Toys R Us, Inc. v. Canarsie Kiddie Shop, Inc.

• Decision Date: 17 March 1983
• Docket Number: No. 82 Civ. 3996.,82 Civ. 3996.
• Citation: 559 F. Supp. 1189
• Parties: TOYS "R" US, INC., Plaintiff, v. CANARSIE KIDDIE SHOP, INC., d/b/a Kids "R" Us, and Abe Pomerantz, Defendants.
• Court: U.S. District Court — Eastern District of New York

559 F. Supp. 1189

TOYS "R" US, INC., Plaintiff, v. CANARSIE KIDDIE SHOP, INC., d/b/a Kids "R" Us, and Abe Pomerantz, Defendants.

No. 82 Civ. 3996.

United States District Court, E.D. New York.

March 17, 1983.

COPYRIGHT MATERIAL OMITTED

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Shea & Gould, McAulay, Fields, Fisher, Goldstein & Nissen, New York City, for plaintiff.

Morril & Paul, New York City, for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

GLASSER, District Judge:

This is an action for trademark infringement, unfair competition, and violation of the New York anti-dilution statute, instituted by plaintiff Toys "R" Us, Inc. ("Toys") against defendants Canarsie Kiddie Shop, Inc., d/b/a Kids `r' Us ("Kids") and Abe Pomeranc.<sup>1</sup> Toys seeks a permanent injunction restraining defendants from using the mark Kids `r' Us.

Kids in response has entered a counterclaim, also alleging trademark infringement, unfair competition, and violation of the New York anti-dilution statute. Kids seeks an injunction restraining Toys from carrying out plans to utilize the mark Kids "R" Us in connection with the sale of children's clothing.

Plaintiff made an application, by order to show cause, for a preliminary injunction on December 21, 1982. Defendants cross-moved for a preliminary injunction at that time. This Court, per agreement of the parties, entered an order enjoining and restraining the plaintiff from opening stores or using the Kids "R" Us name and mark, pending trial of this action (which was consolidated with the motions for preliminary injunctions pursuant to Rule 65(a)(2)).

On the basis of the bench trial subsequently held before me, the following represent my findings of fact and conclusions of law. For the reasons that follow, the relief sought by the plaintiff is granted, and the relief sought by the defendants is denied.

FACTS

The basic facts involved here are largely undisputed, see Stipulated Facts, and are as follows.

Toys' Business

Since in or about 1960, Toys (and its predecessors in interest) has been engaged in the commercial promotion and sale of toys throughout the United States. Toys also sells juvenile furniture, lamps, sporting equipment, linens, books, school supplies, electronic games and children's clothing; Toys is the largest retailer of children's disposable diapers in the United States. These goods are carried by each one of Toys' stores including those stores located within the State of New York.

Toys owns and operates approximately 144 retail stores across the United States, including 15 stores located in the State of New York. On November 15, 1975, Toys opened its first store in Brooklyn, New York. That store is located adjacent to the Kings Plaza Shopping Center at Flatbush Avenue and the Belt Parkway. The Flatbush Avenue store has been in continuous operation since it opened.

In late 1982, Toys opened a second store in Brooklyn, New York. That store is located at 6873-95 Bay Parkway.

In addition to the two Brooklyn stores, Toys currently owns and operates seven stores in Nassau and Suffolk Counties, a store in Queens and a store in Staten Island. At least seven of the Toys "R" Us stores in Brooklyn, Long Island and Staten Island were in operation in July 1977.

The apparel sold by Toys is intended for both boys and girls from infancy through the pre-teen years. Toys sells children's clothing, including crib sets, dresses, sleepwear, outerwear, coats, footwear, jackets, hosiery, jeans, sunsuits, sweatsuits, robes, hats, gloves and snowsuits. The prices at which Toys sells its children's clothing range from between less than a dollar to approximately $20.00. Toys does not manufacture any of the children's clothes that it sells; sales of children's clothing are made on a retail basis only.

Toys has present plans to expand its operations by opening stores devoted exclusively to the sale of children's clothing and related items. Toys' present plans are to use the trademark Kids "R" Us in connection with such an expansion. Toys' first two planned children's clothing stores are slated to be located in Brooklyn, New York and Paramus, New Jersey (Transcript p. 141).

Toys has invested time and money in the development of plans to open stores devoted exclusively to the sale of children's clothing.

For the fiscal year ended January 31, 1982, Toys' sales of goods and services under its Toys "R" Us trademark and service mark were in excess of $780 million nationally. Of this amount, approximately $20 million represents Toys' 1981 sales of children's clothing.

For the year ended January 31, 1982, Toys' sales of children's clothing in stores located in New York State totaled approximately $1,836,000, of which $178,000 represents sales in Toys' Brooklyn (Flatbush Avenue) store.

For the year ended January 31, 1983, Toys' sales of children's clothing in stores located in New York State have totaled in excess of $3,150,000, of which $244,000 represents sales in Toys' Brooklyn (Flatbush Avenue and Bay Parkway) stores.

Since 1961, Toys, and its predecessors in interest, have continually used the trademark Toys "R" Us to identify and distinguish those items sold and promoted by them throughout the United States, including extensive use in the State of New York. Toys is the owner of United States Trademark Registration No. 902,125 for the trademark Toys "R" Us. Plaintiff has filed affidavits pursuant to the Lanham Trademark Act, 15 U.S.C. §§ 1065, 1115(b). Toys is the owner of United States Service Mark Registration No. 1,215,353 for the service mark Toys "R" Us for use in connection with retail department store services. Toys is also the owner of United States Trademark Registration No. 1,207,355 for the trademark TOGS "R" US for hosiery. Toys used phrases such as SKATES "R" US, BIKES "R" US, GAMES "R" US and similar phrases in its advertising.

Since 1975, Toys has spent in excess of $75 million to advertise, publicize and promote the sale of products and services at Toys "R" Us stores throughout the United States. The $75 million spent by Toys on advertising since 1975 has been used to advertise, publicize and promote on television and radio, and in various print media, the sale of products and services at Toys "R" Us stores.

Since 1975, Toys has spent in excess of $8.5 million in the State of New York to advertise, publicize and promote, on television and radio, and in various print media, its sales and its Toys "R" Us stores. Toys advertising in the New York metropolitan area includes regular advertising in local newspapers. Toys has advertised in the New York metropolitan area since late 1975, and in that time has spent in excess of $2 million in television advertising in the New York area.

Kids' Business

Since 1962, defendant Pomeranc or his parents have operated children's clothing stores in Brooklyn, New York. The first store—which was only 500 square feet— was called Canarsie Kiddie Shop and was located at 1441 Rockaway Parkway in Brooklyn.

In 1973, Pomeranc entered the business, and in September 1977, he opened a store at 9419 Avenue L in Brooklyn. At or about the time the Avenue L store was opened, Pomeranc decided to adopt the name, "Kids `r' Us." Before using the "Kids `r' Us" name, Pomeranc and his attorney cleared the name for adoption as defendant's corporate name with the Secretary of State of New York, filing a certificate of incorporation as Kids `r' Us, Inc. on August 12, 1977. The Certificate of Incorporation for Kids `r' Us, Inc. was amended on or about April 20, 1979 to change the name of the corporation to Canarsie Kiddie Shop, Inc.

Defendants' Avenue L store was called Kids `r' Us and, after the corporate name change, Canarsie Kiddie Shop, Inc. registered its use of the assumed name Kids `r' Us pursuant to Section 130 of the New York General Business Law on May 16, 1979.

Defendants opened a second Kids `r' Us store in August 1978. This store expanded to include the adjacent storefront in February 1979 when defendants closed their other stores and consolidated all of their retailing operations into their present 3,000 square foot Kids `r' Us store at 1445-47 Rockaway Parkway in Canarsie.

Defendants, like Toys, sell apparel intended for both boys and girls, from infancy through the pre-teen years.

The Canarsie Kiddie Shop, Inc.'s Certificate of Incorporation dated August 8, 1977 and Certificate of Amendment of the Certificate of Incorporation dated March 13, 1979 state that the purpose of the corporation is to "carry on and conduct the business of buying, selling and dealing generally in children's and adult clothing, toys, jewelry and furnishings at retail and wholesale."

Defendants do not manufacture any of the goods that are sold in the Kids `r' Us store and such sales are made on a retail basis only. The locations at which defendants have operated stores are within an approximately two mile radius of Toys' Flatbush Avenue (Kings Plaza) store. Defendants are considering the possible expansion of their business to locations outside of the Canarsie section of Brooklyn. One of the locations the defendants had considered expanding into was located approximately three blocks away from the Toys' Bay Parkway store (Transcript pp. 554-5). No written agreements have been entered into by defendants for any expansion plans (Transcript pp. 599-601).

At no time during its existence have defendants' gross sales from its children's clothing business exceeded $250,000 annually. Defendants have never advertised on television or radio. Defendants have placed a limited number of advertisements in local Brooklyn newspapers. The total amount of money spent by defendants on advertising and other promotions has not exceeded $2,500 in any year in which defendants have operated under the name Kids `r' Us. Indeed, defendants' tax returns for the years 1978-81 reflect that during that period the defendants never spent in excess of $536 on advertising in any one year (Transcript p. 573).

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