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Ty Inc. v. Softbelly’s, Inc., et al.
Nos. 07-1452, 07-1519, 07-1782, 07-1793, 07-2401, 2008 WL 465851, C.A.7 (Ill.), 02/22/2008
Holding
In this appeal, the U.S. Court of Appeals for the Seventh Circuit ruled that defendant's “Screenie Beanies” infringed plaintiff’s “Beanie Babies” trademark. The court found the “Screenie Beanies” computer screen cleaners to be identical in size, shape, and overall appearance to the “Beanie Babies” baby toys. While it may be true that the hang tag for “Screenie Beanies” differed from plaintiff's well-known red heart-shaped tag, “customers might well believe that plaintiff, having decided to make a screen cleaner rather than the conventional ‘Beanie Baby’ toy, had changed the tag's appearance.” Thus, defendant’s use of the name “Screenie Beanies” and the design of its product demonstrated what the court described as a “reckless disregard for the likelihood of consumer confusion.” In so finding, the Seventh Circuit affirmed the district court’s ruling of willful infringement.
Detailed Summary
Plaintiff Ty Inc. is the manufacturer of “Beanie Babies” baby toys. It filed this suit for trademark infringement under the Lanham Act against Softbelly’s, Inc. and other defendants before the U.S. District Court for the Northern District of Illinois, Eastern Division. Softbelly’s manufactures computer screen cleaner products called “Screenie Beanies” that looks and feels like “Beanie Babies.” Defendant’s product is different from plaintiff’s toy in the sense that the former has chamois bellies and is sold to the public through computer stores.
Following jury trial, the district court entered judgment in favor of plaintiff as a matter of law. Specifically, the district court granted injunctive relief and awarded $713,000 in damages. Further, the district court denied defendants’ motion to vacate. Defendant based its arguments on witness tampering. On appeal, the Seventh Circuit reversed the district court’s judgment on the basis that the judge “had erroneously excluded potentially important evidence” that “Beanies” or “Beanie Babies” had become a generic mark. The Seventh Circuit added that the district judge “should not have taken the issue of likelihood of confusion from the jury.”
On remand, with a different judge presiding, the court conducted jury trial anew. The jury found trademark infringement. The judge entered an injunction forbidding Softbelly’s “to sell plush products in connection with the trademarks ‘Screenie Beanies’ and/or ‘The Screenie Beanies Collection,’ and/or any other trademark confusingly similar to Ty’s BEANIE BABIES®, THE BEANIE BABIES COLLECTION®, and/or BEANIE(S) TRADEMARKS.” But the district court did not award Ty any damages. It stated that forfeiture of the $713,000 in damages to which Ty would otherwise have been entitled by virtue of the Seventh Court’s ruling in the first appeal was the “right sanction for what (the court) found to have been (Ty’s) improper conduct toward the prospective witness.” However, the district court awarded Ty attorneys’ fees that it had incurred in proving Softbelly’s’ trademark infringement. This award was based on the finding that the infringement had been willful.
In this second appeal, Softbelly’s requested a new trial on the issue of liability. It also asked the Seventh Circuit to vacate the award of attorney’s fees. Ty filed its cross-appeal. Particularly, Ty asked the court to vacate the sanction and to restore the $713,000 in damages that the district judge had ordered forfeited. However, Ty did not object to the court’s ruling of subtracting $78,000 from the restored damages. This amount represented attorneys’ fees that Softbelly’s incurred in litigating the issue of Ty’s misconduct.
On the issue of sanctions imposed on plaintiff for misconduct, i.e. seeking to unduly influence a witness for Softbelly’s, the Seventh Circuit ruled that the finding of misconduct should remain. The reason for such finding was that Ty did not contest it. In previously opposing such sanction, Ty had to incur attorney’s fees in the amount of $78,000. Ty subsequently conceded that Softbelly’s was entitled to those fees even though the latter failed in its effort to get a bigger sanction consisting of dismissal of the suit. The court declared that Ty was “punished enough for litigation misconduct that fortunately did not affect the course or outcome of the litigation.”
On the matter of trademark infringement, the court formulated the issue this way: whether the designation “Screenie Beanies” on a nearly identical-looking product (was) likely to make a significant number of consumers think that Softbelly’s product is actually a Ty brand. The court agreed with the jury in answering this issue in the affirmative. The court found the “Screenie Beanies” to be identical in size, shape, and overall appearance to the corresponding “Beanie Baby”. While it may be true that the hang tag for “Screenie Beanies” differs from Ty’s well-known red heart-shaped tag,“customers might well believe that Ty, having decided to make a screen cleaner rather than the conventional “Beanie Baby” toy, had changed the tag’s appearance.”
The Seventh Circuit sustained the lower court’s finding of willful infringement. Sofbelly’s choice of the name “Screenie Beanies” and the design of its screen cleaners demonstrated what the court described as a “reckless disregard for the likelihood of consumer confusion.” Defendant’s attempt to trademark “Screeniebeanies” was previously turned down by the Patent and Trademark Office on the ground that it was “potentially confusing.”
On the basis of the foregoing discussion, the Seventh Circuit affirmed the lower court’s grant of injunctive relief. Also, it remanded the case on the matter of damages awarded in the amount of $713,000 against Softbelly’s, less the attorney’s fees incurred by Softbelly’s for litigating the issue of Ty’s misconduct.
Service
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