Ty Inc v. The Jones Group

• Decision Date: 23 January 2001
• Docket Number: No. 00-2746,00-2746
• Parties: (7th Cir. 2001) Ty, Inc., Plaintiff-Appellee, v. The Jones Group, Inc., Defendant-Appellant
• Court: U.S. Court of Appeals — Seventh Circuit

Page 891

237 F.3d 891 (7th Cir. 2001)

Ty, Inc., Plaintiff-Appellee, v. The Jones Group, Inc., Defendant-Appellant.

No. 00-2746

In the United States Court of Appeals For the Seventh Circuit

Argued December 4, 2000

Decided January 23, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 2057--Ian H. Levin, Magistrate Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before Flaum, Chief Judge, and Diane P. Wood and Williams, Circuit Judges.

Flaum, Chief Judge.

The Jones Group, Inc. ("Jones") manufactures and sells "Beanie Racers," which are plush toys shaped like race cars. Ty, which sells plush toys under the name "Beanie Babies," obtained a preliminary injunction against Jones, forcing it to stop producing and selling Beanie Racers. Jones asks us to reverse the magistrate judge's grant of a preliminary injunction in favor of Ty on several grounds. For the reasons stated herein, we affirm.

I. Background

Ty in 1993 began selling plush toys throughout the United States under the name "Beanie Babies" and has sold over a billion Beanie Babies since the product's inception. Dozens of newspaper and magazine articles, television news stories, web sites, books, and magazines have emerged concerning Ty's Beanie Babies, apparently making the product a national sales phenomenon. Ty has obtained U.S. Federal Trademark Registrations for the marks "Beanie Babies" and "The Beanie Babies Collection." Beanie Babies are small, plush animals filled with plastic pellets. Generally, they are eight to nine inches long and typically are made from a velboa-type fabric. A red, heart- shaped hang tag with Ty's logo on it is attached to each Beanie Babies product.

Jones is a licensee of NASCAR and began in 1998 manufacturing and selling Beanie Racers, which are bean-filled replicas of NASCAR racing cars. Attached to each Beanie Racer is a white and rectangular shaped hang tag with the following information on it: (1) the Beanie Racers mark; (2) the multi-colored NASCAR mark; (3) the signature of the driver of each NASCAR race car, including a disclosure which recognizes the individual or entity who owns the rights to such signature; and (4) the corporate sponsor of each NASCAR race car. Beanie Racers are approximately eight inches long, are filled with plastic pellets, and are made of velboa-type plush fabric.

Ty sent Jones a cease and desist letter dated July 17, 1997 informing Jones that its Beanie Racers infringed upon Ty's trademark rights. Jones proceeded forward with the production of its Beanie Racers and Ty responded by pursuing legal action against Jones. In its suit, Ty alleges that Jones engaged in trademark infringement, unfair competition, and dilution in violation of federal and state laws. On November 17, 1999, Ty requested a preliminary injunction against Jones prohibiting Jones from selling plush toys under the name Beanie Racers pending the outcome of the suit. The magistrate judge granted Ty's motion for a preliminary injunction in an Opinion and Order dated June 5, 2000. Jones requested a reconsideration of the magistrate judge's opinion, but the magistrate judge decided not to alter his original opinion. On July 7, 2000, the magistrate judge entered the preliminary injunction against Jones and set a bond in the amount of $500,000. Jones is appealing the grant of the preliminary injunction pursuant to an interlocutory appeal, 28 U.S.C. sec. 1292(a)(1).

II. Discussion

A. Sliding Scale Analysis

A party seeking to obtain a preliminary injunction must demonstrate: (1) its case has some likelihood of success on the merits; (2) that no adequate remedy at law exists; and (3) it will suffer irreparable harm if the injunction is not granted. See Abbott Labs. v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992). If the court is satisfied that these three conditions have been met, then it must consider the irreparable harm that the nonmoving party will suffer if preliminary relief is granted, balancing such harm against the irreparable harm the moving party will suffer if relief is denied. See Storck USA, L.P. v. Farley Candy Co., 14 F.3d 311, 314 (7th Cir. 1994). Finally, the court must consider the public interest (non-parties) in denying or granting the injunction. Id. The court then weighs all of these factors, "sitting as would a chancellor in equity," when it decides whether to grant the injunction. Abbott Labs., 971 F.2d at 12. This process involves engaging in what we term the sliding scale approach; the more likely the plaintiff will succeed on the merits, the less the balance of irreparable harms need favor the plaintiff's position. Id. The sliding scale approach is not mathematical in nature rather "it is more properly characterized as subjective and intuitive, one which permits district courts to weigh the competing considerations and mold appropriate relief." Id. (internal citations and quotation marks omitted).

We review a district court's decision to grant or deny a preliminary injunction under the abuse of discretion standard. Id. A district court when analyzing the relevant factors abuses it discretion when it commits a clear error of fact or an error of law. Id. at 13. We accord, absent any clear error of fact or an error of law, "great deference" to the district court's weighing of the relevant factors. Id. "[W]hile our review is more searching than an examination of whether the district court weighed those factors irrationally or fancifully, we may not substitute our judgment for that of the district court." Id. (internal citations and quotation marks omitted).

Jones finds fault with the manner in which the magistrate judge weighed the relevant factors in deciding to grant a preliminary injunction in favor of Ty. Balancing the harms "involves a two- step process. First the court must assess the plaintiff's chance of success. Next it must balance the hardships in accordance with this determination." Farley Candy Co., 14 F.3d at 314. Initially, the court only needs to determine that the plaintiff has some likelihood of success on the merits. However, at the balancing stage, the court must determine how great the moving party's likelihood of success on the merits is in order to properly balance the potential harms. See id. at 314 n.1. Jones contends that the magistrate judge failed to conduct a sliding scale analysis in his June 5, 2000 Opinion and Order and that he balanced the harms to the respective parties before considering whether Ty had shown that it had a likelihood of succeeding on the merits. When the magistrate judge balanced the harms, according to Jones, it had not yet determined how great Ty's likelihood of success on the merits was; therefore, the magistrate judge improperly balanced the harms.

Jones, in a motion for reconsideration, alerted the magistrate judge to its belief that he had failed in the opinion to engage in the sliding scale approach. The magistrate judge conducted a hearing on June 20, 2000 to address the matter and then on July 7, 2000 issued a supplemental order denying Jones' motion for reconsideration. Jones points out that the magistrate judge's original opinion made no mention about Ty's approximately 50 - 50 chance of succeeding on the merits. Further, Jones notes that the magistrate judge in his original opinion found, after addressing the likelihood of confusion factors, that Ty had "a better than negligible chance of showing likelihood of confusion." Jones concludes that the magistrate judge's assertion that Ty had about a 50 - 50 likelihood of success on the merits is at odds with his conclusion that Ty had a better than negligible chance of showing a likelihood of confusion. Jones claims that the magistrate judge failed to properly conduct a sliding scale analysis because he balanced the harms before assessing Ty's likelihood of success on the merits and the magistrate judge's determination of the likelihood of success on the merits seems inconsistent with his original opinion.

Both in a supplemental order and a hearing conducted on June 20, 2000, the magistrate judge indicated that he had evaluated Ty's likelihood of success on the merits before considering the balancing of the harms. The magistrate judge said in his supplemental order that "in analyzing the issues, this Court did evaluate the Plaintiff's likelihood of success on the merits prior to considering the balancing of harms. Specifically, based on the record before it, the Court determined that the Plaintiff had about a 50 - 50 chance of likelihood of success on the merits. This evaluation of [the] likelihood of success was, then, considered and applied by the Court in its making of the balancing of harms analysis required in the Seventh Circuit." During the June 20, 2000 hearing regarding Jones' motion for reconsideration, the magistrate judge stressed that he had conducted a sliding scale analysis and that Ty had some likelihood to succeed on the merits:

I just want to mention that it may have been unfortunate on my side, putting the balancing of the harms before the likelihood of success on the merits in terms of the format of the opinion, but the reality of the situation is I looked at the likelihood of success on the merits before I got to the . . . balancing of the harm . . . . I might not have articulated it in the opinion, but it was quite obvious to me that they had . . . a pretty decent chance of winning[;] . . . perhaps up to a fifty-fifty chance of prevailing on [the] permanent injunction. This is not a case where there's just a slight chance of winning.

The magistrate judge was careful to make it clear that he did take into account Ty's likelihood of success on the merits before balancing the harms and that he did consider the extent to which Ty may succeed on the merits. In doing so, he remarked that this is not a case where Ty had a "slight chance of winning." This comment implies that...