Lego the company was fiercely protective of their IP. They had a patent they regularly enforced. Once the patent expired they took MegaBlocks to court trying to claim the shape of their bricks was trademarked (they lost this... but took it all the way to the Canadian Supreme Court).
It's also a sign that you're becoming a commodity which is bad for business. You can Xerox your document on a Canon, but you can't Google something on Bing.
I do not believe this at all. Being the default word for its category is the truest sign of the penetration of a brand.