Designer Skin LLC v. S & L Vitamins, Inc., et al.
Ty Inc. v. Ruth Perryman
306 F.3d 509 (7th Cir., October 4, 2002)
Reversing the decision of the court below, the Seventh Circuit Court of Appeals holds that a reseller of "Beanie Babies" did not violate the Federal Trademark Dilution Act when she used plaintiff Ty Inc.'s "Beanies" trademark in the title and domain name of her web site, at which site approximately 80% of the toys offered for sale are used "Beanie Babies" manufactured by Ty.
Plaintiff Ty Inc. ("Ty") is the manufacturer of a line of bean bag stuffed animals it markets under the trademarks "Beanie Babies" and "Beanies." Defendant Ruth Perryman operated a web site at the domain www.barginbeanies.com, which site is titled "Bargin Beanies." Eighty percent of the toys Perryman offers for sale at her site are used "Beanie Babies" manufactured by plaintiff. The remaining twenty percent of her products consist of competing children's toys manufactured by others, including "Planet Plush" and "Rothschild Bears." Defendant's site contains a disclaimer that states that it is not affiliated with plaintiff.
Claiming that defendant's activities constitute a violation of the Federal Trademark Dilution Act, plaintiff commenced suit. The court below agreed, granted plaintiff summary judgment, and issued an injunction, enjoining defendant from continuing to use plaintiff's "Beanies" mark in the domain name of her site.
On this appeal, the Seventh Circuit reversed. The Court found that plaintiff's "Beanie Baby" and "Beanies" marks were famous, and that defendant Perryman had used them in Interstate commerce, perquisites to a Federal Dilution claim. The court held, however, that defendant's actions constituted neither a blurring nor tarnishment of plaintiff's marks, nor any other actionable form of dilution. Federal dilution laws cannot be used to bar a reseller from using plaintiff's marks in the resale of plaintiff's used products. Said the Seventh Circuit:
In reaching this conclusion, the court relied, in part, on the fact that Ty's marketing strategy included the creation of a secondary market in its products, in which market pent-up demand for products produced in limited supply would raise their prices.
Lastly, the Seventh Circuit affirmed so much of the decision of the court below which prohibited Perryman from using the phrase "Other Beanies" to describe the products of competitors sold on her site. Such a description was "false advertising" and hence actionable.