02-1771 Ty Inc., v. Perryman

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“Ty deliberately produces a quantity of each Beanie Baby that fails to clear the market at the very low price that it charges for Beanie Babies. The main goal is to stampede children into nagging their parents to buy the new Baby lest they be the only kid on the block who doesn’t have it. A byproduct (or perhaps additional goal) is the creation of a secondary market, like the secondary market in works of art, in which prices on scarce Beanie Babies are bid up to a market-clearing level. Perryman is a middleman in this secondary market, the market, as we said, that came into existence as the result, either intended or foreseen, of a deliberate marketing strategy. That market is unlikely to operate efficiently if sellers who specialize in serving it cannot use ‘Beanies’ to identify their business. Perryman’s principal merchandise is Beanie Babies, so that to forbid it to use ‘Beanies’ in its business name and advertising (Web or otherwise) is like forbidding a used car dealer who specializes in selling Chevrolets to mention the name in his advertising.

“We reject the extension of antidilution law that Ty beckons us to adopt, but having done so we must come back to the skipped issue of confusion. For although 80 percent of Perryman’s sales are of Ty’s products, this means that 20 percent are not, and on her Web page after listing the various Ty products under such names as ‘Beanie Babies’ and ‘Teenie Beanies’ she has the caption ‘Other Beanies’ and under that is a list of products such as ‘Planet Plush’ and ‘Rothschild Bears’ that are not manufactured by Ty. This is plain misdescription, in fact false advertising, and supports the last prohibition in the injunction, the prohibition against using ‘Beanie’ or ‘Beanies’ ‘in connection with any non-Ty products.’ That much of the injunction should stand.”

Vacated and remanded.

Appeal from the United States District Court for the Northern District of Illinois, Grady, J., Posner, J.