Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-02308/USCOURTS-casd-3_12-cv-02308-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1125 Trademark Infringement (Lanham Act)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

FUHU, INC., FUHU HOLDINGS, INC.,

Plaintiffs,

CASE NO. 012cv2308 WQH-WVG

ORDER

vs.

TOYS “R” US, INC., TOYS “R” US -

DELAWARE, INC.,

Defendants.

HAYES, Judge: 

The matter before the Court is the Ex Parte Application for Temporary Restraining

Order and Order to Show Cause for Issuance of Preliminary Injunction filed by Plaintiffs Fuhu,

Inc. and Fuhu Holdings, Inc. (“Fuhu”). (ECF No. 11). Also before the Court are the Motion

to Exclude the Declaration of William Bleuel (ECF No. 35) and Motion to Strike the Reply

Declaration of James Mitchell (ECF No. 83) filed by Defendants Toys “R” Us, Inc. and Toys

“R” Us - Delaware, Inc. (“TRU”). 

BACKGROUND

On September 24, 2012, Plaintiffs initiated this action by filing a Complaint against

Defendants, asserting the following claims for relief: breach of contract, breach of the implied

covenant of good faith and fair dealing, fraud, trade secret misappropriation, conversion, false

designation of origin, trade dress infringement, trademark infringement, common law

trademark infringement, common law trade dress infringement, false advertising, unfair

competition, common law unfair competition, unjust enrichment, and replevin. (ECF No. 1). 

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Plaintiffs allege that “Fuhu, Inc., is the creator of NABI, the world’s first full-featured

Android tablet made especially for kids.” Id. at 2. Plaintiffs met with TRU, a large toy

retailer, several times in September and October 2011 to discuss the NABI product including

business strategy, marketing, and rollout plans. On September 28, 2011, the parties signed a

non-disclosure agreement (“NDA”) which states, in relevant part:

1. Each party acknowledges that all of the information provided to the other

party (the “Receiving Party”) is confidential, proprietary and a trade secret of the

party disclosing such information (the “Disclosing Party”)....

4. The Receiving Party’s obligation regarding the Confidential Information shall

not apply to Confidential Information, which ...

a. was already known to the Receiving Party prior to disclosure of it to the

Receiving Party by the Disclosing Party...

d. was known to the public or generally available to the public prior to the

date of disclosure by the Disclosing Party; ...

f. is independently developed by the Receiving Party....

8.... If the Receiving Party breaches this Agreement or discloses any

Confidential Information other than as permitted by this Agreement, the

Disclosing Party shall suffer immediate and irreparable harm for which money

damages shall not constitute a full and adequate remedy....

(ECF No. 50). On October 29, 2011, the parties signed an exclusive distribution agreement

(“Exclusivity Agreement”) under which TRU would be the exclusive distributor of NABI.

Under the terms of the Exclusivity Agreement, TRU agreed to place orders for 10,000 NABI

tablets by December 31, 2011, and to place orders for 500,000 more NABI tablets throughout

2012. TRU also agreed to undertake specific marketing and merchandising actions to support

the NABI sales in their stores. In January 2012, Plaintiffs terminated the Exclusivity

Agreement with Defendants. 

Plaintiffs allege that “on September 10, 2012, TRU announced with great fanfare its

‘proprietary’ tablet for children, TABEO.” (ECF No. 1 at 2). Plaintiffs allege that “[t]he

TABEO product and related marketing bear a striking and not coincidental similarity to Fuhu’s

NABI product and the collateral proprietary information that Fuhu disclosed to TRU under

strict confidentiality. TRU used Fuhu’s trade secrets and confidential information to start

selling TABEO, which systematically attempts to replicate the NABI experience ....” Id. at 4. 

Plaintiffs allege that “TABEO not only is confusingly similar to NABI’s iconic butterfly shape

reflected in the Nabi trademarks and trade dress, but also TRU’s advertising and promotional

materials are derived from the business plan Fuhu shared with TRU on a basis of strict

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confidentiality.” Id. Plaintiffs allege that “TRU has used and continues to use Fuhu’s

confidential information, trade secrets, and other intellectual property [regarding NABI] to

prepare, market, and sell TABEO.” Id. 

On September 25, 2012, Plaintiffs filed an Ex Parte Motion for Temporary Restraining

Order and Order to Show Cause for Issuance of Preliminary Injunction. (ECF No. 11). 

Plaintiffs seek a temporary restraining order enjoining Defendants: 

(1) from taking pre-orders from consumers for: (i) the TABEO product (or ...

the functional equivalent ...) or (ii) the TABEO product’s bumper with flared

corners (or ... the functional equivalent ...);

(2) from selling to consumers or otherwise delivering to consumers (i) the

TABEO product (or ... the functional equivalent ...) or (ii) the TABEO

product’s bumper with flared corners (or ... the functional equivalent ...);

(3) from having the word “nabi,” which is trademarked to Fuhu (NABI),

included in any keyword search functionality for any website controlled by

TRU (including but not limited to www.toysrus.com) .... ;

(4) from further using any of Fuhu’s trade secrets and other confidential

information disclosed to TRU pursuant to the parties’ Non-Disclosure

Agreement, including in marketing materials promoting the TABEO product

(or ... the functional equivalent ...);

(5) from further infringing Fuhu’s Flared Corner Trade Dress, including in

marketing materials promoting the TABEO product (or ... the functional

equivalent ...).

Id. at 2. Plaintiffs seek this injunction on the merits of their claims for trade secret

misappropriation, trade dress infringement, and trademark infringement. 

On October 4, 2012, Defendants filed an opposition and a motion to exclude the

declaration of William Bleuel filed in support of Plaintiffs’ motion. (ECF Nos. 35, 39). On

October 10, 2012, Plaintiff filed a reply. (ECF No. 74). On October 13, 2012, Defendants

filed a motion to strike the declaration of James Mitchell filed in support of the reply. (ECF

No. 83). On October 17, 2012, the Court heard oral argument on the motion. (ECF No. 94).

DISCUSSION

“[A] preliminary injunction is an extraordinary and drastic remedy, one that should not

be granted unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek

v. Armstrong, 520 U.S. 968, 972 (1997) (quotation omitted). When the nonmovant has

received notice, as here, the standard for issuing a temporary restraining order is the same as

that for issuing a preliminary injunction. See Stuhlbarg Int’l Sales Co. v. John D. Brush & Co.,

240 F.3d 832, 839 n.7 (9th Cir. 2001). 

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The party seeking preliminary injunctive relief has the burden to show “that he is likely

to succeed on the merits, that he is likely to suffer irreparable harm in the absence of

preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the

public interest.” Winter v. NRDC, 555 U.S. 7, 20 (2008). 

The Court of Appeals for the Ninth Circuit has articulated a standard “under which a

preliminary injunction could issue where the likelihood of success is such that serious

questions going to the merits were raised and the balance of hardships tips sharply in

[plaintiff's] favor.” Alliance for Wild Rockies v. Cottrell, 622 F.3d 1045, 1131 (9th Cir. 2010)

(citation omitted). The test applies a sliding scale approach in which “the elements of the

preliminary injunction test are balanced, so that a stronger showing of one element may offset

a weaker showing of another.” Id.; see also Leiva-Perez v. Holder, 640 F.3d 962, 966 (9th Cir.

2011) (holding that the sliding scale approach to preliminary injunctions continues to be viable

after Winter “so long as a certain threshold showing is made on each [Winter] factor”).

The Court of Appeals for the Ninth Circuit has held that, in a trademark infringement

claim, irreparable injury may be presumed from a showing of likelihood of success on the

merits. El Pollo Loco, Inc. v. Hashim, 316 F.3d 1032, 1038 (9th Cir. 2003), quoting

GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1205 n.4 (9th Cir. 2000); see also Marilyn

Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 877 (9th Cir. 2009)

(upholding district court’s finding of irreparable harm in trademark infringement matter when

party is likely to prevail on merits).

A. Likelihood of Success on the Merits

1. Trade Secret Misappropriation

Plaintiffs contend that their business plans and related strategies for NABI were

developed through great expense and effort, and qualify as trade secrets. Plaintiffs contend

that NABI has a uniquely branded ecosystem, including hardware, software, content and

service bundles, accessories, application stores, parental controls, marketing strategy and

merchandising, that was discussed in detail with Defendants along with planned technical

features and implementation for the tablet. Plaintiffs contend that Defendants purposefully

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misappropriated Plaintiffs’ confidential business plans for NABI, which were disclosed to

Defendants in strict confidence, to assist them in the development and marketing of TABEO. 

Plaintiffs contend that Defendants used Plaintiffs’ trade secrets to develop their own children’s

tablet and that the advertising and promotional materials for TABEO were derived from

Plaintiffs’ business plan for NABI. 

Defendants contend that the information Plaintiffs shared with them regarding business

strategies and product ideas was publicly-available and already well known within the retail

consumer electronics community. Defendants contend that children’s tablets and accessories 

were already sold on the market when Fuhu and TRU first met, and that TRU had been

independently developing their own children’s tablet before meeting with Fuhu. Defendants

contend that Fuhu is an electronic software company with no experience in marketing or

product design, and that Fuhu did not disclose any marketing or product design trade secret

information to TRU in their 2011 meetings. 

To prevail on a claim for misappropriation of trade secret under New Jersey law1

, the

trade secret owner must establish that: (1) a trade secret exists; (2) information comprising a

trade secret was communicated in confidence; (3) the secret information was disclosed in

breach of that confidence; (4) the secret information was acquired by someone else with

knowledge of the breach; (5) the secret information was used to the detriment of the trade

secret owner; and (6) the trade secret owner took precautions to maintain the secrecy of the

trade secret. Rycoline Products, Inc. v. Walsh, 334 N.J. Super. 62, 71 (N.J.Super.A.D. 2000). 

The subject matter of trade secret must not be a matter of public or general knowledge within

an industry. Sun Dial Corp. v. Rideout, 16 N.J. 252, 257 (N.J. 1954). “A trade secret may also

include pricing and marketing techniques.” Communications Workers of Am. v. Rousseau, 417

N.J.Super. 341, 361 (N.J.Super.A.D. 2010). However, “the definition of trade secret does not

1

The NDA states that “[t]his agreement shall be governed by and construed in

accordance with the internal laws of the State of New Jersey.” (Compl. Exh. B; ECF No. 50).

Defendants argue that the Exclusivity Agreement supercedes the NDA, and the terms of the

Exclusivity Agreement state that California law shall apply to any disputes between the parties. 

However, both parties apply New Jersey law in discussing Plaintiffs’ claim for trade secret

misappropriation.

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include a marketing concept or a new product idea.” Johnson v. Benjamin Moore & Co., 347

N.J.Super. 71, 96 (N.J.Super.A.D. 2002) (finding that plaintiff’s “broad concept of marketing

materials for murals for the masses are not trade secrets.”). 

In order to identify the trade secrets conveyed to TRU, Plaintiffs submit a chart prepared

by Fuhu CEO James Mitchell titled “Summary of Trade Secrets Fuhu Provided to TRU.” 

(ECF No. 13-8). Plaintiffs also submit a “List of [NABI] Products and Accessories” that was

emailed to Defendants in October 2011. (ECF No. 13-4). The “Summary of Trade Secrets

Fuhu Provided to TRU” contains general business strategies for the NABI including the broad

principles of “Volume, Quality, Accessories, Category Dominance, and Digital Distribution”

to be applied in marketing a new product. (ECF No. 13-8). The Court concludes that the

concepts and ideas that Plaintiffs have identified as “trade secrets,” summarized in Exhibit G

to James Mitchell’s declaration, are general business concepts and broad marketing ideas that

do not fit within the definition of trade secret under New Jersey law. See Benjamin Moore &

Co., 347 N.J.Super. at 96. Based on the evidence in the record, Plaintiffs have failed to meet

their burden of showing a likelihood of success on the merits of their claim for trade secret

misappropriation. 

2. Trade Dress Infringement

Plaintiffs contend that they have common law trade dress rights to the shape of NABI

“bumpers,” or flexible contoured covers for the tablet. Plaintiffs contend that their use of the

butterfly-shaped NABI bumper is non-functional and that the bumper shape has acquired

secondary meaning in the market. Plaintiffs contend that secondary meaning is established by

traffic to their website, the popularity of their facebook page, and NABI sales to date. 

Plaintiffs contend that the shape of TABEO is similar to the shape of NABI and will cause

confusion in the minds of consumers between the two products. Plaintiffs contend that TRU

infringed on Plaintiffs’ distinctive trade dress for the butterfly-shaped, flared corners of the

NABI bumper when they designed the TABEO bumper.

Defendants contend that Plaintiffs cannot establish any protectable trade dress in the

NABI bumper or any likelihood of confusion in the market between NABI and TABEO. 

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Defendants contend that the shape of the NABI bumper is inherently functional to protect the

tablet from damage. Defendants contend that Plaintiff has submitted no evidence to carry its

burden to show that the NABI bumper has acquired secondary meaning among consumers. 

Defendants contend that the functional shape and design of the NABI bumper is similar to

many other bumpers on the market created to provide the same functional purpose.

“Trade dress refers to the total image of a product and may include features such as size,

shape, color, color combinations, texture or graphics.” Disc Golf Ass’n, Inc. v. Champion

Discs, Inc., 158 F.3d 1002, 1005 n.3 (9th Cir. 1998). To establish trade dress infringement,

a claimant must show: (1) that its product design is non-functional, (2) that the design is

inherently distinctive or has acquired a secondary meaning, and (3) that there is a likelihood

of confusion. Cont’l Lab. Products, Inc. v. Medax Int’l, Inc., 114 F.Supp.2d 992, 997 (S.D.

Cal. 2000); Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 210 (2000) (“The text

of § 43(a) provides little guidance as to the circumstances under which unregistered trade dress

may be protected. It does require that a producer show that the allegedly infringing feature is

not ‘functional,’ ... and is likely to cause confusion with the product for which protection is

sought .... [A] product’s design is distinctive, and therefore protectable, only upon a showing

of secondary meaning”). 

To determine whether a product’s trade dress design is functional, the Court may

consider four factors: (1) whether the trade dress yields a utilitarian advantage, (2) whether

alternative designs are available, (3) whether advertising touts the utilitarian advantages of the

design, and (4) whether the particular design results from a comparatively simple or

inexpensive method of manufacture. Disc Golf Ass’n, 158 F.3d at 1006. “If a seller advertises

the utilitarian advantages of a particular feature, this constitutes strong evidence of

functionality.” Id. at 1009, citing McCarthy on Trademarks and Unfair Competition § 7:74 at

7-152. There is evidence in the record that the NABI bumper, like contoured covers available

as accessories to other tablets, serves to protect the tablet from damage. Based on the evidence

in the record, the Court concludes that Plaintiffs have failed to show that the design of the

NABI bumper is non-functional. 

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Secondary meaning exists when, “in the minds of the public, the primary significance

of a [mark] is to identify the source of the product rather than the product itself.” Wal-Mart

Stores, 529 U.S. at 211. To show secondary meaning, a plaintiff must demonstrate a mental

recognition in buyers’ minds that products connected with the mark are associated with the

same source. Art Attacks Ink, LLC v. MGA Entertainment Inc., 581 F.3d 1138, 1145 (9th Cir.

2009). Direct evidence of secondary meaning, such as consumer surveys and consumer

testimony, provides the strongest evidence of secondary meaning. Cont’l Lab. Prod., 114

F.Supp.2d at 1000. Secondary meaning may also be established through circumstantial

evidence such as “exclusivity, manner, and length of use, amount and manner of advertising,

amount of sales and the number of customers, and plaintiffs established place in the market.” 

Id. “[P]laintiff bears the burden of showing its... design obtained secondary meaning before

the defendant commenced its allegedly infringing activities.” Id. at 999. The Court concludes

that Plaintiffs have failed to submit direct or circumstantial evidence sufficient to show that

the design of the NABI bumper has obtained secondary meaning in the consumer market. 

Based on the evidence in the record, Plaintiffs have failed to meet their burden of showing a

likelihood of success on the merits of their claim for trade dress infringement. 

3. Trademark Infringement

Plaintiffs contend that Defendants infringed the NABI work mark because online search

results for “nabi” on the TRU web page yield images of TABEO products and accessories. 

Plaintiffs submit a screen shot of the Toys “R” Us webpage after the word “nabi” has been

entered into the website’s search screen. (Mitchell Decl. ¶ 116; ECF No. 13-1). The results

show three different brands of children’s tablets, including TABEO, and numerous TABEO

accessories. Plaintiffs contend that this demonstrates Defendants’ intent to trade off the

goodwill and reputation of the NABI mark in marketing TABEO product and accessories. 

Defendants contend that their products do not use any of Plaintiffs’ trademarks and that

Plaintiffs cannot identify any TRU product that violates the NABI mark. Defendants contend

that there is no confusion among consumers between NABI and TABEO. Defendants assert

that they have changed their online search features to yield no results when the word “nabi”

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is entered into the search field.

To establish a trademark infringement claim under the Lanham Act, plaintiff must

establish that defendant is using a mark confusingly similar to a valid, protectable trademark

of the plaintiff. Brookfield Communications, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036,

1046 (9th Cir. 1999). The test for likelihood of confusion in a trademark infringement action

is whether a reasonably prudent consumer in the marketplace is likely to be confused as to the

origin of the good or service bearing one of the marks. Entrepreneur Media, Inc. v. Smith, 279

F.3d 1135, 1140 (9th Cir. 2002).

 Plaintiffs do not provide any evidence that Defendants used the word “nabi” or the

circular splatter design on any TRU product. Plaintiffs have shown that, at the time their

motion for temporary restraining order was filed, a search for “nabi” on TRU’s website yielded

results of TABEO and other children’s tablets available for sale. Plaintiffs have not provided

evidence of customer confusion when viewing TRU’s website for children’s tablets. Based

on the evidence in the record, Plaintiffs have failed to meet their burden of showing a

likelihood of success on the merits of their claim for trademark infringement of the Nabi mark. 

B. Irreparable Harm

In a trademark infringement claim, irreparable injury may be presumed from a showing

of likelihood of success on the merits. Hashim, 316 F.3d at 1038. Plaintiffs have failed to

meet their burden of showing a likelihood of success on the merits of their claims for trade

secret misappropriation, trade dress infringement, and trademark infringement. Accordingly,

there is no presumption of irreparable harm.

CONCLUSION

IT IS HEREBY ORDERED that the Ex Parte Application for Temporary Restraining

Order and Order to Show Cause for Issuance of Preliminary Injunction filed by Plaintiffs Fuhu,

Inc. and Fuhu Holdings, Inc. (ECF No. 11) is DENIED. 

///

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///

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 IT IS FURTHER ORDERED that the Motion to Exclude the Declaration of William

Bleuel (ECF No. 35) and Motion to Strike the Reply Declaration of James Mitchell (ECF No.

83) are DENIED as moot. 

DATED: October 19, 2012

WILLIAM Q. HAYES

United States District Judge

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