LEGO the Danish toy maker had won two legal battles against copycats in January 2020. Surprisingly the court cases received little mainstream media coverage and had muted responses among LEGO friendly fan media. On Jan 15thc LEGO had partial win against ZURU in federal court in Connecticut. The next day, Guangzhou Intellectual Property Court upheld the ruling against LEPIN.
The Case against LEPIN
Needless to say this is the landmark lawsuit the LEGO had in China. Excerpt from the case: “Meizhi Model and all other defendants are ordered to cease infringement immediately, and to pay the LEGO Group a total of RMB 4.7 million (around DKK 4.5m) as damages. They are also ordered to make a public apology on the websites of China Toy and Juvenile Products Association and Guangdong Toy Association to the LEGO Group for Lepin infringement.”
The damage was puny compared to what LEPIN had earned over the years. We shall see how Meizhi Model, the parent company of LEPIN is going to apologize. In separate development, four executives of Meizhi who were running LEPIN had been arrested by Shanghai Police and remained in custody.
Injunction Ruling Against ZURU
Back in 2018, LEGO accused ZURU, a New Zealand toy maker of “wilfully and maliciously” infringing on Lego’s copyrights, trademarks and patents at the Connecticut District Court. The court granted injunction against sales of ZURU line of Max Build Toy until the lawsuit is completed.
In Jan 15th 2020, the federal court delivered the verdict and ruled in favor of LEGO. The US Court of Appeals for the Federal Circuit upheld district court’s decision to grant emergency injunction as ZURU’s figurine had found to infringe on Lego’s copyrights. However, LEGO had failed to demonstrate the sale of ZURU’s building blocks and Mayka Toy Tape products would cause irreparable harm and vacated the preliminary injunction for those products.
The point to note is how ZURU had infringed LEGO’s copyright on the figurine. Below are screen shots of the ruling.
Implication of ZURU Infringement Case
Personally we found ZURU figurine really ugly and Danish version is superior. China clone brick makers had started redesigning their minifigures to be less LEGO alike to avoid future legal problem. However, judging from ZURU court case, their efforts may be futile. Below are figurines from Zhegao, Sluban, Enlighten and Panlos.
LEGO could have pursued similar strategy in China, obtaining court injunction to ban sales of sets that contains LEGO alike figurines. Though Chinese court don’t follow legal precedent in U.S, the judge may be more incline to enforce the order given China had promised to strengthen the IP protection under phase 1 deal with U.S. The Danish maker just need to target one of the Four Heavenly King of China Clone Bricks, whom are J, Queen and King (resurrected LEPIN), Sembo, LELE and BELA to have the chilling effect to all the clones. Figurines are very important for interlocking brick toy sets when marketing to children. Imagine building a Millennium Falcon without Han Solo and Chewy minifigures. Kids and Adult will unlike to buy plastic bricks set in absence of minifigures. Other makers such as CADA (Double Eagle) and Xinyu (Happy Build) don’t get affected as much because they make Technics type of toy sets.
The implication could be dired for legitimate players such as Enlighten (QMAN), Sluban and KAZI who designed their own sets and had proper IP from movies and anime. If the injunction is successful against any of the leading clone maker, it would prompt others to stop selling overnight because of likeness of their figurines to LEGO.
Next strategic move for LEGO and Clone Makers?
Not sure whether LEGO legal counsel is reading our blog. We once suggested that LEGO follows Bandai move by engaging Shanghai Police and they did! Getting Chinese courts to ban sales of products that contain LEGO likeness figures would be fast and effective legal maneuver that will make the life hard for clone brick makers. The injunction stopped the sales immediately while the lawsuit dragged on. Perhaps the Chinese clones might considering copying Mega Construx figurines instead.
Situation of clone bricks market is quite similar to music industry in China many years back. Back in 2011, the music piracy rate was 99% in China. By 2018, 96% of Chinese consumers listened to license music. The change had to do with technology and government crack down. The interlocking toy market isn’t on the radar so far.
However, Chinese government may not adopt the same heavy hand approach to clone bricks like what they did for music. Because the crack down will leave single dominant player in the market, which is LEGO and leave no home grown makers. It would be in LEGO interests to share the pie with legitimate players such as Enlighten and Sluban while getting the authority’s help in dealing with copycats.
It will be long battle to deal with copycats and counterfeit makers in China. You may read our analysis on current China clone bricks industry. What we would like to see is for legitimate home grown Chinese brick makers to emerge as strong competitors to LEGO and offer more choices to consumers. The existence of copycats is the stumbling block for growth of legitimate players. The legitimate players need room to grow while developing own IP and acquiring licensing. Chinese consumers need to understand that IP products don’t come cheap and be willing to pay more.