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NZ Court of Appeal decides Zuru toys' 'compatibility claim' is comparative advertising not Lego trade mark infringement
Recently, the New Zealand Court of Appeal released its judgment Zuru New Zealand Limited v LEGO Juris A/S [2025] NZCA 650. The judgment is a useful authority on the limits of trade mark monopolies when using a competitor’s registered trade mark for the purpose of comparative advertising, including product compatibility claims.
The decision, as it stands, means using a competitor’s trade mark is allowed provided it is done in such a way that is true, accurate, and not misleading. Importantly, the competitor’s trade mark should not be used in a way that consumers would see it as indicating the trade source of the product on which it is used.
Lego has applied for leave for a further appeal to the Supreme Court which is likely to be decided in April or May 2026. If allowed, the outcome of the Supreme Court will be one to watch in this space.
The decision is a long one (over 200 pages, available here). So, here is our detailed analysis.
The dispute
LEGO Juris A/S (Lego) needs no introduction. It is a famous producer of plastic construction bricks that interlock together.
Zuru New Zealand Limited (Zuru) is a relatively newcomer to the toy industry. By its own admission, Zuru’s business aims and ethos are those of a “disruptor”. It sells a range construction bricks under the brand MAX BUILD MORE. It’s packaging used the words “LEGO® BRICK COMPATIBLE” as shown below:
Lego objected to this use. Zuru replaced the statement with “COMPATIBLE WITH MAJOR BRANDS” but later sought Lego’s consent to proposed variations of this wording which all contained the word LEGO. Lego refused. This prompted Zuru to file High Court proceedings seeking declarations that the use of the compatibility statements that refer to the LEGO trade mark do not constitute trade mark infringement under the Trade Marks Act 2002 (TMA), a breach of the Fair Trading Act 1986 (FTA), or amount to passing off.
Lego opposed and counterclaimed that the original compatibility statement did infringe Lego’s trade mark, is a breach of section 9 of the FTA, and would amount to passing off.
There was no dispute over the accuracy of the claim. Zuru’s bricks are compatible with Lego’s.
High Court Decision
The High Court found:
- The compatibility statements constitute infringing use as a trade mark under s89 of the TMA;
- The specific defences of comparative advertising (s94 TMA) or use indicating the quality or purpose of the goods (s95 TMA) did not apply because Zuru’s use had not been in accordance with honest practices;
- The compatibility statements did not constitute passing off or a breach of s9 of the FTA.
Zuru appealed the finding of infringement. Lego cross appealed the rejection of its claims for passing off and breach of s9 of the FTA.
Court of Appeal’s decision
Trade mark infringement (s89 TMA)
Section 89 of the TMA states:
89 Infringement where identical or similar sign used in course of trade
(1) A person infringes a registered trade mark if the person does not have the right to use the registered trade mark and uses in the course of trade a sign—
(a) identical with the registered trade mark in relation to any goods or services in respect of which the trade mark is registered;…
…
(2) Subsection (1) applies only if the sign is used in such a manner as to render the use of the sign as likely to be taken as being use as a trade mark.
(3) Sections 92 to 98 override this section.
There was no dispute that Zuru was using Lego’s trade mark in relation to Lego’s goods. So, the case turned on whether Zuru’s use of LEGO was “in such a manner as to render the use of the sign as likely to be taken as being use as a trade mark”.
The Court of Appeal judges were split on this question.
The majority found that “use as a trade mark” should be interpreted to mean use as a badge or origin for the user’s goods or services. They phrased the question to be answered as “was Zuru using the LEGO mark in a way that would cause relevant consumers, on seeing the use of the sign in the compatibility statements, to think: “this mark is telling me the trade source of the bricks inside this packaging”. The answer to this was no. MAX BUILD MORE was the dominant brand on the packaging. The use of LEGO was smaller and always to the right on the packaging. Consumers would understand the use of LEGO® BRICK COMPATIBLE as indicating that the MAX bricks are not LEGO bricks but can be used with them.
Justice Cooke disagreed on this point. He found that the “use as a trade mark” requirement is met when there is use of the trade mark to identify the trade mark owner’s good or services. There is no requirement that there be misappropriation of the trade mark owner’s intellectual property, only that the mark is used for identification. Here Zuru was clearly using Lego to identify Lego’s products. It was not necessary to show that Zuru was making a claim that their toy bricks were a Lego product or had some association with Lego. So Zuru were using LEGO as a trade mark.
One reason for the difference in views between the majority and Justice Cooke was the effect the interpretation of "use as a trade mark” would have on the specific statutory defences set out in the TMA. The majority recognised that their interpretation of this wording would largely leave the statutory defences in s94 (comparative advertising) and s95 (use indicating the quality or purpose of the goods) redundant.
Justice Cooke took the view that this could not have been the intention of Parliament when the TMA was enacted and this justified the wider interpretation of “use as a trade mark”.
The majority decision brings the law in New Zealand more in line with the position in Australia after Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8. In that case, the High Court of Australia found that the use of “instant Botox® alternative” was not use of BOTOX as a trade mark as it did not indicate the origin of the goods, rather described a characteristic of them. This will make it easier for traders in New Zealand and Australia to market their own products by way of comparison or reference to a third party’s product.
Comparative Advertising defence
Section 94 of the Trade Marks Act states:
A registered trade mark is not infringed by the use of the registered trade mark for the purposes of comparative advertising, but any such use otherwise than in accordance with honest practices in industrial or commercial matters must be treated as infringing the registered trade mark if the use, without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
It was not necessary for the majority to consider the specific trade mark infringement defences in s94 and 95 of the TMA. However, they did so anyway.
Both the majority and Justice Cooke found that it was not necessary for the comparison to include a superiority claim. Rather, the orthodox idea of a comparison involves contrasting two or more things and identifying their similarities or dissimilarities. That can logically involve saying that the two things are relevantly the same as, or equivalent to, each other, or that aspects of them are the same. So, the use of LEGO® BRICK COMPATIBLE was comparative advertising as LEGO was being used as a comparator for, or to describe, a feature of Zuru’s bricks.
They also agreed that Zuru’s use was in accordance with honest practices. The compatibility statement was true. There was no puffery or hyperbole. There was no real risk of deception. The words were not misleading. In coming to this conclusion, they approved the use of the original approach to honest practices taken by the Courts in the UK in cases such as Cable & Wireless over the expanded principles outlined in Samuel Smith Old Brewery (Tadcaster) v Lee (t/a Cropton Brewery) which involved protecting the advertising and investment functions of the brand (i.e. concepts like trying to gain advantage from leveraging the reputation in Lego’s brand).
Descriptive use defence
Section 95 of the TMA states:
A person does not infringe a registered trade mark if, in accordance with honest practices in industrial or commercial matters, the person uses—
(a) the person’s name or the name of the person’s place of business; or
(b) the name of the person’s predecessor in business or the name of the person’s predecessor’s place of business; or
(c) a sign to indicate—
(i) the kind, quality, quantity, intended purpose, value, geographical origin, or other characteristic of goods or services; or
(ii) the time of production of goods or of the rendering of services; or
(d) the trade mark where reasonably necessary to indicate the intended purpose of the goods (in particular as accessories or spare parts) or services.
Both the majority and Justice Cooke ultimately chose not to decide whether this defence applied. The majority leaned towards the view that Zuru’s use of LEGO did indicate a characteristic of Zuru’s product (namely compatibility with LEGO) but not a relevant intended purpose.
Fair Trading Act and Passing Off
It was accepted that LEGO had acquired strong goodwill and reputation in the field of toy building bricks in New Zealand and worldwide. So, these claims came down to whether Zuru’s use of LEGO would confuse or deceive the relevant public.
The majority found that a reasonable consumer, viewing the packaging as a whole, would understand the combination of prominent brand elements, including ZURU, MAX BUILD MORE, distinctive colours and logo) as indicating the products are Zuru’s, not Lego’s. By the time they read the smaller, single word “LEGO” in the compatibility statement, they would already know it was a Zuru product. So, there was no likelihood of consumer confusion or deception.
Outcomes and orders
- Appeal allowed in favour of Zuru; the Court made a declaration that Zuru’s original compatibility statement did not infringe the registered LEGO trade mark.
- Cross‑appeal by LEGO dismissed.
What does this mean for traders?
This case does provide some useful insight into how you can use a competitor’s trade mark without infringing on their registered trade mark rights - provided that the use would not be viewed by consumers as a badge of origin, and the context of the use is truthful and accurate, it is unlikely this use will be found to be infringing a third party’s rights.
However, we still recommend some caution at least until the outcome of any Supreme Court case is known. The dissenting view of Justice Cooke shows there is still some debate over the correct interpretation of “use as a trade mark” in New Zealand and this point could be revisited in future cases.
Further, the context of your use will be decisive. We highly recommend your use is reviewed by an IP professional before it is launched to check there are no obvious issues that may land you on the wrong side of a cease and desist letter.
Zoe Dewhurst and David Moore - March 2026
