Lego A/S v. Best–Lock Constr. Toys, Inc.

• Decision Date: 11 July 2012
• Docket Number: No. 3:11–CV–1586 (CSH).,3:11–CV–1586 (CSH).
• Citation: 874 F.Supp.2d 75
• Parties: LEGO A/S, and Lego Systems, Inc., Plaintiffs, v. BEST–LOCK CONSTRUCTION TOYS, INC., Defendant.
• Court: U.S. District Court — District of Connecticut

874 F.Supp.2d 75

105 U.S.P.Q.2d 1014

LEGO A/S, and Lego Systems, Inc., Plaintiffs,

v.BEST–LOCK CONSTRUCTION TOYS, INC., Defendant.

No. 3:11–CV–1586 (CSH).

United States District Court,

D. Connecticut.

July 11, 2012.

4,205,482. Cited.Catherine Dugan O'Connor, Day Pitney LLP, Stamford, CT, Elizabeth Ann Alquist, Nicholas A. Pisarsky, Day Pitney LLP, Hartford, CT, for Plaintiffs.

Dena M. Castricone, Michael J. Donnelly, Murtha Cullina, New Haven, CT, Douglas A. Miro, Robert C. Faber, Stephen J. Quigley, Ostrolenk Faber LLP, New York, NY, for Defendant.

RULING ON DEFENDANT'S MOTION FOR PRELIMINARY INJUNCTION

HAIGHT, Senior District Judge:

I. Introduction

Plaintiffs Lego A/S and Lego Systems, Inc. (collectively “Lego”) have manufactured toys called “minifigures” since 1978.¹ Lego's minifigures depict people, all having the same shape but varying two-dimensional representations of facial features and clothing styles on the head and torso respectively. They are designed so that the user can disassemble them and attach them to other figures and studded blocks. Each minifigure has a cylindrical head, a cylindrical neck, a trapezoidal torso, bent arms, hooked hands and square block-like feet. In 1994, Lego registered with the Copyright Office two copyrights for the minifigures: VA 655–104 and VA 655–230 (the “Minifigure Copyrights”).

Defendant Best–Lock Construction Toys, Inc. (“Best–Lock”) has been selling its own minifigures in the United States since 1998. These minifigures can also be attached to studded blocks. Best–Lock's minifigures are the same size as Lego's, and also have cylindrical heads, cylindrical necks, trapezoidal torsos, bent arms, hooked hands and square block-like feet, while differing in color and the two-dimensional representations of facial features and clothing. These minifigures have been successful; by Best–Lock's account, since 1998 it has sold, in the U.S. alone, over five million product sets containing eighteen million minifigures and exceeding $50 million in revenues. Declaration of Torsten Geller in Support of Defendant's Motion for Preliminary Injunction (“Geller Decl.”) ¶ 12. Other companies, such as Hasbro, Inc. and Mega Brands, Inc., sell similar minifigures.

On or about July 14, 2011, U.S. Customs and Border Protection (CBP) carried out the first of a series of seizures of shipments from abroad of Best–Lock's toy blocks and minifigures. CBP sent Best–Lock's counsel a letter dated August 17, 2011, in which it asserted that it is carrying out these seizures because the minifigures infringe the '104 copyright. Best–Lock petitioned CBP to cease the seizures, and demanded that Lego assist it in doing so, but without success.

On October 14, 2011, Lego filed the present action, alleging infringement of the Minifigure Copyrights. In the Complaint, as amended on February 13, 2012, Lego makes claims for (1) infringement of the Minifigure Copyrights under 17 U.S.C. § 101, et seq.; (2) defamation; and (3) violation of the Connecticut Unfair Trade Practices Act (CUTPA), Conn. Gen.Stat. § 42–110a, et seq. Lego prays for a preliminary and permanent injunction, restraining Best–Lock from manufacturing or selling its accused minifigures. Lego also claims its “actual damages” caused by Best–Lock's infringement, and Best–Lock's profits generated thereby. Amended Complaint [Doc. 40] at 10–11.

On January 5, 2012, Best–Lock filed its Answer, together with counterclaims seeking declarations that the Minifigure Copyrights are invalid and that Best–Lock's minifigures do not infringe them, as well as damages and an injunction based on the seizures of Best–Lock's products by CBP.

Best–Lock filed the present Motion for Preliminary Injunction [Doc. 37] (the “Motion”) on February 6, 2012. Best–Lock requests an injunction under Rule 65(a) of the Federal Rules of Civil Procedure (1) restraining and enjoining Lego from asserting the Minifigure Copyrights against Best–Lock before the CBP; (2) ordering Lego to inform CBP that it consents to the past and future importation and delivery to Best–Lock and its customers of products of Best–Lock's seized or detained by CBP based on the alleged infringement; and (3) ordering Lego to immediately withdraw recordation of Copyright VA 655–104 with the CBP. In essence, Best–Lock's Motion asserts that the Minifigure Copyrights are invalid, that Lego is estopped from asserting them, and that Best–Lock is suffering continuing and irreparable harm as a result of CBP's seizures of its products. Lego, of course, opposes the Motion on the grounds that Best–Lock has been infringing the Minifigure Copyrights, and that Lego will likely succeed on the merits of its Complaint.

A hearing on Best–Lock's Motion for a Preliminary Injunction (the “Hearing”) was held before the Court on March 8, 2012. At the Hearing, the parties presented their arguments on the Motion, and also submitted as evidence certain toys, which were marked as Court Exhibits One through Seven. See Exhibit and Witness List [Doc. 61]. These toys include samples of Lego's and Best–Lock's minifigures as well as samples of minifigures manufactured by Hasbro, Inc. and Mega Brands, Inc.

The parties have also fully briefed the Motion. Best–Lock filed a Memorandum of Law in support of the Motion (“Supp. Memo.”) on February 6, 2012. It filed therewith three declarations with attached exhibits: the declarations of Torsten Geller, its CEO (“Geller Decl.”), Frank Desiderio, one of its attorneys (“Desiderio Decl.”), and Stephen Quigley, another of its attorneys (“Quigley Decl.”). Lego filed an Opposition to the Motion (“Opp. Memo.”) on February 21, 2012. It filed therewith two declarations with attached exhibits: the declarations of Michael McNally, the Brand Relations Director for LEGO Systems, Inc., (“McNally Decl.”) and Linda Pollard, a legal assistant at LEGO Systems, Inc. (“Pollard Decl.”). On February 28, 2012, Best–Lock filed a Reply Memorandum (“Reply Memo.”), along with an additional declaration from Geller (“Reply Decl.”) with exhibits.

The Court, having reviewed these briefs and documents, entered an Order [Doc. 74] directing further briefing on whether Lego's claim of copyright infringement by Best–Lock “is barred by laches.” The Court raised the question of laches sua sponte because the parties had not discussed it in the prior briefs. In obedience to that Order, counsel have filed supplemental briefs [Docs. 75 and 76], which the Court has also considered.

II. Standard for Preliminary Injunction

The Second Circuit has recently held that the test for the grant of preliminary injunctions based on alleged copyright infringement is the four-factor test set forth by the Supreme Court in eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006), while intimating that the eBay formulation applies to all applications for preliminary injunctions. Salinger v. Colting, 607 F.3d 68, 77, 78 n. 7 (2d Cir.2010) (“we see no reason that eBay would not apply with equal force to an injunction in any type of case”). Thus, while Salinger involved a request for an injunction by the party alleging infringement, the four-factor test applies likewise to the present request for a preliminary injunction by the alleged infringer. The distinction is significant because the eBay/ Salinger test is not identical to the test most commonly cited.

Under the eBay test as developed in Salinger, the court must consider four factors. First, the party requesting the injunction must demonstrate either (a) a likelihood of success on the merits, or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor. Salinger at 79. Second, the movant must show that it is likely to suffer irreparable injury in the absence of an injunction, paying particular attention to the question of whether the remedies available at law, such as monetary damages, are inadequate to compensate for that injury. Id. at 80. Third, the court must consider the balance of hardships between the parties and grant the injunction only if that balance tips in the movant's favor. Id. Fourth, the court must ensure that the “public interest would not be disserved” by the issuance of a preliminary injunction. Id., quoting eBay at 391, 126 S.Ct. 1837.²III. Likelihood of Success on the Merits

Best–Lock argued initially that it is likely to succeed on the merits in this action for four reasons: (1) Lego is equitably estopped from enforcing its rights under the Minifigure Copyrights, Supp. Memo. at 10–17; (2) the Minifigure Copyrights are invalid because the allegedly protected elements are functional and because Lego committed a fraud on the Copyright Office, id. at 17–19, 23–27; (3) Best–Lock has not infringed the Minifigure Copyrights, id. at 19–23; and (4) Lego's CUTPA claim is wholly unsupported, id. at 27.

Prompted or perhaps inspired by the Court's sua sponte introduction of the subject of laches into the case, Best–Lock now makes the additional argument that laches bars all of Lego's claims against it—equitable and legal.

Lego disagrees with all these contentions. If the Court accepts one or more of Best–Lock's arguments, such a ruling would obviously have a material effect upon the Salinger factors, to which the Court must look in determining whether Best–Lock is entitled to the cross-injunction for which it prays in the present Motion.

I discuss each of these issues in the order stated, except that the discussion of laches immediately follows the discussion of equitable estoppel.

A. Equitable Estoppel

Best–Lock argues that Lego is estopped from enforcing its rights under the Minifigure Copyrights by the doctrine of equitable estoppel. A copyright defendant invoking equitable estoppel must show that (1) the plaintiff had knowledge of the defendant's infringing acts, (2) the plaintiff either intended that the defendant rely on his acts or omissions...