Court of Canada.  The supreme court agreed with the lower court decisions that the passing off action must fail under the doctrine of functionality.  The doctrine of functionality establishes that trademark protection cannot extend to features of a mark which has a purely functional role.  Despite a few sophisticated constitutional arguments on the part of the appellant, the court held that, in addition to the doctrine of functionality, the appellant's case must fail due to a lack of distinctiveness of the LEGO block design.  The block design was commonly used by a number of different toy block products, so the design lacked distinctiveness.

The case illustrates the limits of using trademarks to extend the monopoly created by patents.  Nevertheless, the use of trademarks in conjunction with patents is a powerful tool in maintaining market dominance in the absence of a monopoly.  (c)

Famous Trade Marks - the case of Mattel v. Barbie

Famous trademarks are awarded significant protection under the Canadian Trademarks Act.  The trademarks act protects the owners of trademarks from others who would use a confusingly similar trademark.  Section 6 of the act defines what constitutes confusion.  In particular, section 6 states that the use of a trademark causes confusion with another trademark if the use is likely to lead to the inference that the wares or services associated with those trademarks are manufactured, sold, leased, hired or performed by the same person or business, whether or not the wares or services are of the same general class.  Hence, trademarks which are quite famous, can theoretically be protected against others who would use similar trademarks for completely different products or services.  This has lead some to speculate that famous trademarks can be enforced beyond the scope of their original trademark registrations.  Hence, the trademark registrations for the famous trademark VIRGIN, used by the Virgin group of companies, could theoretically be enforced against any person or company who used the trademark VIRGIN for virtually any product or service. 

The supreme court of Canada in the recent case of Mattel Inc. V. 3894207 Canada Inc. has clarified the law concerning the issue of confusion as applied to famous trademarks.  The case involved a numbered company which operated a chain of restaurants in the Montreal area under the trademark BARBIE'S.  The numbered company filed a trademark application in order to protect its trademark.  The application was approved by the trademarks office, but later opposed by Mattel Inc. on the basis that the mark was allegedly confusing with Mattel's registered trademark BARBIE.  The opponent, Mattel, brought forward survey evidence which demonstrated that, in the mind of the people surveyed, that there might possibly be a link between the applicant's restaurant and the opponents trademark.  Despite Mattel's evidence, the opposition board rejected Mattel's position.  Mattel appealed to the Federal Court.  The Opposition board's decision was confirmed by the Federal Court and then again by the Federal Court of Appeal.  Mattel appealed yet again to the Supreme Court of Canada.   

The Supreme court dealt with two principal issues, namely the nature of confusion and the nature of the evidence used to find confusion.  On the issue of confusion, the court accepted Mattel's contention that the BARBIE trademark was famous.  Indeed, the justices agreed with Mattel's contention that the BARBIE trademark had reached the status of a cultural icon.  Nevertheless, in the court's opinion, the mark was famous only with respect to dolls and not with respect to restaurant services.  While the court concluded that resemblance of the wares/services is not a requirement for a finding of confusion, a significant difference in the nature of wares/services used in association with two trademarks was an important consideration in determining confusion.  Simply because the BARBIE trademark was famous with respect to dolls, that fame, in itself, did not render the mark famous in other areas such as restaurant services.  In effect, the court held that since the "doll" business and the restaurant business appealed to different tastes and largely different clienteles, there was no likelihood of confusion between the two trademarks.
 
As to the issue of the survey evidence introduced by Mattel, the court dismissed it as irrelevant.  The court noted that the test is one of likelihood of confusion, i.e. that there must be a finding that the two marks are likely to be confused.  The court noted that the survey asked the question "Do you believe that the company that makes BARBIE dolls might have anything to do with this sign or logo".  The survey asked a question addressing the issue of possible confusion, not likely confusion.  The court seemed to leave open the door for the possible relevance of this type of survey evidence, provided of course the wording of the question resulted in a clear test of likelihood of confusion.  Of course, evidence of actual confusion would have been highly relevant; however, no such evidence was submitted.

While this case does seem to limit the scope of protection afforded to famous trademarks, the case did leave the door open to marks whose fame was such that confusion could be found even if the competing mark was used for very different wares/services.  Indeed, the court sited the example of the VIRGIN trademark, which has been used with a diverse nature of wares and services including soft drinks, music, games, resorts, cellular phones, clothing, books, cosmetics, credit cards and even air lines.  The fame of the VIRGIN trademark may be of such breadth that using a similar mark for an unrelated service or product may result in a likelihood of confusion.  In essence, since the VIRGIN trademark is famous in such a variety of different areas, it is possible that the average consumer might be confused if confronted with a similar trademark in a line of business not presently occupied by Richard Branson's group of companies. (c)

Robertson v. Thomson Corp. (Ownership of Copyright in Newspaper Articles)

The ownership of intellectual property rights in freelance writing was recently dealt with by the supreme court of Canada in the case of Robertson v. Thomson Corp. (2006 SCC 43).  The case dealt specifically with literary works, namely articles, which were produced by freelance writers and submitted for publication in the Globe and Mail newspaper.  The case, while specifically dealing with the issue of the ownership of copyright in newspaper articles, touched on the larger issue of the ownership of intellectual property rights created by employees and independent contractors.  The majority ruled in the favor of the author, and by so doing, reinforced the well  established principle that the author of a work (or the creator of an invention) is the de facto owner of intellectual property rights in the work.
        
The case was commenced by a freelance author Heather Robertson, who submitted two original articles to the Globe and Mail newspaper in 1995.  While the article submissions were governed by agreements, the issue of copyright ownership was not addressed.  The articles were subsequently published.  Sometime after publication, the Globe and Mail newspaper, transferred her articles to Info Globe Online, an online database of articles and other publications which paid subscribers can access.  CD-ROMs of the newspaper were also produced.  Heather Robertson brought action against the owners of the Globe and Mail and Info Globe Online to remove her articles from their databases.  Ms. Robertson also had her case certified as a class action on behalf of freelance writers and employees of the Globe and Mail who also submitted articles to the paper.

In essence, the case dealt with the competing rights of the author and the newspaper publisher.  Section 13(1) of the Copyright Act clearly states that "Subject to this Act, the author of a work shall be the first owner of the copyright therein."  Hence, the court observed that Ms. Robertson was the owner of the copyright in the work.  The court also accepted as obvious that the Globe and Mail owned copyright in its newspaper, which the court viewed as a creative compilation of works as defined by the Copyright Act.  However, the court noted that section 2.1(2) of the Copyright Act confirmed that "[t]he mere fact that a work is included in a compilation does not increase, decrease or otherwise affect the protection conferred by this Act in respect of the copyright in the work."  Therefore, the issue of infringement of copyright turned on one question: was reproducing a single article a reproduction of a part of a compilation.  The majority held, rightfully in my opinion, that the distribution of single articles constituted copyright infringement on the part of Info Globe Online since they did not own the copyright in the individual articles.  However, the court held that since the CD-ROM's reproduced the entire newspaper (less advertisements) and not just individual articles, the distribution of these CD-ROM's did not constitute copyright infringement because the copyright in the newspaper properly belonged to the Globe and Mail.

The court also dealt with the issue of the rights of the writers employed by the Globe and Mail to write articles.  The court noted that section 13(3) of the Copyright Act stated that "where the author of a work was in the employment of some other person under a contract of service or apprenticeship and the work was made in the course of his employment by that person, the person by whom the author was employed shall, in the absence of any agreement to the contrary, be the first owner of the copyright, but where the work is an article or other contribution to a newspaper, magazine or similar periodical, there shall, in the absence of any agreement to the contrary, be deemed to be reserved to the author a right to restrain the publication of the work, otherwise than as part of a newspaper, magazine or similar periodical."  The court noted that the employees of the Globe and Mail did not exercise their rights to restrain the publication of their works.

The court also dealt with the issue of the nature of the agreement to license copyright and noted that such agreements need not be in writing, unless an exclusive license or assignment was intended.

This case again raises the thorny issue of the ownership of intellectual property rights created by employees and independent contractors.  The case follows the generally accepted principle that independent contractors (freelance writers) are the owners of any intellectual property rights subsisting in the work they create.  The case also re-affirms the principle that employers own the intellectual property rights created by their employees.  The case has been criticized by some as a hindrance to providers of on-line content, but nothing could be further from the truth.  In this author's opinion, the case does not change the established principles relating to the ownership of intellectual property created by employees and contractors.  To be effective, any relationship involving employees or independent contractors should be governed by written agreements which specifically deal with the issue of intellectual property ownership. (c)