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UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY INTERNATIONAL PLAYTHINGS LLC and EPOCH COMPANY, LTD, Plaintiffs, v. TOY TECK LTD. LLC, TOYTECK CORPORATION, MANLEY TOYS LTD., MITCHELL AUGUST A/K/A MITCH AUGUST, JOHN DOES 1-5, ABC CORPORATIONS 1-5, Oral Argument Requested Defendants. Civil Action No. 2:11-CV-_____

PLAINTIFFS MEMORANDUM OF LAW IN SUPPORT OF APPLICATION FOR PRELIMINARY INJUNCTION WITH TEMPORARY RESTRAINTS CONNELL FOLEY LLP Attorneys for Plaintiffs International Playthings LLC and Epoch Company, Ltd. 85 Livingston Avenue Roseland, New Jersey 07068 (973) 535-0500 On the Brief: Peter J. Pizzi Hector D. Ruiz Sydney J. Darling

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TABLE OF CONTENTS PAGE PRELIMINARY STATEMENT .................................................................................................... 1 STATEMENT OF FACTS ............................................................................................................. 3 LEGAL ARGUMENT.................................................................................................................... 4 POINT I ...................................................................................................................................... 4 A. B. 1. Standard Governing Injunctive Relief ............................................................................ 4 Plaintiffs Are Likely To Succeed On The Merits Of Their Claims Defendants............. 5 Plaintiffs Have Shown a Reasonable Likelihood Of Success That Defendants Have Falsely Advertised in Violation of the Lanham Act (15 U.S.C. 1125(a)) ............. 5 (a) There is a Reasonable Likelihood of Success on Plaintiffs Reverse Passing Off Claim Under the Lanham Act (15 U.S.C. 1125(a))............................... 7 (b) Plaintiffs Have Shown A Likelihood of Success That the Defendants Have Falsely Advertised In Violation of 15 U.S.C. 1125(a)(1)(B). ....................... 9 (i) Toytecks Advertisements Misrepresent the Nature and Characteristics of Plaintiffs Product ................................................. 9 (ii) Toytecks False Representations Are Contained In Commercial Advertising And Promotion............................................................. 10 (iii)Toytecks Deceiving Advertising Misleads Customers................... 11 (iv) Toytecks False Advertising Is Material To Purchasing Decisions. 11 (v) Defendants Products Are Sold In Interstate Commerce .................. 12 2. Plaintiffs Are Likely to Succeed On the Merits of Their Copyright Infringement Claims ...................................................................................................................... 12 New Jersey Unfair Competition Claims ................................................................... 13

3.

C. Plaintiffs Will Suffer Irreparable Harm If The Requested Injunctive Relief Is Not Granted .................................................................................................... 14 D. The Balancing of the Equities Weighs in Favor of Plaintiffs and Against Defendants ...................................................................................................................... 16

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E. F.

The Public Interest Is In Favor of the Grant Of A Preliminary Injunction................... 17 Plaintiffs Are Entitled to Expedited Discovery ............................................................ 18

CONCLUSION............................................................................................................................. 19

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TABLE OF AUTHORITIES Cases Adams v. Freedom Forge Corp., 204 F.3d 475, 485 (3d Cir. 2000) ............................................ 17 Advance Magazine Publishers Inc. v. Vogue Int'l, 123 F. Supp. 2d 790, 802 (D.N.J. 2000) ..................................................................................................................... 21 Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1254 (3d Cir. 1983)............................................................................................................................ 18 AT&T v. Winback & Conserve Program, 42 F.3d 1421 (3d Cir. N.J. 1994).......................... 16, 21 Ballas v. Tedesco, 41 F. Supp.2d 531, 537 (D.N.J. 1999) .............................................................. 5 Buying For The Home, LLC v. Humble Abode, LLC, 459 F. Supp. 2d 310, 317-318 (D.N.J. 2006) .............................................................................................................. 15 Campbell Soup, 977 F.2d at 91 (quoting ECRI v. McGraw-Hill, Inc., 809 F.2d 223, 226 (3d Cir.1987) ..................................................................................................... 17 Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 943 (3d Cir. 1993) ................................................... 11 Castrol, Inc. v. Pennzoil Co., 987 F.2d 939, 950 (3d Cir. 1993) .................................................. 13 Coach, Inc. v. Bags & Accessories, 2011 U.S. Dist. LEXIS 52767, at *25 (D.N.J. May 17, 2011) .............................................................................................................. 18 D&R Communs., LLC v. Garett, No. 11-413, 2011 U.S. Dist. LEXIS 84658 (D.N.J. Aug. 2, 2011)..................................................................................................... 16 Doctors Assocs., Inc. v. Desai, No. 08-3363, 2008 U.S. Dist. LEXIS 62178 (D.N.J. Aug. 12, 2008)................................................................................................... 20 Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, 307 F.3d 197, 206 (3d Cir. 2002), cert. denied, 538 U.S. 1032 (2003) ................................................... 14 Eli Lilly & Co. v. Roussel Corp., 23 F. Supp. 2d 460, 480 (D.N.J. 1998).................................... 12 Ellsworth Assocs. v. United States, 917 F. Supp. 841 (D.D.C. 1996) .......................................... 22 Entm't Tech. Corp. v. Walt Disney Imagineering, 03-3546, 2003 U.S. Dist. LEXIS 19832 (E.D. Pa. Oct. 2, 2003) ...................................................................................... 22 Facenda v. N.F.L. Films, Inc., 542 F.3d 1007, 1021 (3d Cir. 2008) .......................................... 7, 9 Feist Publns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991) ......................................... 14

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Fisons Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 472 n.8 (3d Cir. 1994) .................................................................................................................................... 7 Gold Cross Safety Corp. v. PHH Vehicle Mgmt., No. 07-2401, 2008 U.S. Dist. LEXIS 50354, 6-7 (D.N.J. June 25, 2008)....................................................................... 15 Gordon & Breach Science Publishers S.A. v. American Inst. of Physics, 859 F. Supp. 1521, 1536 (S.D.N.Y. 1994) ............................................................................... 12 Harlem Wizards Entertainment Basketball, Inc. v. NBA Properties, Inc., 952 F. Supp. 1084, 1091 (D.N.J. 1997) .................................................................................... 16 Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 801 (3d Cir. 1989) .................................................................................................................................. 17 J & J Snack Foods, Corp. v. Earthgrains Co., 220 F. Supp. 2d 358, 374 (D.N.J. 2002) ............................................................................................................................ 16 Johnson & Johnson-Merck Consumer Pharmaceuticals Co. v. RhonePoulenc Rorer Pharms., Inc., 19 F.3d 125, 129 (3d Cir. 1994) ............................................... 10 Kay Berry, Inc. v. Taylor Gifts, Inc., 421 F.3d 199, 207 (3d Cir. 2005)....................................... 15 Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004) ...................................... 4, 21 Lipton v. Nature Co., 71 F.3d 464, 473 (2d Cir. 1995)................................................................... 8 North v. Rooney, No. 03-1811, 2003 U.S. Dist. LEXIS 11299, at *16 .......................................... 4 Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Pharm. Co., 129 F. Supp. 2d 351, 367 (D.N.J. 2000). ...................................................................... 18, 19, 20 Operating Sys. Support, Inc. v. Wang Labs., Inc., No. 98-2138, 2001 U.S. Dist. LEXIS 24689 (D.N.J. Apr. 23, 2001), revd on other grounds, 52 Fed. Appx. 160, 2002 U.S. App. LEXIS 15650, Copy. L. Rep. (3d Cir. 2002) ........................................................................................................................................... 8 Opticians Ass'n of Am. v. Indep. Opticians of Am., 920 F.2d 187, 196-97 (3d Cir. 1990)...................................................................................................................... 18, 20 Pappan Enters., Inc. v. Hardee's Food Sys., Inc., 143 F.3d 800, 805 (3d Cir. 1998) ...................................................................................................................... 18, 19, 21 Philadelphia Newspapers v. Gannett Satellite Info. Network, No. 98-2782, 1998 U.S. Dist. LEXIS 10511, at *2 (E.D. Pa. July 15, 1998)................................................. 22 Roho, Inc. v. Marquis, 902 F.2d 356, 359 (5th Cir. 1990).............................................................. 9 Smith v. Montoro, 648 F.2d 602, 607 (9th Cir. 1981) .................................................................... 9 v
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Trico Equip., Inc. v. Manor, No. 08-5561, 2009 U.S. Dist. LEXIS 50524, at *21-22 (D.N.J. June 13, 2009).............................................................................................. 17 U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 92223 (3d Cir. 1990)....................................................................................................................... 11 Video Pipeline, Inc. v. Buena Vista Home Entmt, Inc., 342 F.3d 191, 196 (3d Cir. 2003), cert. denied, 540 U.S. 1178 (2004) ........................................................ 4, 14, 18 Waldman Publishing Corp. v. Landoll, Inc., 43 F.3d 775, 781-85 (2d Cir. 1994) ....................................................................................................................................... 8, 9 Warner-Lambert Co. v. BreathAsure, Inc., 204 F.3d 87, 91-92 (3d Cir. 2000) ......................................................................................................................................... 10 Westchester Fire Ins. Co. v. Global Real Constr., LLC, No. 09-207, 2009 U.S. Dist. LEXIS 3481 (D.N.J. Jan. 16, 2009) ........................................................................... 4 Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 129 S. Ct. 365, 374 (2008).......................................................................................................................................... 4 Statutes 15 U.S.C. 1125(a)(1)(A) ........................................................................................................ 8, 10 15 U.S.C. 1125(a)(1)(B) ............................................................................................ 7, 10, 11, 12 15 U.S.C. 1125(a))................................................................................................................... 6, 8 15 U.S.C. 1125(a), N.J.S.A. 56:4-1 et seq ................................................................................... 6 15 U.S.C. 1125(d)(1)(C) (2011) .................................................................................................. 5 15 U.S.C. 1114(1) ...................................................................................................................... 7 17 U.S.C. 106....................................................................................................................... 14, 15 17 U.S.C. 106(6) ........................................................................................................................ 15 17 U.S.C. 502(a). ....................................................................................................................... 14 also17 U.S.C. 501 (a), (b) ........................................................................................................ 14 Rules FED. R. CIV. P. 30(b)(1)................................................................................................................. 21 FED. R. CIV. P. 34(b)(2)................................................................................................................. 21

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PRELIMINARY STATEMENT This action is brought by International Playthings LLC (International) and Epoch Company, Ltd. (Epoch) (collectively Plaintiffs) for injunctive relief against defendants Toy Teck Ltd. LLC, Toyteck Corporation, Manley Toys Ltd., and Mitchell August (collectively Defendants or Toyteck) and for damages and other relief on account of Defendants false advertising and reverse palming off in violation of the Lanham Act and state law, as well as copyright infringement and unjust enrichment. In the mid-1980s, Epoch created and introduced a line of collectible plastic animal dolls called Sylvanian Families, along with a line of accessories, including houses and playground equipment, with which children may create an entire environment for their dolls. In 1993, Epoch reintroduced Sylvanian Families as CALICO CRITTERS OF CLOVERLEAF CORNERS (CALICO CRITTERS). Epoch holds registrations for the CALICO CRITTERS mark and also has registered copyrights in and relating to the CALICO CRITTERS line. In 2000, International became the exclusive distributor of CALICO CRITTERS. In or about 2011, Defendants came out with an imitation or knock-off product which Defendants call Teacup Families. Defendants Teacup Families product line is markedly more limited than the CALICO CRITTERS line and, unlike the CALICO CRITTERS line, does not allow children to create an entire neighborhood or world for the dolls using only the Teacup Families products. Defendants recently began advertising Teacup Families on national television and the Internet. Defendants current video advertising, being presented on television and the Internet, uses at least three (3) Cozy Cottages, a variety of house offered in the CALICO CRITTERS Product line, in its video advertisements of Teacup Families. This machination results in a false depiction of Toytecks product line and also conveys to the viewer that houses and accessories 1
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offered only by International are in fact a product available from Toyteck, which is a complete falsehood and blatant act of palming off. The Verified Complaint contains images taken from the Teacup Families Commercial which currently appears at

http://www.youtube.com/user/ToyTeckLTD#p/a/u/1/VHYKb37yCcY last visited at 1:11 pm EST, Sunday, November 20, 2011. The Teacup Families Commercial is also in rotation nationwide on network and cable television. To promote the misleading image that the Teacup Families line offers children the ability to create a neighborhood or world similar to CALICO CRITTERS, Defendants advertisements depict products and accessories offered only by Plaintiffs, including several of Plaintiffs Cozy Cottage environments, thereby engaging in false advertising and palming off Plaintiffs products as though produced by and available from Defendants. Defendants conduct is

intentional. The Cozy Cottages used in Defendants ads have been painted or otherwise altered so that their colors fit within the Teacup Families color scheme and so that the Cozy Cottages are not readily identifiable. In addition, in some shots of the Cozy Cottage in Defendants ad, certain unique details of the Cozy Cottage are obscured in an effort to obliterate distinguishing features of the Cozy Cottage. Defendants have embarked on this campaign of deception in order to seize market share from Plaintiffs during the holiday selling season, which is currently underway. In addition, the association created by Defendants between CALICO CRITTERS and Teacup Families is irreparably damaging to Plaintiffs reputation and goodwill. Therefore, in addition to damages and permanent injunctive relief, an immediate temporary restraining order and preliminary injunction are necessary to bring Defendants deception to a halt.

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STATEMENT OF FACTS Plaintiffs shall rely on and incorporate by reference the Verified Complaint, with exhibits, and the Declaration of Michael Varda as their Statement of Facts in regard to this application.

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LEGAL ARGUMENT POINT I A. Standard Governing Injunctive Relief Pursuant to the well-established standard governing injunctive relief, Plaintiffs are entitled to the requested relief. Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004). A preliminary injunction should be granted when a plaintiff has established: (1) it is reasonably likely to succeed on the merits of its claim; (2) a likelihood that it will suffer irreparable harm if an injunction is denied; (3) the likelihood of irreparable harm to the nonmoving party is no greater than that to the moving party; and (4) the public interest weighs in favor of the requested relief. See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 129 S. Ct. 365, 374 (2008); Video Pipeline, Inc. v. Buena Vista Home Entmt, Inc., 342 F.3d 191, 196 (3d Cir. 2003), cert. denied, 540 U.S. 1178 (2004). Finally, when considering a TRO, Courts in this Circuit consider the same factors applicable to preliminary injunction application. See, e.g., Westchester Fire Ins. Co. v. Global Real Constr., LLC, No. 09-207, 2009 U.S. Dist. LEXIS 3481 (D.N.J. Jan. 16, 2009); North v. Rooney, No. 03-1811, 2003 U.S. Dist. LEXIS 11299, at *16 (D.N.J. June 18, 2003); see also Ballas v. Tedesco, 41 F. Supp.2d 531, 537 (D.N.J. 1999) (considering temporary restraining order). Moreover, the authority to provide injunctive relief as a remedy is expressly provided for in the Lanham Act. 15 U.S.C. 1125(d)(1)(C) (2011) ([T]he owner of a famous mark that is distinctive, inherently or through acquired distinctiveness, shall be entitled to an injunction against another person who, at any time after the owners mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark . . . .). As evidenced by all the cases cited to herein, such relief is often granted in false advertising and palming off cases.

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As explained below, Plaintiffs meet their burden because they are likely to succeed on the merits, Defendants actions, if left unchecked, will continue to cause Plaintiffs irreparable harm greatly outweighing any harm that Defendants might suffer, and the public interest weighs in favor of granting the requested relief. The emergent nature of the relief requested is a result of the Christmas and Hanukkah selling season, which is critical in the toy and hobby industry. Black Friday is generally viewed as the biggest selling day of the year. advertisement, the Teacup Families (See Varda Declaration at 10.) Commercial which currently must The offending appears be at

http://www.youtube.com/user/ToyTeckLTD#p/a/u/1/VHYKb37yCcY,

pulled

immediately from the Internet and television display in order to prevent continued irreparable harm in the form of lost sales the magnitude of which cannot be easily quantified. B. Plaintiffs Are Likely To Succeed On The Merits Of Their Claims Against Defendants Defendants acts constitute trademark and copyright infringement, unfair competition in violation of 15 U.S.C. 1125(a), N.J.S.A. 56:4-1, et seq., and the common law of unfair competition. As set forth in the Verified Complaint, Defendants actions clearly constitute unlawful and unfair competition. 1. Plaintiffs Have Shown a Reasonable Likelihood Of Success That Defendants Have Falsely Advertised in Violation of the Lanham Act (15 U.S.C. 1125(a))

Plaintiffs assert a false advertising claim against Defendants pursuant to Section 43 of the Lanham Act based upon Toytecks efforts to pass of Plaintiffs goods as their own and misleading advertising relative to the Cozy Cottage. provides in relevant part: (a)(1) Any person who, on or in connection with any goods or services ... uses in commerce any word, term, name, symbol, or 5
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device, or any combination thereof, or any ... false or misleading description of fact, or false or misleading representation of fact, which(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her ... goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. 15 U.S.C. 1125(a). As the Third Circuit has explained, where literal falsehood is proven, evidence of actual confusion need not be provided: Some actions brought under the Lanham Act require proof of actual confusion and others do not. In an action brought under sections 32 and 43(a) of the Lanham Act for trademark infringement, 15 U.S.C. 1114(1) and 1125(a)(1)(A), plaintiff need not provide proof of actual confusion; he need only show likelihood of confusion. In an action brought under another part of section 43 (a) of the Lanham Act for false advertising, 15 U.S.C. 1125(a)(1)(B), plaintiff need not prove the challenged advertising misled the public if he can show it was literally false. However, if his claim is not that the advertising was false but that it was misleading, he must prove the public was actually misled or confused by it. Facenda v. N.F.L. Films, Inc., 542 F.3d 1007, 1021 (3d Cir. 2008) (citing Fisons Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 472 n.8 (3d Cir. 1994)). Here, Plaintiffs are likely to succeed on the merits of the their false advertising claim because Toyteck has intentionally and deceptively included Plaintiffs Cozy Cottage in its advertising to pass it off as part of Toytecks Teacup Families product line by distorting and misrepresenting that characteristics of the Cozy Cottage and otherwise obstructing unique design features on the Cozy Cottage, all in an effort to pass of the Cozy Cottage as part of Defendants

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Teacup Families product line. Furthermore, upon information and belief, Toyteck falsely claims that ToyTeck is a federally registered mark and that Toy Teck Ltd. LLC is a validly existing corporation. At the very least, Defendants unlawful use of the Cozy Cottage in its advertisements is likely to cause confusion among consumers as to the products offered by Defendants and Plaintiffs. (a) There is a Reasonable Likelihood of Success on Plaintiffs Reverse Passing Off Claim Under the Lanham Act (15 U.S.C. 1125(a))

Section 1125(a)(1)(A) states: Any person who, on or in connection with any goods or services, . . . uses in commerce . . . any false designation of origin . . . which-is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin . . . of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action . . . . A successful claim for reverse passing off under the Lanham Act requires that the plaintiff establish (1) that the work at issue originated with the plaintiff; (2) that origin of the work was falsely designated by the defendant; (3) that the false designation of origin was likely to cause consumer confusion; and (4) that the plaintiff was harmed by the defendants false designation of origin. Lipton v. Nature Co., 71 F.3d 464, 473 (2d Cir. 1995) (citing Waldman Publishing Corp. v. Landoll, Inc., 43 F.3d 775, 781-85 (2d Cir. 1994)); Operating Sys. Support, Inc. v. Wang Labs., Inc., No. 98-2138, 2001 U.S. Dist. LEXIS 24689 (D.N.J. Apr. 23, 2001), revd on other grounds, 52 Fed. Appx. 160, 2002 U.S. App. LEXIS 15650, Copy. L. Rep. (3d Cir. 2002). Importantly, various courts of appeals have concluded that the gravamen of the injury in a reverse passing off case is that the originator of the misidentified product is involuntarily deprived of the advertising value of its name and of the goodwill that otherwise would stem from 7
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public knowledge of the true source of the satisfactory product. Waldmon Pub. Corp. v. Landoll, Inc., 43 F.3d 775, 785 (2d Cir. 1994) (quoting Smith v. Montoro, 648 F.2d 602, 607 (9th Cir. 1981)); see also Roho, Inc. v. Marquis, 902 F.2d 356, 359 (5th Cir. 1990). And critically, for claims asserted under subsection (a)(1)(A), only a likelihood of confusion is required. Facenda v. N.F.L. Films, Inc., 542 F.3d 1007, 1021 (3d Cir. Pa. 2008). As to the first element, the Cozy Cottage is offered in Plaintiffs CALICO CRITTERS line of products. By including the Cozy Cottage in its advertisements, Defendants have falsely designated the origin of the product in their advertisements. In furtherance of this deceit, Toyteck attempted to mask its use of the Cozy Cottage by altering the Cozy Cottages coloring from its light tan and orange color scheme to the purple and yellow colors of its Teacup Families product line. In addition, as averred in the Complaint, Toyteck has also obstructed unique design features of the Cozy Cottage in its advertising. These facts support false designation of origin -the second element of proof for this Lahnam Act claim. As to the third element, by placing the Cozy Cottage in its advertisement surrounded by Defendants Teacup Families product line, Toyteck deceives consumers and children into believing Toyteck offers products that enable kids to create an entire neighborhood or world for the dolls which includes the Cozy Cottage. Finally, there is a likelihood of harm to Plaintiff. For instance, there is a strong

likelihood that at the very least, Defendants distortion of Plaintiffs product will misdirect Plaintiffs customers to Defendants own products and away from those of Plaintiffs. Furthermore, by using Plaintiffs products in its commercials, Defendants continue to cause harm to Plaintiffs reputation and goodwill. And in further support of this last prong, Plaintiffs seek expedited discovery discussed more fully, supra.

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In sum, there can be little doubt that Toytecks conduct creates a strong likelihood of confusion among purchasers of the Cozy Cottage as to the products origin. Accordingly, Plaintiffs demonstrate there is a reasonable likelihood of success on their claim under the Lanham Act 15 U.S.C. 1125(a)(1)(A). (b) Plaintiffs Have Shown A Likelihood of Success That the Defendants Have Falsely Advertised In Violation of 15 U.S.C. 1125(a)(1)(B). (i) Toytecks Advertisements Misrepresent the Nature and Characteristics of Plaintiffs Product

In order establish a Lanham Act claim based on a false or misleading representation under 15 U.S.C. 1125(a)(1)(B), a Lanham Act plaintiff must prove that: (1) that the defendant has made false or misleading statements as to his own product [or anothers]; (2) that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience; (3) that the deception is material in that it is likely to influence purchasing decisions; (4) that the advertised goods traveled in interstate commerce; and (5) that there is a likelihood of injury to the plaintiff in terms of declining sales, loss of good will, etc. Warner-Lambert Co. v.

BreathAsure, Inc., 204 F.3d 87, 91-92 (3d Cir. 2000) (citing Johnson & Johnson-Merck Consumer Pharmaceuticals Co. v. Rhone-Poulenc Rorer Pharms., Inc., 19 F.3d 125, 129 (3d Cir. 1994)); see also U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 922-23 (3d Cir. 1990) (same)). Importantly, a defendant violates the Lanham Act when the commercial message or statement is either (1) literally false or (2) literally true or ambiguous, but has the tendency to deceive consumers. Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 943 (3d Cir. 1993) (a plaintiff must prove either literal falsity or consumer confusion, but not both) (emphasis in original). As

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the Third Circuit explained in Facenda, 542 F.3d at 1021: In an action brought under another part of section 43 (a) of the Lanham Act for false advertising, 15 U.S.C. 1125(a)(1)(B), plaintiff need not prove the challenged advertising misled the public if he can show it was literally false. However, if his claim is not that the advertising was false but that it was misleading, he must prove the public was actually misled or confused by it. By placing the Cozy Cottage in its advertising surrounding by Defendants Teacup Families product line, Toyteck deceives and confuses consumers and children into believing Toyteck offers products that enable kids to create an entire neighborhood or world for the dolls which include the Cozy Cottage, and to misdirect Plaintiffs customers to its own products and away from those of Plaintiffs. (ii) Toytecks False Representations Are Contained In Commercial Advertising And Promotion

The Lanham Act allows a remedy for false statements made in the context of commercial advertising or promotion. 15 U.S.C. 1125(a)(1)(B). The term is most frequently defined as including the following elements: (1) commercial speech (2) by a defendant in commercial competition with the plaintiff (3) for the purpose of influencing customers to buy the defendant's goods or services and (4) disseminated sufficiently to the relevant purchasing public to constitute advertising or promotion within the industry. Eli Lilly & Co. v. Roussel Corp., 23 F. Supp. 2d 460, 480 (D.N.J. 1998) (citing Gordon & Breach Science Publishers S.A. v. American Inst. of Physics, 859 F. Supp. 1521, 1536 (S.D.N.Y. 1994)). The term commercial advertising or promotion consists of any promotional statement directed at actual or potential purchasers. Gordon & Breach Science Publrs. S.A. v. American Inst. of Physics, 905 F. Supp. 169, 182 (S.D.N.Y. 1995).

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Plainly, Toytecks advertisements or its Teacup Families line of products which include the Cozy Cottage aired on cable television, network television and internet sites such as Facebook and You Tube, constitute commercial advertising within the meaning of Section 43 of the Lanham Act. (iii) Toytecks Deceiving Misleads Customers Advertising

In its video advertisements, Toyteck misstates the characteristics of Plaintiffs products and of Toytecks products relative to Plaintiffs products, and wrongfully disparages Plaintiffs products. Toyteck appears to have painted or otherwise altered the color of the Cozy Cottages used in its advertisements. The Cozy Cottage, by contrast, is manufactured and sold solely with light tan clabbered siding and an orange colored roof. By placing the Cozy Cottage in its advertising surrounding by Defendants Teacup Families product line, Toyteck deceives consumers and children into believing Toyteck offers products that enable kids to create an entire neighborhood or world for the dolls which include the Cozy Cottage, and to misdirect Plaintiffs customers to its own products and away from those of Plaintiffs. (iv) Toytecks False Advertising Material To Purchasing Decisions Is

A false statement violates the Lanham Act if it is material in that it is likely to influence the purchasing decision. Castrol, Inc. v. Pennzoil Co., 987 F.2d 939, 950 (3d Cir. 1993). Upon information and belief, Toyteck offers only one house, a car/van, and a limited amount of playground equipment. Furthermore, Toyteck manufactures and sells one house in connection with Teacup Families which appears much smaller and much less comprehensive than the Cozy Cottage. It is clear that Toytecks actions have the effect of misdirecting Plaintiffs customers to its own products and away from those of Plaintiffs.

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(v)

Defendants Products Are Sold In Interstate Commerce

Defendants products are sold in major markets, including New Jersey, at retail establishments including Wal-Mart, Toys R Us, Walgreens, Target, Kmart, and Radio Shack. For instance, Teacup Families products are sold at the Toys R Us in Totowa, New Jersey. (Varda Declaration at 7; Cmplt. at 28.) Thus, there can be no dispute that Defendants products are sold in interstate commerce. 2. Plaintiffs Are Likely to Succeed On the Merits of Their Copyright Infringement Claims

Copyright owners retain the exclusive right to reproduce the copyrighted work, to prepare derivative works, to distribute copies, and to publicly display the work. 17 U.S.C. 106; see also17 U.S.C. 501 (a), (b); Video Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 342 F.3d 191, 196-97 (3d Cir. 2003). To establish a claim of copyright infringement, a plaintiff must demonstrate: (1) ownership of a valid copyright; and (2) unauthorized copying of original elements of the plaintiffs work. See Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, 307 F.3d 197, 206 (3d Cir. 2002), cert. denied, 538 U.S. 1032 (2003); Feist Publns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). Moreover, pursuant to Section 502 of the Copyright Act, courts may grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright. 17 U.S.C. 502(a). Section 410(c) of the Copyright Act provides in part: In any judicial proceedings the certificate of a registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate. Id. Once it is determined that the plaintiff is a valid copyright owner, the operative question is whether the defendants unauthorized actions encroach upon the exclusive rights of the

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copyright-holding plaintiff. Gold Cross Safety Corp. v. PHH Vehicle Mgmt., No. 07-2401, 2008 U.S. Dist. LEXIS 50354, 6-7 (D.N.J. June 25, 2008). Copying in this context means the act of infringing any of the exclusive rights that accrue to the owner of a valid copyright, as set forth at 17 U.S.C. 106, including the rights to distribute and reproduce copyrighted material. Kay Berry, Inc. v. Taylor Gifts, Inc., 421 F.3d 199, 207 (3d Cir. 2005); see also 17 U.S.C. 106(6) (providing that the owner of the copyright has the exclusive right to display the copyrighted work publicly). Epoch owns copyrights in and related to the CALICO CRITTERS product line, including characters, accessories, a house and furniture. (See Cmplt. at 16.) The Cozy Cottagewhich is an integral part of the CALICO CRITTERS collectionhas been modified without authorization and displayed in Toytechs advertisements all without Plaintiffs permission, which encroaches upon Plaintiffs rights associated with its copyrights. Accordingly, Plaintiffs have demonstrated a likelihood of success on the merits as to their copyright infringement claim. 3. New Jersey Unfair Competition Claims

Unfair competition claims under New Jersey statutory and common law generally parallel those under Section 43(a) of the Lanham Act. See Buying For The Home, LLC v. Humble Abode, LLC, 459 F. Supp. 2d 310, 317-318 (D.N.J. 2006); J & J Snack Foods, Corp. v. Earthgrains Co., 220 F. Supp. 2d 358, 374 (D.N.J. 2002) ([T]he elements for a claim for trademark infringement under the Lanham Act are the same as the elements for a claim of unfair competition under the Lanham Act and for claims of trademark infringement and unfair competition under New Jersey statutory and common law. . . .); Harlem Wizards Entertainment Basketball, Inc. v. NBA Properties, Inc., 952 F. Supp. 1084, 1091 (D.N.J. 1997) (N.J.S.A. 56:41 is the statutory equivalent of Section 43(a)(1) of the Lanham Act); D&R Communs., LLC v. Garett, No. 11-413, 2011 U.S. Dist. LEXIS 84658 (D.N.J. Aug. 2, 2011) (The elements of 13
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unfair competition under N.J.S.A. 56:4 and New Jersey common law are the same as those required under the Lanham Act.) (citation omitted)). The Third Circuit has also adopted this view, stating, [w]e previously have held that the federal law of unfair competition under 43(a) is not significantly different from the New Jersey [common] law of unfair competition and have applied the identical test to both claims. AT&T v. Winback & Conserve Program, 42 F.3d 1421 (3d Cir. N.J. 1994). C. Plaintiffs Will Suffer Irreparable Harm If The Requested Injunctive Relief Is Not Granted Due to, inter alia, the significant permutation of Defendants false advertisements palming off Plaintiffs products, exacerbated by the commencement of the holiday shopping season, Plaintiffs will suffer irreparable harm if a preliminary injunction is not immediately issued temporarily and preliminarily enjoining Defendants from using and/or altering Plaintiffs products in Defendants advertisements. Irreparable harm is potential harm which cannot be redressed by a legal or an equitable remedy following a trial. Trico Equip., Inc. v. Manor, No. 08-5561, 2009 U.S. Dist. LEXIS 50524, at *21-22 (D.N.J. June 13, 2009) (citing Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 801 (3d Cir. 1989)). To establish irreparable harm, the requesting party must set forth a clear showing of immediate irreparable injury. Campbell Soup, 977 F.2d at 91 (quoting ECRI v. McGraw-Hill, Inc., 809 F.2d 223, 226 (3d Cir.1987)). The harm must be irreparablenot merely serious or substantial, and it must be of a peculiar nature, so that compensation in money cannot atone for it. Campbell Soup, 977 F.2d at 92 (quoting ECRI, 809 F.2d at 226); but see Adams v. Freedom Forge Corp., 204 F.3d 475, 485 (3d Cir. 2000) ([T]he request for money alone itself does not foreclose a claim of irreparable injury.). The Third Circuit has explicitly stated that once the likelihood of confusion caused by trademark infringement has

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been established, the inescapable conclusion is that there was also irreparable injury. Coach, Inc. v. Bags & Accessories, No. 10-2555, 2011 U.S. Dist. LEXIS 52767, at *25 (D.N.J. May 17, 2011) (quoting Pappan Enters., Inc. v. Hardee's Food Sys., Inc., 143 F.3d 800, 805 (3d Cir. 1998); Opticians Ass'n of Am. v. Indep. Opticians of Am., 920 F.2d 187, 196-97 (3d Cir. 1990). Further, where the challenged advertising makes a misleading comparison or reference to a competitors product, irreparable harm is presumed. Novartis Consumer Health, Inc. v.

Johnson & Johnson-Merck Pharm. Co., 129 F. Supp. 2d 351, 367 (D.N.J. 2000). Furthermore, under the precedent of this Circuit, a showing of a prima facie case of copyright infringement or reasonable likelihood of success on the merits raises a presumption of irreparable harm. Video Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 342 F.3d 191, 205 (3d Cir. N.J. 2003); see also Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1254 (3d Cir. 1983) (A copyright plaintiff who makes out a prima facie case of infringement is entitled to a preliminary injunction without a detailed showing of irreparable harm.). Irreparable harm should be presumed in this case; however, assuming, arguendo, that it is not, it is clear that Plaintiffs will suffer irreparable harm in light of the current economic climate if Defendants conduct is allowed to continue through the holiday season. First, a great portion of Plaintiffs sales are generated during the Christmas and Hanukkah holiday season. (Varda Declaration at 10.) If Defendants conduct is not enjoined, Plaintiffs face an irreparable blow to sales in a down economy which could be crippling to Plaintiffs respective businesses. Second, Defendants produce an inferior product to Plaintiffs and any association between CALICO CRITTERS and Teacup Families is damaging to Plaintiffs reputation and goodwill. (Varda Declaration at 8 & 11.) Due to the timing of Defendants assault, such damage to

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Plaintiffs reputation could also be fatal. Finally, Defendants have defaced the Cozy Cottage in their advertisements, which harms Plaintiffs image. (Varda Declaration at 9.) D. The Balancing of the Equities Weighs in Favor of Plaintiffs and Against Defendants In determining whether to grant preliminary relief, a court must undertake to balance the hardships to the prospective parties. Pappan Enters., 143 F.3d at 805. Plaintiffs can also establish that the harm it will suffer harm in the absence of injunctive relief far outweighs that harm to Defendants if injunctive relief is granted. Simply stated, with injunctive relief, Plaintiffs are requesting that a competitor obey the bounds of fair competition by being prevented from distorting and using Plaintiffs products in its advertising. This not a difficult burden for Defendants. See Novartis Consumer Health, Inc. v. Johnson & JohnsonMerck Consumer Pharms. Co., 290 F.3d 578, 596 (3d Cir. N.J. 2002) (the injury a defendant might suffer if an injunction were imposed may be discounted by the fact that the defendant brought that injury upon itself.); Opticians Ass'n of America v. Independent Opticians of America, 920 F.2d 187, 197 (3d Cir. N.J. 1990) (By virtue of this recalcitrant behavior, [the opposing party] can hardly claim to be harmed, since it brought any and all difficulties occasioned by the issuance of an injunction upon itself.); Doctors Assocs., Inc. v. Desai, No. 08-3363, 2008 U.S. Dist. LEXIS 62178, at *6 (D.N.J. Aug. 12, 2008) (the self-inflicted harm is far outweighed by the immeasurable harm to Plaintiff resulting from Defendants continued . . . infringement.) Moreover, as already discussed, Defendants conduct will cause Plaintiffs irreparable injury due to the confusion Defendants have caused in the marketplace. The Third Circuit has held that a showing of a likelihood of confusion establishes irreparable injury. See Opticians Assn, 920 F.2d at 196.

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Finally, Defendants are misleading consumers and further distorting Plaintiffs products by creating the false impression of Toytecks and Plaintiffs product line and also conveying to the viewer that houses and accessories offered only by International are in fact available from Toyteck. E. The Public Interest Is In Favor of the Grant Of A Preliminary Injunction Generally speaking, there is a strong public policy against the dissemination of false and misleading advertising. See, e.g., Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharms. Co., 290 F.3d 578, 597 (3d Cir. 2002) (agreeing with those district courts that have found that there is a strong public interest in the prevention of misleading advertisements) (quotations omitted). And, where, as in this case, a party has demonstrated both a likelihood of success on the merits and irreparable injury, it almost always will be the case that the public interest will favor the plaintiff. AT&T , 42 F.3d at 1427; see also Advance Magazine Publishers Inc. v. Vogue Int'l, 123 F. Supp. 2d 790, 802 (D.N.J. 2000) (Once the likelihood of success on the merits and irreparable injury to plaintiff have been amply demonstrated it will almost always be the case that the public interest will favor injunctive relief.) (quotations omitted). This rule is even more evident in cases arising under the Lanham Act. Kos Pharms., Inc. v. Andrx Corp., 369 F.3d 700, 730 (3d Cir. 2004) (the most basic public interest at stake in all Lanham Act cases: the interest in prevention of confusion, particularly as it affects the public interest in truth and accuracy.); Pappan Enters. v. Hardee's Food Sys., 143 F.3d 800, 807 (3d Cir. 1998) (acknowledging the public interest . . . in a trademark case . . . is most often a synonym for the right of the public not to be deceived or confused.). To be sure, the case law in the Third Circuit supports the contention that there is a strong public policy against the

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dissemination of false and misleading advertising. See, e.g., Novartis, 290 F.3d at 597 (agreeing with those district courts that have found that there is a strong public interest in the prevention of misleading advertisements) (quotations omitted). F. Plaintiffs Are Entitled to Expedited Discovery Pursuant to Rules 30 and 34 of the Federal Rules of Civil Procedure, Plaintiffs are entitled to expedited discovery. FED. R. CIV. P. 30(b)(1); FED. R. CIV. P. 34(b)(2). To be sure, expedited discovery is particularly appropriate when a plaintiff seeks injunctive relief because of the expedited nature of injunctive proceedings. Philadelphia Newspapers v. Gannett

Satellite Info. Network, No. 98-2782, 1998 U.S. Dist. LEXIS 10511, at *2 (E.D. Pa. July 15, 1998) (quoting Ellsworth Assocs. v. United States, 917 F. Supp. 841 (D.D.C. 1996)). Where narrowly tailored to meet the needs of a preliminary injunction, leave to conduct expedited discovery should be granted. Entm't Tech. Corp. v. Walt Disney Imagineering, 03-3546, 2003 U.S. Dist. LEXIS 19832 (E.D. Pa. Oct. 2, 2003) In the present matter, expedited discovery efforts will be narrowly tailored and focused on determining, inter alia, the means by defendants accomplished the false and misleading Teacup Families Commercial, the extent of distribution of that video, whether other false and misleading advertising has been carried out by Defendants, and the identity of all those who participated with Defendants in accomplishing this deception.

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CONCLUSION For the foregoing reasons, this Court should grant Plaintiffs request for a temporary restraining order and for a preliminary injunction.

CONNELL FOLEY LLP Attorneys for Plaintiffs International Playthings LLC and Epoch Company, Ltd.

By:

/s/ Peter J. Pizzi Peter J. Pizzi

DATED: November 22, 2011

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