For some businesses the main assets are ideas, designs and products. This intellectual property is so important that many state and federal laws fiercely protect business concepts. If a company uses the intellectual property of another company without permission, that company can face serious penalties.
New Jersey-based retailer Toys “R” Us Inc. has recently been sued by Fuhu, a Californian toy maker, over intellectual property. According to Fuhu, Toys “R” Us was the sole distributor of a children’s tablet called nabi. Fuhu claims Toys “R” Us did little to promote the tablet during the 2011 holiday season. Although initial sales were promising, the toy store company stopped accepting pre-orders. After Christmas sales proved dismal, the nabi tablet toy was discontinued.
Soon after, Toys “R” Us began making a similar children’s tablet called Tabeo. Fuhu believes this tablet was based on the designs of the nabi tablet. Apparently, the products have similar shapes, functions and directly compete with one another. Therefore, the suit was brought claiming an infringement of trade secrets.
Fuhu is asking for an unspecified amount of damages. It is asking the court to force Toys “R” Us to give Fuhu all remaining Tabeo tablets and to stop using Fuhu’s trade secrets. Furthermore, Fuhu is asking the court to force Toys “R” Us to pay attorney fees, litigation costs and compensatory damages.
While this case is likely to go on for some time, other businesses can learn from this situation. It is important for businesses to protect their intellectual property from the outset. Businesses should ensure that all necessary documents have been filed with appropriate agencies to provide governmental protection. Furthermore, these companies should make sure that contracts with outside parties specifically protect intellectual property that could otherwise be at issue.
Source: Bloomberg, “Harvard, Time Warner, Toys ‘R’ Us: Intellectual Property,” Victoria Slind-Flor, Sept. 27, 2012