Ty Inc. v. Softbelly's Inc., 03-1592.

• Citation: 353 F.3d 528
• Decision Date: 22 December 2003
• Docket Number: No. 03-1592.,03-1592.
• Parties: TY INC., Plaintiff-Appellee, Counterdefendant-Appellee, v. SOFTBELLY'S, INC., et al., Defendants-Appellants, Counter-plaintiffs-Appellants, v. TY WARNER, Counterdefendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

353 F.3d 528

TY INC., Plaintiff-Appellee, Counterdefendant-Appellee, v. SOFTBELLY'S, INC., et al., Defendants-Appellants, Counter-plaintiffs-Appellants, v. TY WARNER, Counterdefendant-Appellee.

No. 03-1592.

United States Court of Appeals, Seventh Circuit.

Argued October 20, 2003.

Decided December 22, 2003.

COPYRIGHT MATERIAL OMITTED

Louis T. Walsh (argued), Welsh & Katz, Chicago, IL, for Plaintiff-Appellee.

Andrew M. Hale (argued), Rock, Fusco & Garvey, Chicago, IL, for Defendant-Appellant.

Before POSNER, KANNE, and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge.

Ty Inc., the manufacturer of "Beanie Babies," brought suit for trademark infringement against Softbelly's, Inc. and affiliated companies and individuals unnecessary to discuss separately. Softbelly's manufactures a very similar looking and feeling product that it calls "Screenie Beanies." They differ from Beanie Babies mainly in having chamois bellies and being sold to the public through computer stores for use in wiping computer screens.

The case was tried to a jury, but rather than allow it to render a verdict the judge entered judgment as a matter of law for Ty under Fed.R.Civ.P. 50. He awarded Ty both injunctive relief and some $700,000 in damages. He also dismissed Softbelly's counterclaims, which Softbelly's had abandoned in the district court and (though it is anyway too late) seeks halfheartedly to resuscitate on appeal. Cf. Sokaogon Gaming Enterprise Corp. v. Tushie-Montgomery Associates, Inc., 86 F.3d 656, 658 (7th Cir.1996); Colburn v. Trustees of Indiana University, 973 F.2d 581, 593 (7th Cir.1992). Later he denied Softbelly's motion to vacate the judgment under Fed.R.Civ.P. 60(b)(3) on the ground of witness tampering. Softbelly's challenges this denial as well as the judgment.

The issues at the trial were three. The first was whether "Beanies," which Ty claims to be a common law trademark owned by it (it has a registered trademark on "Beanie Babies"), has become a generic term for small plush toys, in the shape of animals, that are filled with bean-like materials to give the toys a soft and floppy feel. If "Beanies" has become a generic term — has become, that is, beanies — it cannot be a legally protected trademark. The second issue is whether, if "Beanies" has not become generic, the designation "Screenie Beanies" is likely to make consumers think that Softbelly's product is actually a Ty brand. The third issue is whether "Screenie Beanies" dilutes the Beanies or Beanie Babies trademarks.

On the first issue, on which the burden of proof rested on Ty because "Beanies" is not a registered mark, Mil-Mar Shoe Co. v. Shonac Corp., 75 F.3d 1153, 1156 (7th Cir.1996); Filipino Yellow Pages, Inc. v. Asian Journal Publications, Inc., 198 F.3d 1143, 1146 (9th Cir.1999); Blinded Veterans Ass'n v. Blinded American Veterans Foundation, 872 F.2d 1035, 1041 (D.C.Cir.1989), Ty presented the following evidence in an effort to prove that "Beanies" is not generic:

(1) A survey by Dr. Henry Ostberg of 220 men and women over the age of 18, interviewed at nine different malls throughout the country, found that 60 percent of the respondents thought "Beanies" a brand name. Ostberg selected the age-18 cutoff because he was told by Ty that most of the purchasers of beanbag toys are over 18. If 60 percent of the relevant consuming public thinks "Beanies" a brand name, as many of 40 percent may think it generic — and in fact 36 percent of the respondents in Ostberg's survey did. But the legal test of genericness is "primary significance." Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 118-19, 59 S.Ct. 109, 83 L.Ed. 73 (1938); Wesley-Jessen Division of Schering Corp. v. Bausch & Lomb Inc., 698 F.2d 862, 865 (7th Cir.1983); King-Seeley Thermos Co. v. Aladdin Industries, Inc., 321 F.2d 577, 581 (2d Cir.1963); 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 12:6 (4th ed.2003); 5 id. § 32:192. Ostberg's results are evidence that the primary significance of "Beanies" is still as the name of Ty's brand.

(2) A linguist testified that 98 percent of the references in news articles to the word "Beanie" were to Ty's products and that dictionaries do not list it as a generic (lower-case) word.

(3) A statistician sampled eBay and Yahoo auctions and found that more than 80 percent of all references to "beanie(s)" were to Ty's products.

(4) In a phone survey conducted in 1999, more than 60 percent of the respondents identified "Beanies" as relating to Ty or Beanie Babies.

(5) Ty polices the use of "Beanie(s)" vigorously by filing lawsuits, sending cease and desist letters, and opposing trademark applications for the word or its cognates.

This evidence was not conclusive. But Softbelly's presented very little contrary evidence. In fact, the only evidence it placed before the jury was a survey of 13-to 18-year-old girls which found that many of them consider "beanies" the name of the product rather than just Ty's brand name; the testimony of a teenage girl that she considers "beanies" the name of the product; and a statement by Ty Warner, Ty's CEO, that refers to another firm's having sold a "Zoo Beanies" product in 1998. The judge was right that Softbelly's evidence was not enough, in the face of Ty's evidence, to create a triable issue whether "Beanies" is generic. The testimony of one teenager proves nothing at all, and the survey was worthless — 13- to 18-year-old girls being an arbitrary subset of consumers of beanbag stuffed animals. See Universal City Studios, Inc. v. Nintendo Co., 746 F.2d 112, 118 (2d Cir.1984); 5 McCarthy, supra, § 32:159; Robert C. Bird, "Streamlining Consumer Survey Analysis: An Examination of the Concept of Universe in Consumer Surveys Offered in Intellectual Property Litigation," 88 Trademark Rep. 269 (1998). Softbelly's argues that Ty Warner has identified teenage girls as his product's largest group of consumers. Not so; in the testimony Softbelly's cites, Warner states that his prime market consists of girls 5 to 14, followed by girls/women 14 to 80. (Of course, this testimony also casts a shadow over Dr. Ostberg's testimony for Ty.) And Warner's reference to "Zoo Beanies" proves nothing at all, for the name might be an infringement of Ty's trademark.

To determine that a trademark is generic and thus pitch it into the public domain is a fateful step. It penalizes the trademark's owner for his success in making the trademark a household name and forces him to scramble to find a new trademark. And it may confuse consumers who continue to associate the trademark with the owner's brand when they encounter what they thought a brand name on another seller's brand. (Think of Ostberg's 60 percent — and there would be a problem even if they were only 10 percent.) The fateful step ordinarily is not taken until the trademark has gone so far toward becoming the exclusive descriptor of the product that sellers of competing brands cannot compete effectively without using the name to designate the product they are selling. Imagine the pickle that sellers would be in if they were forbidden to use "brassiere," "cellophane," "escalator," "thermos," "yo-yo," or "dry ice" to denote products — all being former trademarks that have become generic terms. The problem is not that language is so impoverished that no other words could be used to denote these products, but that if no other words have emerged as synonyms it may be difficult for a seller forbidden to use one of the trademarked words or phrases to communicate effectively with consumers.

Sometimes a trademark owner will sponsor a generic term precisely in order to avoid its mark becoming generic. Xerox succeeded with "copier," and "Sanka" was saved from becoming generic by the emergence of "decaf" to denote the product of which Sanka was for long the best-known brand. But because "beanies" is so much shorter and punchier than the alternatives that have emerged so far for designating the product, such as "plush beanbag animals," Ty may be fighting a losing war to keep its "Beanies" trademark from becoming "beanies" a generic term. But it won this battle.

More precisely it won this battle on the basis of the evidence that the judge permitted to be presented to the jury, as distinct from that evidence plus the evidence that the judge excluded. The excluded evidence consisted of (1) the results of a LEXIS search that revealed generic uses of the term "beanie(s)" in newspapers; (2) an internal Ty memo written by Warner himself in which he said "we want to emphasize our Beanies are not just any Beanies — But special. Set us apart from our competitors' Beanies;" and (3) other internal memos, reporting on trade shows, in which employees of Ty used "Beanies"' in a generic sense, as in: "Ganz — has product called FLOPPIES. They are a larger version of the Beanies concept. Heard through rumor mill that they are sold out of their `beanies' until November." Or: "Plush Images Booth # 3350 — They had `beanies' that were similar in look, but fabric was inexpensive and it looked like a cheap knockoff of product." The judge excluded all this (and more) evidence tendered by Softbelly's because Softbelly's had failed to include it in the list of exhibits attached to the pretrial order. He also excluded eBay screens indicating widespread use of "beanies" in a generic sense on the separate ground that Softbelly's had failed to summarize these exhibits. The source of his authority to exclude them is unclear. It is not Fed.R.Evid. 1006, as the judge thought, because that provision merely authorizes summaries and empowers the judge, if summaries are introduced, to require production of the materials summarized. But we may assume that ordering the making of summaries is inherent in a trial judge's authority to manage a lawsuit in an efficient manner.

Nevertheless the judge was too severe in these rulings, especially when his lenity toward Ty is weighed in the balance. The suit had been...