Perrin & Nissen sued SAS for trademark, trade dress, and copyright infringement; related state claims; and breach of contract. Allegations: Perrin & Nissen is an English company that makes toy balloon products under the names “Magic Plastic” and “Amazing Elastic Plastic.” The toy is plastic compound with a blow-pipe. 
Users can turn the plastic into balloons by balling up some of the compound, inserting the pipe, and blowing into the pipe. Perrin & Nissen has made the toy since 1947 under the name “Magic Plastic,” and began importing it into the US in 1994 in toy stores like FAO Schwartz. 
Allegedly, Claney, one of the defendants, approached Perrin & Nissen in 1997 about selling it in the mass market, with Perrin & Nissen to retain all ownership rights.
The parties agreed to use a different name than the name used in American high-end stores: “Amazing Elastic Plastic.” Some customers required assurances that the product was the same as “Magic Plastic,” which fact Perrin & Nissen confirmed in writing. At the same time, The Better Blocks Trust filed an ITU for “Amazing Elastic Plastic”; the ITU was signed by Claney. Better Blocks later assigned the ITU to RJM Ventures; the registration issued in 1999.
In 1998, Perrin & Nissen entered into an agreement with International Chemical Corp., licensing it exclusively to manufacture the toy in North America in return for a royalty of 52 cents per four-pack, with a minimum of $260,000/year. Perrin & Nissen disclosed its trade secrets in return for ICC’s promise of confidentiality. Claney and ICC chose a distributor; it was given no ownership in either the trademark or the product.
Perrin & Nissen decided to change the “Amazing Elastic Plastic” packaging, and licensed the new trade dress to Claney, ICC, and the distributor, who agreed to use the trade dress only with the name “Amazing Elastic Plastic” in North America to mass market retailers and only in connection with Perrin & Nissen’s product. Then the distributor filed for bankruptcy, and a new distributor stepped in.
In 2002, royalties began decreasing, until there were no sales at all in April-May 2003. According to the distributor, this was because of competing imports from China. In 2004, Perrin & Nissen agreed with the distributor that Perrin & Nissen would make the toy in England and sell it directly to the distributor, and they agreed to a price increase for retail customers. But their retail customers (Target & Walgreen’s) not only rejected the price increase, but decided to stop selling the toy, and the distributor declined to take the already-agreed-on quantities. The distributor took the position that it had cancelled the outstanding order, worth $95,000, and that it owned the registered “Amazing Elastic Plastic” trademark, though it wouldn’t use Perrin & Nissen’s photos or art in connection with its sales.
In 2006, Perrin & Nissen learned that beginning in 2002, the distributor had been selling toy balloon products made in China using packaging that contained part of Perrin & Nissen’s trade dress and the mark “Amazing Elastic Plastic.” The distributor substituted those products for Perrin & Nissen when filling orders for the toy for retailers, while telling Perrin & Nissen and ICC that customers didn’t want to sell the toys any longer.
Perrin & Nissen alleged valid claims for copyright infringement of its packaging, fraud, and breach of contract.
The interesting stuff happened with the Lanham Act and coordinate claims. Perrin & Nissen alleged secondary meaning in its trade dress because of use on the Amazing Elastic Plastic product since 1998. But that packaging says “Amazing Elastic PlasticTM is a Trademark of SAS Group Inc.” (SAS being the distributor.) Perrin & Nissen received an earlier version of the packaging in 1998 from SAS’s predecessor in interest, RJM Ventures (the filer of the ITU, in case you don’t remember), which stated “Amazing Elastic PlasticTM is a Trademark of RJM Ventures Ltd.” Since the packaging was attached to the complaint and relied on in the complaint, the court could properly consider it on a motion to dismiss. So: Perrin & Nissen clearly had notice that SAS’s predecessor in interest was asserting ownership of the trademark and printing its own name on the packaging as early as 1998.
Perrin & Nissen could not therefore plausibly claim that its trade dress acquired a secondary meaning in the minds of purchasers as being associated exclusively with Perrin & Nissen, since its name never appeared on the packaging. (Hmm. I don’t think this throws licensing into doubt; it just means that the licensor has to inspect the product to make sure that the licensee isn’t making trademark claims adverse to the licensor!) So Perrin & Nissen failed to state a claim for false designation of origin based on trade dress.
Perrin & Nissen also alleged two false advertising claims. The first was that the packaging “Established Toy Since 1947” misrepresents the nature, characteristics, qualities and geographic origin of SAS’s product by falsely suggesting that the product is the genuine toy Perrin & Nissen has been making since 1947, instead of a Chinese knockoff. Perrin & Nissen also alleged that “Established Toy Since 1947” had secondary meaning, which allegation was defeated by the court’s reasoning above. The genuineness argument, too, failed because Amazing Elastic Plastic has never been marketed as emanating from Perrin & Nissen, but always marked with someone else’s trademark claim.
The other false advertising claim did better. Perrin & Nissen competes with SAS because it sells “Magic Plastic” toy balloons in the US. Perrin & Nissen also alleged that SAS was advertising toy balloon products on its website using a 1997 video with Jayne Phillips of Perrin & Nissen and her daughter demonstrating the toy, which falsely represents the quality of the product because SAS is selling an inferior knockoff that doesn’t work as well. This was sufficient to state a claim: the ability to form bubbles is a material characteristic of the product.
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