Figures from Zuru's Max Build More 750-piece construction set. Screenshot / YouTube
Kiwi toy company Zuru says it will appeal an injunction against its figurines, won by Lego in the US earlier this month - and that it's launching a countersuit, alleging the Danish toymaker is abusing its market dominance in a bid to smother new competition.
To outsiders, it seems a lot like the recent case that saw Zuru win $43 million costs and damages from Telebrands, a US company that had ripped off its signature "Bunch O Balloons" product.
Is the boot simply now on the other foot?
An intellectual property expert says there's a key difference (keep reading). First, some quick background:
On July 8, a US court granted Lego an interim injunction, and ordered Zuru to immediately stop manufacturing, distributing its Max Build More and Mayka lines and to remove any of the products already on store shelves. Zuru US retail partner Walmart was ordered to stop selling the products, pending a full hearing.
Zuru was founded by Cambridge siblings Anna, Mat and Nick Mowbray. The trio have built a $600 million-a-year toy business over the past 15 years and made a splash locally by buying "Dotcom Mansion" in Auckland for $32.5 million in 2016. But their business is global, and most of their manufacturing and most of their 5500 staff are in China and Hong Kong.
Along the way, they've had to spend tens of millions on legal costs in what can be a sharp-elbowed industry.
The latest drama began in April when - just days after their Bunch O Balloons victory was confirmed, Lego filed its legal action.
The Danish toymaker claimed the Zuru's Max Build More and Mayka products copy the distinctive look of Lego Minifigures, and would confuse consumers into thinking they were Lego toys.
This week, Zuru lawyer Gregory Smith said his company was not only appealing, but has filed a countersuit in a Californian court (then transferred to Connecticut), accusing Lego of anti-competitive practices designed to "stifle" newcomers - practices that he claims break US antitrust laws.
"Intellectual property rights are extremely important to Zuru. We work hard to ensure we are not infringing on legitimate valid third-party rights," Smith told the Herald.
"In this case, we believe Lego is asserting overly broad claims in an improper effort to monopolise the construction toy products market, block legitimate competition and eliminate value-priced innovative and high-quality, competing construction toy products from the market."
But Lego's market heft aside, to a layperson it looks like the Danish toy company is simply doing to Zuru what Zuru did Telebrands after it copied Bunch O Balloons.
Nick Mowbray has called the giant Lego (2018 revenue: $8.2 billion) legally "aggressive" (an adjective also used by Bloomberg to describe the toy company).
But can he claim the moral high ground after he and his sibling so tenaciously pursued Telebrand through the US court system?
Sebastien Aymeric, a senior associate with James and Wells - a law firm that specialises in intellectual property issues - said that while superficially similar, the two cases hinge on quite different IP principles and laws (Aymeric does not act for Zuru or Lego).
In the Bunch o Balloons matter, Zuru alleged Telebrands had infringed its "utility" patent - equivalent to what is more traditionally known in New Zealand as just a patent, he told the Herald.
"Broadly speaking, a utility patent in the US protects the way a product works, regardless of that product's look or feel. Zuru devised a novel and inventive method of filling up several balloons with water at once. The utility patent protects that method. The court found that Telebrands, by using a similar method in its product, infringed that patent.
The current Lego vs Zuru fight is about a different kind of patent; a "design" patent - equivalent to a design registration in New Zealand, he said.
"A design patent protects the appearance, the visual aesthetics of a product, not the way it works. Lego owns several design patents protecting its figurines and bricks of a certain shape - those that have been publicly available for less than 14 years."
Lego also registered copyright to protect the appearance of the figurines and those bricks of a certain shape, Aymeric said.
"Copyright is very similar to a design patent in that it protects the appearance of a product. It is also of a similar duration."
Unlike a design patent, however, copyright only protects against copying; that is, if a third party independently designs a similar product without copying, that won't be copyright infringement (although that may be an infringement of the design patent), he said.
Lego also owns registered and unregistered shape trade marks in the US for the figurines, some bricks and even the cylindrical studs used to connect at the top of the bricks, Aymeric said.
"This gets a bit technical but owning a shape trade mark does not mean the owner can stop others from using that shape altogether.
"It means the owner can stop others from using the shape 'as a trade mark'. That is. broadly speaking, use the shape to create a connection in the mind of consumers between the shape of a product and its source so the shape acts as a badge-of-origin."
A trade mark does not expire provided it is renewed as required.
The bottom line: Lego could potentially have a much harder time winning its case against Zuru than Zuru did with Telebrands (itself a multi-year, multi-front fight).
"A shape trade mark is more difficult to enforce than a utility patent or design patent," Aymeric said.
The legal action could even ultimately backfire on Lego, once the matter goes to a full hearing.
"It may also be that at trial, the court finds that the interim injunction should not have been granted because there is no infringement or because Lego's patents, copyright and/or trade marks are invalid," Aymeric said.
"The usual course would be for Zuru to counterclaim to revoke [and] invalidate those registered rights."
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Lego did not immediately respond to a request for comment.
But in its US court filing, the company said: "While the Lego Group welcomes fair competition, Zuru's nationwide launch" of the Max Build More products at Walmart's retail and online stores in October "was anything but fair play".
Unless it's stopped, Lego said, "Zuru will continue to exploit the actual and inevitable consumer confusion caused by its inferior infringing products during this prime holiday buying season, while causing irreparable harm to the Lego Group's goodwill and reputation."
For Zuru, Smith said, "We are vigorously defending this lawsuit on that basis there was no improper infringement and Lego is relying on invalid intellectual property rights."
The Kiwi toy company also intends to go full-force with its counter-suit alleging anti-competitive behaviour.
In the meantime, Smith emphasises that the suit only affects Zuru's Max Build More and Mayka toys in the US.
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