US appellate court reverses lower court's finding that domain name ' bargainbeanies.com ' diluted the BEANIE BABIES trademark

Ty Inc. vs. Ruth Perryman

Ty Inc. seeks extension of law on dilution to protect its trademark from becoming generic

In Ty Inc. vs. Ruth Perryman, the US Court of Appeals for the Seventh Circuit has vacated a lower court's decision that the domain name 'bargainbeanies.com' diluted Ty Inc.'s BEANIE BABIES mark. The appellate court examined the interplay between trademark dilution law and fair use, and refused to allow Ty Inc. to use the law on dilution to prevent the trademark from becoming a generic term.

The Case:

Ty Inc. is the manufacturer of the well-known BEANIE BABY beanbag stuffed animals. Ruth Perryman sold second-hand beanbag stuffed animals-primarily Ty Inc's Beanie Babies-over the Internet, having registered the domain name 'bargainbeanies.com'. Ty Inc. brought suit against Perryman, claiming dilution of its BEANIE BABIES mark.

The district court granted summary judgment to Ty Inc.

On appeal, the Seventh Circuit found no dilution in Perryman's use of domain name 'bargainbeanies.com', and vacating the lower court's ruling, remanded for a reformulation of the injunction on the following grounds:

• There was no dispute as to the fame of Ty's mark, and that Perryman's use of the mark was commercial in nature.
• There are three possible rationales for protection from dilution: blurring, tarnishing, and taking a free ride on the trademark owner's investment. None of these bases for dilution applied to Perryman, because she was "selling the very product to which the trademark sought to be defended against her 'infringement' is attached." Further, Ty Inc.'s marketing strategy intentionally created a secondary market for Beanie Babies.
• Ty Inc's goal in bringing this suit was to extend anti-dilution law to forbid commercial uses that "accelerate the transition from trademarks (brand names) to generic names (product names.)" Several famous marks had become generic, such as THERMOS and ESCALATOR, and "Ty is doubtless cognizant of a similar and quite real danger to BEANIE BABIES [...]."