In a lawsuit filed earlier last week (Monday, September 24, 2012), Fuhu, the maker of the Nabi children’s tablet computer, sued Toys “R” Us, the world’s largest toy retailer, claiming that Toys “R” Us infringed on their trademark rights and misappropriated their trade secrets while creating the Tabeo children’s tablet.

The growing market for tablet computers, and hot competition over said market, has spilled over into the area of children’s products; and manufacturers and retailers are taking notice. A quick search of “children’s tablets” reveals many options – vTech’s InnoTAB2, Leap Frog Enterprise’s LeapPad2, and the Kurio Kid’s Tablet are just a few of the options available to consumers. In addition to these tablets, Toys “R” Us previously sold the Nabi children’s tablet through their stores and website. Fuhu is claiming that Toys “R” Us did nothing to promote the tablet and that the toy retailer actually did not order enough stock to meet the demand for it. Fuhu subsequently terminated their contract with Toys “R” Us in January of 2012.

While Toys “R” Us actually sells many children’s tablets, the toy retailer recently entered the manufacturing side of the market by creating the Tabeo, which the website bills as a “fun, safe and innovative learning tablet created just for kids.” However, Fuhu is claiming that the toy giant’s newest gadget is just a rip-off of the Nabi. Fuhu’s lawsuit alleges that Toys “R” Us created the Tabeo by using confidential information obtained through the toy retailer’s exclusive contract with Fuhu. In addition, Fuhu is claming that Toys “R” Us continues to use Fuhu’s confidential information, trade secrets, and trademarks to create the Tabeo.

According to the lawsuit, Fuhu created the Nabi tablet to look like a butterfly, specifically pointing to the fact that “Nabi” is the Korean word for butterfly. The suit alleges Toys “R” Us violated Fuhu’s trademark through trade dress infringement by using the same butterfly shape and design that Fuhu used for the Nabi tablet, including the “removable bumper that fits snugly around the outer edge of the tablet,” which is also in the shape of a butterfly. Fuhu’s suit also alleges trade secret misappropriation, claiming that Toys “R” Us “improperly acquired and/or used and/or solicited and/or disclosed Fuhu’s trade secrets relating to Nabi and solicited at least one customer and/or manufacturer based on the misappropriated trade secrets.”

Fuhu will likely prevail in the claim against Toys “R” Us for trade dress infringement. Trade dress protection refers to the protection afforded to the design and shape of a product’s packaging, configuration, or design.  Trade dress protection is offered for products under the Lanham Act, and most products are protected without registration. Fuhu’s butterfly shaped tablet is likely to fall under the category of product design. For product design to be protected under trade dress, the product must have a secondary meaning. Here, Fuhu’s “butterfly” shape arguably has a secondary meaning – the suit claims that Fuhu’s logo on the Nabi tablet is also in the shape of a butterfly and that it has come to be closely associated with the shape of a butterfly. The butterfly shape has likely acquired secondary meaning because it identifies and distinguishes the Fuhu brand of tablet.

Fuhu may prevail in the claim against Toys “R” Us for misappropriation of trade secrets if the company can show all the elements of trade secret misappropriation. A trade secret includes information, a formula, pattern, compilation, program, device, method, technique, or process that must be secret, must have independent economic value, and must be subject to reasonable efforts to maintain secrecy to qualify for protection. Fuhu claims that they the information relating to the Nabi tablet was kept secret within the company and that Fuhu made reasonable efforts to maintain the secrecy of the information through a non-disclosure agreement with Toys “R” Us as well as by “ensuring physical security of its records [and by] marking confidential materials with confidentiality legends…” However, Fuhu’s lawsuit states that the information has independent economic value because of the non-disclosure agreements and efforts to maintain secrecy. A court may find this reasoning to be circular, and unless Fuhu can produce articulable proof that the information alleged to have been misappropriated by Toys “R” Us has independent economic value, Fuhu’s trade secret infringement claim is unlikely to prevail.

As the holiday season approaches and the toy industry experiences the traditional sales boost, Fuhu is asking for unspecified monetary damages and for Toys “R” Us to turn over the Tabeos to Fuhu. A spokesperson for Toys “R” Us was unable to comment on the suit at this time.

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