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Supreme Court of Canada rules that section 7(b) of the Trade-marks Act is constitutionally valid, doctrine of functionality applies to unregistered trade- marks

On November 17, 2005, the Supreme Court of Canada gave judgment in a case brought by Kirkbi AG and LEGO Canada Inc. against Mega Bloks Inc. The case was based on a claim that Mega Bloks had passed off its micro brick toys as and for those of the plaintiffs.

The plaintiffs asserted common law rights in the "LEGO Indicia" which is the appearance of the familiar array of studs that are applied to LEGO® bricks. The trial judge found that the LEGO Indicia was distinctive in fact, in that the LEGO Indicia is recognized by the public as denoting the products of the plaintiffs, that the activities of Mega Bloks has caused confusion, and that the plaintiffs had suffered damage. The trial judge also found that the LEGO Indicia was functional, and that as a result, the plaintiffs' case failed.

On appeal to the Federal Court of Appeal, in a 2-1 split decision, the majority of the Court held that anything that is merely functional is not entitled to trade mark protection.

The Supreme Court of Canada agreed with the Federal Court of Appeal in finding that a product that is merely functional cannot be the subject of trade mark rights. The Court also found that distinctiveness and hence goodwill cannot flow from a product that is merely functional in nature, because that would amount to granting a perpetual monopoly in subject matter that should be free to other traders to copy.

The Supreme Court also dealt with another issue raised by Mega Bloks, that federal passing off law embodied in section 7 (b) of the Trade-marks Act is unconstitutional as being ultra vires of the Parliament of Canada. The Court rejected that position, in decisively finding that section 7(b) is a valid exercise of federal authority in rounding out the protection to be afforded to both registered and unregistered trade-marks.

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