By Thomas Long, J.D.
District court correctly determined that LEGO was likely to prove that toy maker ZURU’s action figures infringed LEGO’s copyrights and would cause irreparable harm, but injunctions over other toys were vacated for erroneous findings on design patent and copyright infringement.
A district court did not abuse its discretion in entering a preliminary injunction barring construction toy maker ZURU Inc. from selling its ZURU Action Figures, which allegedly infringed copyrights owned by LEGO in its Minifigure products, the U.S. Court of Appeals for the Federal Circuit has held. The district court did not clearly err in finding that the accused products and the copyrighted products were substantially similar and that LEGO would sustain irreparable harm without an injunction. However, the appellate court determined that the district court abused its discretion in entering preliminary injunctions with respect to the ZURU’s Max Build More Bricks and MAYKA Toy Tape products after incorrectly determining, on the record before it, that LEGO would likely suffer irreparable harm. The preliminary injunction order was affirmed-in-part, vacated-in-part, and remanded (LEGO A/S v. ZURU Inc., January 15, 2020, Clevenger, R.).
Accused products. ZURU launched its allegedly infringing toy products (ZURU Action Figures, MAX Build More Bricks, and MAYKA Toy Tape) in October 2018. On November 12, 2018, LEGO sent a cease-and-desist letter to ZURU demanding that ZURU stop selling products that infringe LEGO’s design patents, trademarks, and copyrights. ZURU did not respond, and LEGO sent a second letter on December 3, 2018. On December 5, ZURU responded by stating that it would not cease sales of the MAX Build More products and would not comply with LEGO’s demands.
Infringement suit. LEGO then told ZURU that it would file suit and seek a temporary restraining order (TRO). ZURU replied by email, claiming that it would remove the allegedly infringing products from its website and that it would recall products currently with Walmart. However, LEGO believed ZURU’s products remained up on the Walmart website for sale, so it filed suit in the District of Connecticut and requested a TRO and preliminary injunction restraining ZURU from manufacturing, selling, offering for sale, displaying, and importing products that allegedly infringe LEGO’s copyrights, trademarks, and design patents. The district court granted a TRO on December 14, 2018 hearing, and after a full round of briefing and a two-day hearing, and granted LEGO’s motion for preliminary injunctive relief on July 8, 2019. ZURU filed for an interlocutory appeal before the Federal Circuit.
ZURU Action Figures—copyright claims. The appellate court first considered the district court’s grant of a preliminary injunction on the ZURU Action Figures (also referred to as the "MAX Build More 15 MAX Figures set") for their alleged infringement of LEGO’s copyrights and trademarks. The Federal Circuit concluded that the district court did not abuse its discretion in entering the preliminary injunction with respect to LEGO’s copyright infringement claim as to the ZURU Action Figures; therefore, it did not address ZURU’s alleged trademark infringement.
Likelihood of success—substantial similarity. ZURU did not dispute the district court’s finding that it had access to LEGO’s products, so the only dispute regarding the copyright infringement claim over the ZURU Action Figures was whether substantial similarities existed between protectable material in them and the LEGO Minifigures products. According to LEGO, its Minifigure Figurine was one of its most iconic construction toys, and the accused ZURU products imitated the LEGO Minifigures’ look and feel. The district court agreed with LEGO. The appellate court rejected ZURU’s contention that the district court made clearly erroneous factual findings by relying on an expert’s comparisons of the accused products to the actual LEGO products rather than to the images in LEGO’s copyright registrations. The Federal Circuit noted that the LEGO expert did view the LEGO copyright registrations, and the court held that it was proper for the expert and the district court to additionally consider the actual LEGO products. In the appellate court’s view, the copyrightable elements of the Minifigure Copyrights and the Minifigure sculptures relied upon by the district court were the same. Apart from the medium in which they were conveyed, there were no material differences between the LEGO Mini-figure sculptures and the corresponding copyright images, the court said. Moreover, ZURU identified no material differences between the figures depicted in the LEGO copyright registrations and the ones the district court and the expert compared to the ZURU Action Figures. The Federal Circuit affirmed the district court’s finding that LEGO was likely to succeed on the merits of its copyright infringement claim over the ZURU Action Figures.
Irreparable harm. ZURU argued that the district court clearly erred in finding that LEGO would suffer irreparable harm based on LEGO’s claims of intergenerational harm that were too speculative and remote. ZURU also argued that benefit to ZURU did not necessarily mean injury to LEGO, and any reliance on increased sales or market share by ZURU could not, by itself, show harm to LEGO. The Federal Circuit determined that the district court did not abuse its discretion in finding a likelihood of irreparable harm to LEGO absent a preliminary injunction. The district court found that the construction toy market was highly competitive and that ZURU’s sales of products that infringed LEGO’s copyrights would allow ZURU to increase its sales and market share, and to establish relationships with consumers for whom LEGO competed. Also, the district court found that LEGO was likely to sustain harm to its goodwill and reputation, based on evidence that ZURU’s products were of inferior quality. These injuries would be unquantifiable.
Balance of hardships. Finally, the Federal Circuit decided that the district court did not err in its determination that the balance of hardships favored LEGO. Also ZURU would be damaged considerably by the imposition of an injunction, its injuries would result solely from its own infringing acts. Accordingly, the Federal Circuit held that the district court did not abuse its discretion in granting LEGO a preliminary injunction against the ZURU Action Figures for their alleged infringement of the Minifigure copyrights.
Max Build More Blocks—design patent claims. LEGO held design patents for its bricks and building materials. LEGO asserted that at least three of ZURU’s building blocks products infringed three asserted design patents because the accused products were substantially similar to the patented designs. The district court agreed. On appeal, ZURU did not dispute the district court’s finding as to LEGO’s likelihood of success, but it challenged the findings that LEGO would sustain irreparable harm and that the balance of the equities tipped in LEGO’s favor. The Federal Circuit held that the district court abused its discretion in making these findings.
Irreparable harm. At oral argument, counsel for LEGO stated that the district court relied on two things to establish irreparable harm: (1) that absent an injunction, LEGO would effectively be forced into a compulsory license; and (2) that LEGO would suffer a loss of goodwill and brand equity because the accused Max Build More Bricks’ "clutch power"—their ability to remain stuck together—was inferior. However, LEGO’s counsel admitted that the compulsory license argument was circular because the necessary result of not being enjoined entailed allowing the alleged infringer to continue selling the accused products. Also, LEGO’s counsel was not able to cite to anything in the record indicating that the ZURU products in fact had inferior "clutch power." Nonetheless, the district court found irreparable harm due to LEGO’s likely loss of market share. But LEGO’s counsel admitted that there was no basis for this finding, so the appellate court rejected it as well. The Federal Circuit concluded that every stated rationale for finding irreparable harm was either incorrect or unsupported.
Balance of the equities. According to the appellate court, the district court did not abuse its discretion in finding that ZURU’s injuries resulted solely from its own deliberate acts of alleged infringement. Nevertheless, because the district court incorrectly found that LEGO would be irreparably harmed absent an injunction directed to the allegedly infringing Max Build More Bricks, ZURU’s own inability to show harm did not prevent the appellate court from finding that LEGO, as the party seeking a preliminary injunction, failed to demonstrate that the balance of equities tipped in its favor. For these reasons, the Federal Circuit found that the district court abused its discretion and vacated its entrance of a preliminary injunction on the allegedly infringing Max Build More Bricks.
MAYKA Toy Tape packaging image—copyright claims. LEGO asserted that product packaging for ZURU’s MAYKA Toy Tape infringed copyrights associated with LEGO’s Friends™ line of miniature figurines. The district court determined that LEGO had shown that the Friends figurines had protectable elements, that LEGO demonstrated a likelihood of success on the merits of its copyright infringement claim, that LEGO was likely to suffer irreparable harm absent an injunction, and that the balance of the hardships tipped in LEGO’s favor. The Federal Circuit found that the district court abused its discretion in entering a preliminary injunction directed at the MAYKA Toy Tape products whose packaging includes the allegedly infringing packaging image.
Likelihood of success—substantial similarity. The appellate court affirmed the district court’s finding that LEGO was likely to succeed on the merits of its copyright infringement claim. The only dispute as to likelihood of success was the substantial similarity of the parties’ works. LEGO’s expert based her opinion on a comparison of the accused product packaging and the copyrighted Friends images. She pointed to similarities in terms of scale and proportion, such as the length of the leg, the proportions or size of the torso, and the head and hair.
Irreparable harm. However, the Federal Circuit disagreed with the district court’s finding as to irreparable harm because there was no evidence that the MAYKA product was inferior. Without such a showing, LEGO could not show that continuing sales of the MAYKA product would lead to lost goodwill and damaged reputation. In addition, LEGO did not sell a product similar to the MAYKA Toy Tape, so sales of that product could not cause LEGO to suffer reduced market share.
Balance of hardships. Because the district court incorrectly found that LEGO would be irreparably harmed absent an injunction directed to the MAYKA Toy Tape, ZURU’s own inability to show harm did not prevent the appellate court from finding that LEGO, as the party seeking a preliminary injunction, failed to demonstrate that the balance of the hardships analysis favored it.
For these reasons, the Federal Circuit concluded that the district court abused its discretion and vacated its entrance of a preliminary injunction on the MAYKA Toy Tape products whose packaging included the allegedly infringing image.
This case is No. 2019-2122.
Attorneys: Elizabeth A. Alquist (Day Pitney LLP) for LEGO A/S, LEGO Systems, Inc., and LEGO Juris A/S. John William Lomas, Jr. (Dentons US LLP) for ZURU Inc.
Companies: LEGO A/S; LEGO Systems, Inc.; LEGO Juris A/S.; Zuru Inc.,
MainStory: TopStory Copyright Patent FedCirNews
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