Interlego AG v Panda Toys Australia P/L

[1992] FCA 836

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )

1

NEW SOUTH WALES DISTRICT REGISTRY ) NO. G 815 of 1992

)

GENERAL DIVISION )

BETWEEN:  INTERLEGO AG

First Applicant

LEG0 AUSTRALIA PTY LIMITED

Second Applicant

AND:  PANDA TOYS AUSTRALIA PTY LTD

Respondent

C O N :	GUMMOW J.
PLACE :	SYDNEY
DATE :	6 NOVEMBER 1992

REASONS FOR JUDGMENT (EX TEMPORE)

GUMMOW J

This proceeding was commenced by a Statement of Claim filed on 4 November 1992. The applicants are members of the Lego Group of companies and complain of various breaches of their rights by the respondent. In particular, interlocutory injunctive relief is sought today on the grounds of infringement of registered design number 97773 (which was issued on 10 September 1987), passing off and contravention of S. 52 of the Trade Practices Act 1974. In the statement of claim there are allegations also of copyright infringement and of contravention of certain subsections of S. 53 of that

'

statute. I need say no	more of those
are not pressed at this	interlocutory level.

RECEIV' A

19 NOV 1992

The respondent, as it appears from the present state of

the evidence, has in stock at least 1797 items of what I will

call the Panda Basic box. It also has in stock at least 2052

pieces of what I will call the Panda box with toy angle element. The evidence indicates that the wholesale value of the former product in stock is in the vicinity of $14,000 and that of the latter is in the vicinity of $12,000. The evidence also indicates that these products were imported form Greece in about August this year. There has been some sale of the goods but the bulk of that which was imported appears still to be in stock.

The reference to the toy angle element is significant because the complaint as to registered design infringement concerns a design registered in respect of an article so entitled and this is the foundation for one of the injunctions which is sought today. In respect of the other product line, the Panda Basic boxes, the evidence indicates that whilst they contain many toy building block pieces, they do not contain

the relevant allegedly infringing angle element. The matter was first complained of by the applicants	following the events of 5 October 1992 when an officer of the
second applicant received information as to the offering of a supply of Panda products on behalf of the respondent. Inquiries have been put on foot leading to the taking of legal advice and the conduct of correspondence between the solicitors for the parties. No satisfactory undertakings

having been given from the view of the applicants, the present
proceeding was then commenced.

For its part, the respondent proffers an undertaking that, pending the determination of the proceedings or further order, it will not sell or offer for sale toy block sets in packaging, an example of which is exhibit D. It is a proviso to this undertaking that it will not be breached by the offering for sale or sale of toy block sets in the packaging example which is exhibit E. However, that undertaking does not deal with the angle element. in respect of that, what is offered is an undertaking by the respondent to keep full and proper records of all sales by it of Panda toy block sets and the other toy block set containing that angle element. An example of that element from the respondent's products is exhibit C.

It should be emphasised that the present application is

one for interlocutory relief. The question then involves

question on two issues of design infringement on the one hand several inquiries. The first is to the existence of a serious	and contravention of section 52 and passing off on the other.
The second involves the assessment of the balance of convenience. In assessing the balance of convenience I must take into account again the apparent weight of the case as to the serious question on each branch of the litigation. It follows from the nature of this inquiry that any conclusion expressed this afternoon as to the grant or withholding of interlocutory relief in no way prejudges one way or the other what would be the outcome at a trial when the evidence, no doubt, will be different. It should be fuller and the legal criteria to be applied will be different in character to those put forward this afternoon.
The applicants, as I indicated, are members of the Lego group of companies. They manufacture children's moulded plastic toy building sets. These goods are marketed under several trademarks, including "Lego" in some 100 countries, including Australia. Lego products have been sold in this country for over 30 years. They are currently sold throughout Australia in some 1400 retail outlets. These include large department stores and retail outlets in cities, suburbs and country areas in all states of Australia and in the Australian Capital Territory and the Northern Territory.
The evidence at this interlocutory level also indicates that Lego products are sold through many smaller specialty toy stores throughout the country. They are extensively
advertised in a wide variety of forms, including leaflets, newspaper and magazine advertisements, point of sale displays and the like. There is extensive television advertising. The expenditure is substantial and the sale of the applicant's products in this country have been, and continue to be, in a very large order.
In understanding the present debate it is important to realise that Lego products are marketed and sold by reference to what the applicants regard as certain key additional marks which operate to distinguish within the overall Lego product range certain sub-ranges. For example, the 1992 Lego brochure, which is exhibit F, indicates a number of products within the Lego product range distinguished by terms such as Duplo, Lego System, Dacta and Basic. These words are used by the applicants either on their own or in conjunction with the Lego mark.
This is not a recent state of affairs. The evidence, as it now stands, is not contradicted. It is to the effect that companies within the Lego Group have used Basic as a mark in association with the sale of plastic toy building blocks since approximately 1958. In Australia this has occurred since 1962. Sales of Lego Basic sets in Australia have been, and continue to represent, a substantial proportion of the total sales of the Lego product. The packaging, a range of which is
in evidence, indicates the prominent display of the mark,
Basic, on the Lego Basic sets.
I turn then to consider the questions of prima facie case, or as more accurately put, the existence of a serious question on the two branches of the case. The evidence includes various examples of the Panda product in packaging which prominently displays the word Basic in a form of print which resembles that which has been used by the Lego companies for some years. I should add that I do not overlook in more recent times in at least some of its packaging a somewhat different from of script has been used to display the word Basic on the Lego goods.
Two particular samples of the Panda packaging are in evidence, exhibits D and E. The mark, Basic, is used in large lettering five or six times on the packaging of each Panda set. It is displayed in block lettering. It is larger than the other lettering on the packaging. In particular in exhibit D the word appears, displayed in approximately double the size of the term Panda which is also featured. The Panda Basic sets are advertised as suitable for children from three years and upwards. This is the case for a number of the applicant's Basic sets, though the applicant has Basic sets for children in older-age groups.
Counsel for the respondent points to the use of the term Panda on the products marketed by his client as overshadowing
recognition of the term Basic. However, bearing in mind the and distinguishing any impact that might flow from the
extent - as appears to be the position from the evidence as it now stands - of the user, and promotion by the applicants of the word Basic in relation to their sets - albeit in association with the word Lego - in my view there is a serious question that a potential purchaser, and more particularly past purchasers of Lego goods, including Lego Basic sets, would be likely to be misled into thinking that the Panda Basic sets which feature the term Basic, are connected to or associated with the applicants or the products advertised and sold by the applicants. I should add that there was some debate before me as to the significance of the use of a symbol comprising the letter R within a circle, which is displayed on the respondent's packaging. In some cases it is used in relation to the word Basic in other in relation to the term Panda. Nothing, I think of any great weight, turns upon it for the present application.
However, as I have indicated on the first branch of the case, I think there is a serious question. It is a serious question that goes both to contravention of section 52 and to passing off. I turn next to consider the serious question issue, in relation to the alleged registered design infringement. Counsel for the respondent says that here there is no serious question. He says this flows from either or both of two considerations. The first goes to validity, and the second in infringement.

As to validity, counsel points to S. 17 of the Desians

Act 1906 and contends that the design should not have been registered because it was not new or original. In particular, he says that the design falls foul of paragraphs (a), and also paragraph (b) of subsection 17 (1). There may be some greater substance in this when the necessary investigations have been completed to fully air the issue at trial. As the matter stands before me at the moment, I do not place any significant weight upon the allegation of invalidity. The respondent is on somewhat stronger ground as to infringement, bearing in mind the propositions which are often repeated, that where the area of design ingenuity operates in a narrow field, small differences will suffice to take an article out of infringement.

There is at this stage no evidence of fraudulent copying. The complaint of the applicants being one of importation and sale of, or threatened sale of, articles to which the design, or obvious imitations of the design has been applied outside of Australia. Counsel for the respondent points to various alleged distinctions between his clients' angle and the representation of it in the design, and the representation in the design registration number 97773. As to some of them, I am by no means persuaded the design registration has all the features upon which the respondent relies to supply the grounds for contrast with its product. However, it is correct that there has been some rounding of two of the corners in the

would be, in my view, wrong to come to any conclusion at this	respondent's product. This is in contrast to the square corners apparent in the design registration. Nevertheless it	stage, other than that there was a serious question as to infringement.
I turn then to the question of the balance of convenience. Both sides, of course, are eager to engage in the Christmas trade. Christmas is an important period for merchants dealing in the lines of goods with which this litigation is concerned. The applicants however, make the point that if there is to be any rough edge inflicted by the imposition of injunctive relief, then it should be borne not by them, but by the respondent whose intrusion in to the status has given rise to the need for an application to the Court.
The evidence shows that the months of October and November are vital for the sale of toy building blocks. Retailers in the toy trade order the major proportion of their stock for Christmas sales at this time of the year. Sales by the second applicant, the Australian company of the Lego Group, during the period in question represents by far its most important trading season of the year. October and November represent in excess of 25 percent of its average total sales. The pace and intensity of advertising is increased at this time of the year.
examination, that the quality of the Panda products is There is also evidence, on which there was no cross- significantly inferior to that of the applicants. This is
said to be the result of lower quality of the moulds from which the elements in the Panda products are made. I take that into account. I take into account also the weight of the case as to serious question. The matter, as it appears to me at present, is that the applicants are on perhaps stronger footing as regards their claim on the basis of contravention of S. 52 in passing off. Nevertheless, any apparent weaknesses at this stage in the infringement action are not sufficient to outweigh the considerations tending in favour of the grant of interlocutory injunctive relief based also on the design registration.
Accordingly, in all the circumstances, I reach the conclusion that there should be a grant of interlocutory injunctive relief in relation to both the Basic packaging and also the angle element. It will be necessary to frame the terms of such relief and also to give directions this afternoon for the preparation of the action for trial.
[Counsel Addressed and his Honour then orders as follows:]
THE COURT ORDERS THAT:
1. Upon the Applicants by their Counsel giving to the Court the usual undertaking as to damages, until further Order, the Respondent, by itself, its servants and agents, be

restrained from: (a) importing, selling, offering or advertising for	sale, distributing or otherwise dealing in blocks or
elements or any product which contains any such block or element, an example of which is Exhibit C; and
(b)	selling, offering or advertising for sale, distributing or otherwise dealing in any sets of plastic toy building blocks in packaging bearing the mark "BASIC" featured in the manner appearing in Exhibit D or E or in a manner substantially identical with Exhibit D or E or deceptively similar thereto.

2.    The Natice of Motion filed 4 November 1992 otherwise be dismissed.

1. Costs of the Notice of Motion to be costs in the cause.

2. Exhibits C, D and E to remain with the papers and the other Exhibits to be returned to the solicitors for the parties.

5.   The matter stand over to 11 December 1992 at 9.30am before Gummow J.

THE COURT DIRECTS THAT: 

6.   Respondent to file and serve its Defence and Cross-Claim by 20 November 1992.

7.   Applicants to file and serve their Defence to Cross-Claim by 27 November 1992.

8.  Applicants to file and serve any further Affidavits on which they intend to rely by 4 December 1992.

I certify that this and the preceding eleven (11) pages

are a true copy of the Reasons for Judgment herein of the
Honourable Mr Justice Gummow.

Associate: /%..&g7 I

Date: 6 November 1992

Counsel and solicitors	Mr Alan Robertson
for the applicants:	instructed by Blake Dawson Waldron
Counsel and solicitors	Mr D K Catterns
for the respondent:	instructed by Peter Cornelius & Partners