Building blocks of trade mark law: New Zealand approach to "use as a trade mark" now compatible with Australia

For over a year, New Zealand trade mark lawyers have been eagerly awaiting the Court of Appeal decision released recently in Zuru New Zealand Ltd v Lego Holding A/S [2025] NZCA 650 (Zuru v Lego).

The decision provides long awaited clarity for businesses on the lawful use of another party’s trade mark, particularly in the context of advertising goods or services by reference to the goods or services of another trader.

The case

Lego is well-known as a leading manufacturer of plastic toy bricks, a product that has been popular with children (and adults) for many decades. Lego bricks are designed to interlock, allowing users to create an endless variety of structures and imaginative designs.

Zuru, a New Zealand-based business that sells a wide range of products, produces and sells plastic toy bricks that are similar to those made by Lego and which are specifically designed to be compatible with Lego’s products – in the sense that they interlock with them.

To explain this design feature to customers, Zuru included the following statement on its product packaging: “LEGO® BRICK COMPATIBLE”.

This statement exposed Zuru to legal risk, because Lego holds a registered trade mark in New Zealand for LEGO, including for toys. Zuru appeared to have used Lego’s registered mark in relation to the same goods covered by Lego’s trade mark registration. The critical question before the Court of Appeal was: did this use constitute trade mark infringement?

Infringement – the basics

Infringement of a trade mark in New Zealand is governed by the Trade Marks Act 2002.

A trade mark can be infringed in a number of ways. This includes where a sign "is used" that is identical to a registered trade mark, in relation to the same goods or services for which that mark is registered (colloquially known as “double identity” infringement). In the present case, it was not disputed that Zuru had used a sign identical to Lego’s trade mark (LEGO) on identical goods and services (toys).

However:

• to amount to infringement, the sign must have been used in a way that would likely be taken as being “use as a trade mark” (s89(2)); and

• defences to trade mark infringement include the registered mark being used solely for the purposes of “comparative advertising” (s94).

What is “use as a trade mark”?

The High Court (hearing the matter at first instance) had found that Zuru had used Lego’s mark as a trade mark. Whether this finding was correct was the central issue for the Court of Appeal to decide.

Interestingly, the Court of Appeal was split on this question.

• The majority (Justices Ellis and Palmer) held that Zuru’s use was not “use as a trade mark”, because it was not used as a badge of origin for Zuru’s goods – in other words, it was not being used to indicate the origin or trade source of Zuru’s goods. To amount to use “as a trade mark”, the majority held that the sign had to be used in a way that would cause consumers to think “this is telling me the product’s source”.

• The majority found that Zuru had not used the LEGO mark to indicate the source of its own product. Instead, the statement (“LEGO® BRICK COMPATIBLE”) was being used descriptively, to indicate the opposite: that despite not being Lego product, it could still be used with Lego products.

• Justice Cooke disagreed and considered Zuru’s use to be “use as a trade mark”. His Honour found that, being a made up word, any use of LEGO must necessarily be trade mark use rather than descriptive use. His reasoning was also influenced by the concern that, if Zuru’s use was not trade mark use, then what would be the point of the comparative advertising defence?

The majority’s interpretation will guide future trade mark infringement cases (unless overturned on appeal) and will simplify marketing strategies for trans-Tasman businesses, who for over two years now have had to grapple with what appeared to be contrasting and inconsistent positions in Australia vs New Zealand on what constitutes “use as a trade mark.” In Australia, the use of the phrase “instant Botox® alternative” by a trader on cosmetics packaging was held not to infringe the registered trade mark BOTOX (in Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8). The High Court of Australia held that the trader had not used BOTOX “as a trade mark” as it had not been used to indicate the origin of the goods, but rather to describe them. The Court of Appeal decision in Zuru v Lego aligns New Zealand trade mark law with Australian law on this point, which will no doubt be a relief for not only trans-Tasman businesses but also those who advise them on their IP infringement risks and rights.

Comparative advertising defence

The Trade Marks Act provides a defence where a registered trade mark is used for the purposes of comparative advertising. The mark must however be used in accordance with “honest practices” (among other things), otherwise the defence will not apply.

Comparative advertising might typically be thought of as a statement of direct comparison, along the lines of: “our product is better than theirs”. This had been the view taken by the High Court.

While the majority held that there had been no use “as a trade mark” and therefore no infringement, it did not need to go on to consider any defences (such as comparative advertising). However, it did acknowledge (in obiter) that had the defence been necessary, it would have been made out. Justice Cooke (in the minority) considered that the comparative advertising defence did apply, finding that Zuru’s competitive (or even "aggressive") promotion of its own products as a substitute to those of Lego was still in accordance with honest practices.

Reflections

The Zuru v Lego decision will streamline marketing strategies for trans-Tasman businesses and also arguably make advising clients easier for the trade mark lawyers among us. Many points from this decision will influence future cases on trade mark use, and this Insight only touches the surface. The key takeaways are:

• For businesses who find others using their word marks, logos, slogans or other registrable brand collateral:

- Where that use arguably indicates that your business is the trade origin of their goods or services, or otherwise implies an association with your business that does not exist in a way that could mislead consumers, this use will still amount to either trade mark infringement, a breach of the Fair Trading Act 1986 or the tort of passing off (or possibly all of these); and

- Reliance on registered trade marks is still highly valuable, as context is everything. Where “use as a trade mark” occurs in cases of “double identity infringement” then (unlike claims for breach of the Fair Trading Act or passing off) relief can be awarded even where no consumer confusion arises.

• For businesses who want to advertise their own goods or services by reference to another party’s registered trade mark, some caution is still necessary. How the mark is used is key, and again, context is everything. Seeking legal advice before your campaign is launched could save you a lot in future legal fees.

If you have questions about your business’s brand strategies or trade mark rights, one of our experts would be happy to help.

‍