Intellectual Property and Lego
I recently read a fun article about how Lego remains the dominant firm for plastic bricks even though it has no intellectual property protection in the product. There is no Lego patent or copyright anymore, and there is no trade secret in making plastic pieces of different colors that fit together. Lego does have a powerful brand secured by trademark law, but normally that would not be enough to maintain a significant competitive advantage. So what is the answer to its success?
One aspect is that Lego is very good at making the blocks. Very few of them have defects. Indeed, Lego puts a number on each block (and imagine how many there must be in the world) so that if there is a defect, they can track exactly where the block came from and fix the mould or process that made it. Quality control is critical when the products are highly similar.
Another key is that Lego has purchased the exclusive rights to popular franchises such as Star Wars and Harry Potter. I could make a Death Star out of an alternative product, but it won’t be as good as the Lego version because the blocks cannot be custom made for a Death Star. (Granted, some of Lego’s competitors have bought the rights to other franchises, but Lego appears to have the better ones.)
Finally, Lego does lots of clever marketing. There are some Lego theme parks, Lego stores in prominent places such as Rockefeller Center, and so on.
Anyway, this is another good case study for someone who wants to understand how creativity can thrive in the absence of patent and copyright, along the lines discussed in The Piracy Paradox.