Toys "R" Us v. Akkaoui, 40 U.S.P.Q.2d (BNA) 1836 (N.D. Cal. 1996)

ORDER GRANTING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION AND DENYING PLAINTIFFS' REQUEST FOR COSTS AND ATTORNEYS' FEES

WILKEN, District Judge.

Plaintiffs move for a preliminary injunction enjoining Defendants from using the name "Adults R Us" or any colorable variation on Plaintiffs' Toys "R" Us trademark. Plaintiffs also request an award for costs and attorneys' fees. Defendants oppose the motions. The matter was heard on October 11, 1996. Having considered all of the papers filed by the parties and oral argument on the motion, the Court GRANTS Plaintiffs' motion for a preliminary injunction and DENIES as premature Plaintiffs' request for costs and attorneys' fees.

BACKGROUND

Plaintiffs Toys "R" Us and Geoffrey, Inc. seek a preliminary injunction against Defendants Mohamad Ahmad Akkaoui, Lingerienet, and Acme Distributors, all doing business as Adults "R" Us, for trademark dilution and infringement. Plaintiffs hold an array of trademarks ending with the phrase "R Us." On August 28, 1996, they learned that Defendants were operating an Internet site and shopping service featuring a variety of sexual devices and clothing under the name "adultsrus." On September 13, 1996, Plaintiffs sent a letter to Defendants demanding that they immediately shut down their Internet site. On September 17, 1996, Defendants' attorney notified Plaintiffs' San Francisco counsel that it would be impossible to comply with Plaintiffs' demands and that he regarded Plaintiffs' legal theory to be weak. On September 25, 1996, Plaintiffs filed suit in U.S. District Court alleging trademark dilution, trademark infringement, false designation of origin, and unfair competition. They also sought a preliminary injunction to enjoin Defendants on the basis of trademark dilution and infringement.

On October 2, 1996, Defendants filed an objection to Plaintiffs' motion. Defendants argued that because they had stopped using names such as "Adults R Us" by October 1, 1996, there was no longer any activity to enjoin. Plaintiffs replied, however, that as of October 4, 1996, sites identified as "Adults R Us" could still be found on the Internet. Most of these sites were no longer linked to Defendants' catalogue of sexual products, but some were. Plaintiffs therefore persist in their request that this Court issue a preliminary injunction, both to ensure a more complete removal of the name "Adults R Us" from the Internet and to prevent Defendants from infringing or diluting Plaintiffs' trademarks again in the future. Plaintiffs also seek attorneys' fees and costs.

DISCUSSION

A. Legal Standard for Preliminary Injunction

Upon a motion for a preliminary injunction, this Court must consider four factors:
(1) the likelihood of the moving party's success on the merits;
(2) the possibility of irreparable injury to the moving party if relief is not granted;
(3) the extent to which the balance of hardships favors the respective parties; and
(4) in certain cases, whether the public interest will be advanced by granting the preliminary relief.

Miller v. California Pacific Medical Ctr., 19 F.3d 449, 456 (9th Cir.1994) (en banc ). The moving party is entitled to preliminary injunction if it establishes either:

(1) a combination of probable success on the merits and the possibility of irreparable harm, or
(2) the existence of serious questions going to the merits, the balance of hardships tipping sharply in its favor, and at least a fair chance of success on the merits.

Id. (quoting Senate of California v. Mosbacher, 968 F.2d 974, 977 (9th Cir.1992). "These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Id. (quoting United States v. Odessa Union Warehouse Co-op, 833 F.2d 172, 174 (9th Cir.1987)).

B. Probability of Success on the Merits

1. Dilution

Subject to the principles of equity, the owner of a famous mark is entitled to an injunction "against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark." 15 U.S.C. 1125(c)(1).

When determining whether a mark is famous and distinctive, the Court may consider such factors as:

(A) the degree of inherent or acquired distinctiveness of the mark;
(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used;
(C) the duration and extent of advertising and publicity of the mark;
(D) the geographical extent of the trading area in which the mark is used;
(E) the channels of trade for the goods or services with which the mark is used;
(F) the degree of recognition of the mark in the trading areas and channels of trade use by the marks' owner and the person against whom the injunction is sought;
(G) the nature and extent of use of the same or similar marks by third parties; and
(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.

Id. Applying these criteria, the Court finds that the Toys "R" Us family of marks were famous and distinctive before Defendants began identifying themselves as "Adults R Us." Plaintiffs have used the Toys "R" Us trademark continuously since 1960 and the Kids "R" Us mark since 1983, advertising their products through a variety of channels both locally and nationally. Tumolo Aff. 3-9. Because of Plaintiffs' promotional activity and because of the mark's inherent peculiarity, the "R Us" family of marks have acquired a strong degree of distinctiveness. See Geoffrey, Inc. v. Stratton, 16 U.S.P.Q.2d 1691, 1694 (C.D.Cal.1990), aff'd, 951 F.2d 359 (9th Cir.1991), cert. denied, 506 U.S. 851 (1992) (holding that "R Us" is associated exclusively with Geoffrey, Inc., the holder of the Toys "R" Us trademark). Plaintiffs have registered Toys "R" Us, Kids "R" Us, and a variety of other marks ending in "R Us" and have litigated extensively to prevent others from using marks ending with "R Us." See id. Finally, both Plaintiffs and Defendants are using the Internet to advertise their products and services. Toys "R" Us and Kids "R" Us thus qualify as famous, distinctive marks eligible for protection from dilution under 15 U.S.C. 1125.

The statute defines dilution as the "lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of--(1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake, or deception." 15 U.S.C. 1127. In authorizing courts to enjoin dilution, Congress intended "to protect famous marks from subsequent uses that blur the distinctiveness of the mark or tarnish or disparage it." H.R.Rep. No. 374, 104th Cong., 1st Sess. 3 (1995), quoted in Ringling Brothers-Barnum & Bailey Combined Shows, Inc. v. B.E. Windows Incorporation, No. 96 CIV. 4758(SAS), 1996 WL 391886, *3 (S.D.N.Y. July 11, 1996). "Adults R Us" tarnishes the "R Us" family of marks by associating them with a line of sexual products that are inconsistent with the image Toys "R" Us has striven to maintain for itself. See Hasbro, Inc., v. Internet Entertainment Group, Ltd., No. C96-130WD, 1996 WL 84853 (W.D.Wash. Feb. 9, 1996).

Plaintiffs have therefore established a strong likelihood that they will prevail on the merits of their trademark dilution cause of action.

2. Infringement

Because Plaintiffs are likely to succeed on the merits of their dilution claim, the Court need not address Plaintiffs' trademark infringement claim.

C. Irreparable Harm to Moving Party

"Once a trademark has become diluted, it has lost the strength it once possessed." Ringling Bros., 1996 WL 391886 at *4. Money damages alone cannot repair the injury. Id. (quoting Deere & Co. v. MTD Products, Inc., 860 F.Supp. 113, 122 (S.D.N.Y.), aff'd, 41 F.3d 39 (2d Cir.1994)). Because Plaintiffs have established the likelihood that "Adults R Us" dilutes their trademarks, they have also established that they will likely suffer irreparable injury from the continuation of references to "Adults R Us" on the Internet.

Although Defendants do not contest that their use of the mark "Adults R Us" diluted the distinctiveness of Plaintiffs' marks, they do contest that they are currently engaging in any activity that the Court can enjoin. They maintain that they stopped using any names that could be associated with Toys "R" Us by October 1, 1996, and that consequently "there is nothing to enjoin." Defendants' Objection, 1. Plaintiffs counter, however, that a variety of "Adults R Us" sites remained on the Internet after October 1st. Plaintiffs thus contend that the Court should order Defendants to take additional steps to remove all references to "Adults R Us" from the Internet. They also argue that even if Defendants had already taken all possible steps to expunge references to "Adults R Us", an injunction is still necessary to protect against possible future trademark violations.

Because Defendants have not completely removed all references to "Adults R Us" from the Internet and because Defendants have not informed the Court that a preliminary injunction would impose an undue burden on them, a preliminary injunction is appropriate. Furthermore, the voluntary cessation of unlawful activity moots the dispute only if Defendants' cessation is "irrefutably demonstrated and total." Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132, 1135 (9th Cir.1986); E. & J. Gallo Winery v. Consorzio Del Gallo Nero, 782 F.Supp. 472, 468 (N.D.Cal.1992). Defendants have not irrefutably established that they will never dilute Plaintiffs' trademarks in the future; therefore Plaintiffs are entitled to a preliminary injunction even if all references to "Adults R Us" have been removed from the Internet.

D. Attorneys' Fees and Costs

Plaintiffs also request that the Court award them costs and attorneys' fees. Title 15 U.S.C. 1117(a) does authorize the award of reasonable attorneys' fees, but only when a violation "shall have been established." In issuing a preliminary injunction, the Court has determined only that Plaintiffs are likely to succeed on the merits. It has not determined that Plaintiffs have actually succeeded on the merits. The decisions Plaintiffs cite all reached final judgment on the merits. See Intel Corp. v. Terabyte Int'l, Inc., 6 F.3d 614 (9th Cir.1993) (attorneys' fees awarded after bench trial); Gallo, 782 F.Supp. 472 (attorneys' fees awarded after summary judgment); O'Brien Int'l, Inc. v. Mitch, 209 U.S.P.Q. 212 (N.D.Cal.1980) (attorneys' fees awarded after bench trial). It is thus premature to award attorneys' fees here.

CONCLUSION

For the foregoing reasons, IT IS HEREBY ORDERED that Defendants, their agents, servants, employees, franchisees, licensees, attorneys, and all others in active concert or participation with Defendants having notice of this order by personal service are hereby ENJOINED AND RESTRAINED during the pendency of this action, from:

1. Using the name or mark "Adults R Us" or any colorable variation thereof, or any colorable variation of Plaintiffs' TOYS "R" US trademark or any trademark, trade name or Internet domain ending in "rus" in connection with Defendants' business; and

2. Doing any other act or thing calculated, or likely, to induce the belief that any Defendant or Defendant's business is in any way affiliated, connected, associated, licensed, or authorized by Plaintiffs, or any act likely to dilute, tarnish, or blur the distinctiveness of Plaintiffs' TOYS "R" US trademark.

IT IS FURTHER ORDERED:

3. That Defendants, their agents, servants, employees, franchisees, licensees, attorneys, and all others in active concert or participation with Defendants having notice of this Order by personal service shall immediately discontinue using the Internet Web site address or domain names "http://www.adultsrus.com" and "adultsrus.com" and Defendants shall immediately request Network Solutions, Inc. to cancel their "adultsrus.com" domain name registration, if not already done.

4. That, since Network Solutions, Inc. has delegated complete control regarding the disposition of the registration and use of the domain name "adultsrus.com" to this Court, the domain name "adultsrus.com" is hereby cancelled.

5. That Plaintiffs shall notify Network Solutions, Inc. of this Court's cancellation of the domain name "adultsrus.com."

6. That Defendants, their agents, servants, employees, franchisees, licensees, and attorneys and all others in active concert or participation with Defendants having notice of this ORDER by personal service, shall deliver up all labels, signs, prints, packages, wrappers, receptacles, and advertisements in their possession bearing the name or mark "Adults R Us" or any other reproduction, counterfeit, copy, or colorable imitation of Plaintiffs' TOYS "R" US and KIDS "R" US marks, and/or any other of Plaintiffs' "R" US trademarks and service marks and all plates, molds, matrices, and other means of making the same, to Plaintiffs' counsel Neil A. Smith, Limbach & Limbach L.L.P., 2001 Ferry Building, San Francisco, California, 94111, within ten (10) days from the date hereof in accordance with 15 U.S.C. 1118, and that these materials shall be held by Plaintiffs or their counsel during the pendency of this action.

7. That Defendants shall preserve copies of all their computer files relating to the use of the name "Adults R Us" or any colorable variation thereof, shall take all possible steps to retrieve computer files relating to the use of the name "Adults R Us" or any colorable variation thereof that may have been deleted before the entry of this order, and shall deliver back-up copies of all of the aforementioned files to Defendants' counsel for safekeeping during the pendency of this action.

8. That Defendants shall immediately notify in writing and direct all publishers of directories or lists, including Internet search engines, in which Defendants' "Adults R Us" name appears, to delete all references to this name from their public databases, search engine directories, directory assistance, and from all future directories in which said name is to appear, and to delete all forwarding or "cache memory" or storage mechanisms referencing such name, and that Defendants shall notify their customers, subscribers, and correspondents who have done business or communicated with them, during the period that they have used the name "Adults R Us" on their Internet Web site or used "adultsrus.com" as their domain name, of their name change or that they no longer do business under this name. In such notice, and in further communications relating to their business involving sexual devices or clothing, they should make no further references to TOYS "R" US or its TOYS "R" US trademark.

9. That Defendants shall immediately notify in writing and direct all publications in which advertisements or other references to Defendants' "Adults R Us" business are scheduled to appear to cancel all advertisements and references using the name "Adults R Us."

10. That Defendants shall file with the Court and serve upon Plaintiffs' counsel within two weeks of the entry of such Order of Preliminary Injunction an affidavit or declaration attesting to and detailing Defendants' compliance with it.

11. That Plaintiffs shall post a bond in cash or corporate surety on this Preliminary Injunction in the amount of $500.00.

IT IS SO ORDERED.