Zuru New Zealand Limited & Ors v LEGO Juris A/S & Anor - [2025] NZCA 650

Intellectual property — trade marks — comparative advertising.

Zuru’s appeal is allowed. We make a declaration that the use of the word "LEGO" in Zuru’s original compatibility statement did not infringe the registered trade mark LEGO Lego’s cross-appeal is dismissed. 

Zuru is entitled to band A costs for a standard appeal. We certify for second counsel. 

Lego has been a leading manufacturer of plastic building bricks, baseplates and figures since the late 1940s, although the Lego name originated several years before that. Although the patents and copyright Lego once held on its basic brick and baseplate products have long since expired, the registered trade mark LEGO remains. Zuru markets their own plastic toy building bricks and related products under the trade mark MAX BUILD MORE. Zuru’s plastic toy brick products are compatible for use with Lego's products. Zuru wishes to tell consumers this and have sought to do so through the use of a compatibility statement on the packaging of their products: "LEGO® BRICK COMPATIBLE". The statement uses the word mark, but not the well-known LEGO logo. 

The High Court determined that the compatibility statements constituted infringing use under s 89 of the Trade Marks Act 2002 (TMA). He also found that the statements were not protected by the statutory defences of comparative advertising (s 94) or use indicating the quality of purpose of the goods (s 95) because the use had not been in accordance with honest practices. He did not, however, consider that Lego's counter-claims of passing off or breaches of the Fair Trading Act 1986 (FTA) were made out. Zuru and Lego each appeal these findings.

 The Court allows the appeal with reasons given by Ellis and Palmer JJ and concurring reasons given by Cooke J. 

Was the use here "use as a trade mark"? 

Per Ellis and Palmer JJ: No. Use as a trade mark in terms of s 89(2) is concerned with the orthodox function of a trade mark: as a badge of origin in the user. There will be no infringement if the Lego mark was not used by Zuru in a manner likely to be taken as indicating the trade origin of Zuru’s goods. The orthodox conceptual distinction between use "as" and use "of' a trade mark is reflected in the TMA as it had been in s 8(1A)(d) of the Trade Marks Act 1953. When enacting the TMA there was a conscious Parliamentary decision not to carry over the concept of deemed infringement by "importing a reference" to a sign or mark. The broader concept of use as a trade mark and use of trade mark function argued for by Lego is based on the expansive European approach, which is not the position in New Zealand. The defence provisions also do not support Lego's proposed interpretation of s 89(2). Section 89(2) operates as a gateway to infringement and, so, to the defence provisions, most of which are very clearly predicated on use as a trade mark (prima facie infringement) having first been established. Section 94 should not be interpreted as an exception or outlier in that regard. 

Here, the High Court erred in assessing whether the LEGO mark was used by Zuru as a badge of origin. The relevant question was whether relevant consumers would think that the LEGO mark is telling them the trade source of the Zuru bricks. While the LEGO mark is relatively prominent, larger than the rest of the descriptive phrase and LEGO has no further meaning beyond the connection with the toy products, its use here is purely descriptive. The compatibility statement would indicate to relevant consumers that the MAX bricks are not LEGO bricks but can be used with them. This is not a use with trade mark significance. 

Per Cooke J: Yes. Use of a trade mark requires the use of the mark to identify the trade mark owner's goods or services, but there is no requirement that there be misappropriation of the owner's intellectual property. The passing of the Trade Marks Act 2002, and particularly the inclusion of the new comparative advertising defence contained in s 94, indicates that the scope of permissible comparative advertising was intended to be clearly defined. A narrower conception of use, as the majority holds, would render s 94 otiose and frustrate the legislative intent. Here, LEGO is a made-up word, and any use of such a word is necessarily use as a trade mark. Section 89(2) is engaged here.

 
Was the comparative advertising defence engaged here? 

Per Ellis and Palmer JJ: As there was no use of a trade mark in terms of s 89(2), this question need not be determined. If that conclusion was wrong, however, the comparative advertising defence would apply to protect Zuru’s use here. 

Per Cooke J: Yes. The High Court Judge erred in narrowly construing the comparative advertising defence. Claims of equivalence are able to give rise to the defence, as well as claims of superiority. The use was also in accordance with honest practices. The statement was true, it was not unfair, there is no confusion arising from the use of the trade mark, and there was an open and obvious comparison. An aggressive comparison between goods to obtain a customer base is not dishonest practice, but rather is simply competition. As the claim of equivalency here was comparative advertising and it was in accordance with honest practices, the comparative advertising defence is engaged here. 

Was Lego's counter-claim of passing of and misleading conduct made out? 

Per Ellis and Palmer JJ (Cooke J agreed): No. At trial, Zuru rightly accepted that Lego’s trade mark had acquired strong goodwill and reputation. Accordingly, the FT A and passing off claims turned on whether Zuru had used the LEGO trade mark so as to confuse or deceive the relevant public. As the High Court Judge found, the counter-claims were not made out. The Judge was correct to reject the argument put forward by Lego's expert - Professor Klein - that consumers would be misled by Zuru’s packaging because reasonable customers view packaging as a whole, customers rely on a range of diagnostic cues when purchasing, and the MAX mark would be correctly taken as that of a brand.