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Lego wins trademark dispute in China: brick by brick in the Middle Kingdom

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China is not exactly a place where it is worth enforcing intellectual property rights. However, the toy manufacturer Lego has won important legal victories there in the fight against imitators, reports Eike Fesefeldt.

Many people consider "Made in China" to be a synonym for a cheaply copied product, often made from inferior materials. Everything that can be copied is copied: clothing, electronics and toys. European and North American companies in particular can report insufficient enforcement of intellectual property protection in China. Online trade, in particular, through which counterfeit products are distributed more effectively year after year, represents the greatest challenge.

But is China really the (trademark and copyright) free space that the country is often labeled as? It is often criticized that the legal area of ​​China does not offer any practical legal enforcement and at the same time the counterfeiting companies have no awareness of wrongdoing. In addition to systematic state protection and corruption, there is another difficulty in the legal enforcement of claims: the strict formalities of Chinese courts.

In theory, there is comprehensive legal protection

In purely theoretical terms, however, China offers comprehensive legal protection against theft of intellectual property. The People's Republic undoubtedly provides all legal instruments, such as defense, injunctive relief or claims for damages as well as criminal sanctions.

The country is a member of the World Intellectual Property Organization (WIPO) and has signed major international agreements. There is a comprehensive legal national set of rules that is subdivided into trademark, copyright and patent law. In addition, special courts have been set up to deal with legal issues relating to intellectual property. In January 2017, China amended its trademark law for the fourth time, proving that it will ultimately adapt to international laws and regulations.

Lego is fighting on all fronts, and especially against Lepin

The Danish company Lego is repeatedly the victim of Chinese imitators and at the same time extremely active in defending itself against these and other competitors. The company pulled up to the ECJ, for example, because it wanted to defend the intellectual protection of its building blocks, which ultimately failed. In this respect, the design of the stones is no longer protected. On the other hand, it is forbidden to pretend to be Lego or to copy existing sets. The toy manufacturer also employs warning lawyers in Germany.

In contrast to many competitors in the toy market, the company is also trying to enforce the protection of intellectual property rights in China. There are several Chinese companies that brazenly imitate Lego products. The Danes have chosen Shantou Meizhi Model Co., which previously operated under the Lepin brand, as their main legal opponent.

The Lepin products were offered for about a tenth of the price of the original Lego goods and were easily available via the internet. Even packaging, minifigures and logos were not copied in a creative way. Lepin advertised aggressively that the bricks were 100 percent compatible with Lego bricks. The company simply renamed the well-known Lego City product line to Lepin Cities and used Ninjasaga instead of Ninjago or Star Wnrs instead of Star Wars. Lego did not want to accept that and took legal action against Lepin both criminally and civilly.

Successfully sued for omission and damages

On January 20, 2020, Lego proudly announced that it had civilly won a "major intellectual property lawsuit" against Lepin in China. Specifically, Lepin was convicted of copying and selling "cloned" Lego on an appeal in the Guangzhou Intellectual Property Court -Sets to refrain. According to a press release from Lego, the ruling is final.

In the first instance, Lepin was sentenced by the Guangzhou Yuexiu District Court in November 2018 to refrain from copying and selling 18 kits. Lepin also had to pay a fine to Lego. In another case, which was decided in July 2017, the logo and the word mark of the toy manufacturer from Denmark were classified by a Beijing court as "well-known" brands in China.

Criminal proceedings are still ongoing

The criminal law side of the legal dispute against Lepin caused greater upheaval. In April 2019, the Chinese government announced that police had raided three Lepin factories in the southern Chinese cities of Shantou and Shenzhen. 650,000 sets were secured, which, if they had been real Lego sets, would have had a market value of 30 million US dollars.

According to the government, the police also confiscated 200,000 assembly instructions and the same amount of packaging. 90 product series have been manufactured on more than ten assembly lines. The production equipment had been destroyed by the police so that the companies would not continue to produce as soon as the investigators left the factories. Four members of the counterfeiting ring were arrested. The criminal proceedings themselves have not yet been concluded. Lego says it will continue to work closely with Chinese law enforcement agencies.

More than symbolism?

The legal disputes that Lego is waging in China are primarily symbolic. The company wants to signal that it will not give up without a fight. Lepin was just one of several companies that copied the popular Lego products 1 to 1.

The Chinese authorities are currently working to create a favorable business environment for multinational companies. The Lego legal disputes are to be seen in the context of the trade war between the USA and China that has been going on since 2018. Under massive pressure from the USA, Beijing had repeatedly announced tougher action against product piracy. In particular, reforms have already been initiated that are not only intended to remain theoretical, but also to change the structure of the courts dealing with intellectual property. It remains to be seen where this path will lead.

As for the litigation against Lepin, that brand does indeed seem to no longer exist. But it is now clear: The company behind it continued shortly afterwards, this time under the names King and Nuogao. Still, Lego's legal successes are impressive. Perhaps the toy manufacturer dedicates its own collection to its lawyers out of gratitude, e.g. "Lego Lawyers" or "Lego Legal" - with a courtroom, judges, clerks, constables and various lawyers. And please don't forget the public prosecutor!

The author Dr. Eike Fesefeldt works as a public prosecutor. He is seconded to the International Criminal Court as a trial lawyer from the state of Baden-Württemberg. The views mentioned in the text reflect only his personal opinion.