manatt, phelps & phillips, llp kirby noonan lance & …manatt, phelps & phillips,...

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FUHU’S MPA ISO TRO & OSC RE

PRELIMINARY INJUNCTION

CASE NO. 12-CV-2308 WQH-WVG

MANATT, PHELPS & PHILLIPS, LLP RONALD S. KATZ (Bar No. CA 085713) email: [email protected] ROBERT D. BECKER (Bar No. CA 160648) email: [email protected] SHAWN G. HANSEN (Bar No. CA 197033) email: [email protected] 1841 Page Mill Road, Suite 200 Palo Alto, CA 94304 Telephone: (650) 812-1300 Facsimile: (650) 213-0260

Attorneys for Plaintiffs FUHU, INC. & FUHU HOLDINGS, INC.

KIRBY NOONAN LANCE & HOGE LLP CHARLES T. HOGE (Bar No. CA 110696) email: [email protected] ETHAN T. BOYER (Bar No. CA 173959) email: [email protected] 350 10th Ave., Suite 1300 San Diego, CA 92101 Telephone: (619) 231-8666 Facsimile: (619) 231-9593

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

FUHU, INC. & FUHU HOLDINGS, INC.

Plaintiffs,

vs.

TOYS “R” US, INC. & TOYS “R” US – DELAWARE, INC.,

Defendants.

Case No. 12-CV-2308 WQH-WVG FUHU, INC. & FUHU HOLDINGS, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE FOR ISSUANCE OF PRELIMINARY INJUNCTION Hearing Date: TBD Hearing Time: TBD Judge/Dept.: Hon. William Q. Hayes

CONFIDENTIAL

TO BE LODGED UNDER SEAL

Case 3:12-cv-02308-WQH-WVG Document 102 Filed 10/19/12 of 26

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TABLE OF CONTENTS

Page

i FUHU’S MPA ISO TRO & OSC RE



I. INTRODUCTION .............................................................................................................. 1

II. FACTUAL BACKGROUND ............................................................................................. 2

A. Background of Fuhu and the Development of the NABI Tablet ............................ 2

B. TRU and Fuhu Enter into Exclusivity Agreement for the NABI............................ 3

C. TRU Fails to Promote the NABI in Direct Violation of the Exclusivity Agreement ............................................................................................................... 4

D. TRU Launches its Own Kid Tablet, the TABEO, to Compete Directly with the NABI ................................................................................................................. 4

III. FUHU IS ENTITLED TO IMMEDIATE INJUNCTIVE RELIEF.................................... 6

A. Fuhu is Likely to Succeed on the Merits of its Claims for Misappropriation of Trade Secrets....................................................................................................... 7

1. Fuhu has Protectable Trade Secrets that It Confidentially Shared with TRU..................................................................................................... 8

2. TRU Misappropriated Fuhu’s Trade Secrets to Develop Its Own Branded Tablet and Copycat Ecosystem................................................... 10

3. Preliminary Injunctive Relief is Also Potentially Available under New Jersey’s Version of the Uniform Trade Secret Act........................... 12

B. Fuhu is Likely to Succeed on the Merits of its Trademark and Trade Dress Infringement Claims.............................................................................................. 13

1. TRU Infringes Fuhu’s NABI word mark .................................................. 13

2. TRU Infringes Fuhu’s Trade Dress........................................................... 14

C. Fuhu Will Suffer Irreparable Injury from TRU’s Sales of the TABEO ............... 18

D. The Balance of Hardships Weighs Decidedly in Fuhu’s Favor............................ 20

E. Public Interest Favors Protection of Fuhu’s Trade Secrets and Other Intellectual Property Rights .................................................................................. 21

IV. THE PARTIES HAVE AGREED THAT NO BOND SHOULD BE REQUIRED ......... 21

V. CONCLUSION................................................................................................................. 22


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TABLE OF AUTHORITIES

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CASES

Acolyte Technologies Corp. v. Jeja Intern. Corp. Ltd.,

2011 WL 4025111 (S.D. Cal. Sept. 12, 2011) vacated on other grounds by Acolyte

Technologies Corp. v. Jeja Intern. Corp. Ltd., 2011 WL 4837490 (S.D. Cal. Oct. 12,

2011) ................................................................................................................................. 20, 21

Alliance for the Wild Rockies v. Cottrell,

632 F.3d 1127 (9th Cir. 2011)............................................................................................... 7, 8

American Trucking Associations, Inc. v. City of Los Angeles,

559 F.3d 1046 (9th Cir. 2009)................................................................................................... 6

AMF Incorporated v. Sleekcraft Boats,

599 F.2d 341 (9th Cir. 1979)................................................................................. 14, 16, 17, 18

Brookfield Commc’ns, Inc. v. W. Coast Entm’t Corp.,

174 F.3d 1036 (9th Cir. 1999)................................................................................................. 17

Commc'ns Workers of America v. McCormac,

417 N.J.Super. 412 9 A.3d ........................................................................................................ 8

Computer Associates International, Inc. v. Bryan,

784 F. Supp. 982 (E.D.N.Y. 1992) ......................................................................................... 19

Disc Golf Ass’n, Inc. v. Champion Discs, Inc.,

158 F.3d 1002 (9th Cir. 1998)................................................................................................. 15

Eclipse Associates Limited v. Data General Corporation,

894 F.2d 1114 (9th Cir. 1990)........................................................................................... 14, 17

Grand River Enterprise Six Nations, Ltd. v. Pryor

(2nd Cir. 2007) 481 F.3d 60.................................................................................................... 19

Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers

(1974) 415 US 423, 94 S.Ct. 1113............................................................................................ 6

Grocery Outlet Inc. v. Albertson’s Inc.,

497 F.3d 949 (9th Cir. 2007)................................................................................................... 13

Hammock v. Hoffman–LaRoche, Inc.,

142 N.J. 356, 662 A.2d 546 (1995)........................................................................................... 8

International Jensen, Inc. v. Metrosound U.S.A., Inc.,

4 F.3d 819 (9th Cir. 1993)....................................................................................................... 21

Lillge v. Verity,

2007 WL 2900568 (N.D. Cal. Oct. 2, 2007)........................................................................... 20

Natural Organics, Inc. v. Proteins Plus, Inc.,

724 F. Supp. 50 (E.D.N.Y. 1989) ........................................................................................... 19

North Atlantic Instruments, Inc. v. Haber,

188 F.3d 38 (2d Cir. 1999)...................................................................................................... 19


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TABLE OF AUTHORITIES

(continued)

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Osteotech, Inc. v. Biologic, LLC,

2008 WL 686318 (D. N.J. Mar. 7, 2008).............................................................................. 7, 8

Playboy Enterprises, Inc. v. Netscape Communications Corp.,

354 F.3d 1020, 69 U.S.P.Q.2d 1417 (9th Cir. 2004) .............................................................. 14

Processed Plastic Co. v. Communications, Inc.,

675 F.2d 852 (7th Cir. 1982)................................................................................................... 20

Rent-A–Center, Inc. v. Canyon Television & Appliance,

944 F.2d 597 (9th Cir. 1991)................................................................................................... 19

Rohm & Haas Co. v. Adco Chemical Co.,

689 F.2d 424 (3d Cir. 1982)...................................................................................................... 8

Rycoline Prod., Inc. v. Walsh,

334 N.J.Super. 62, 756 A.2d 1047 (App. Div. 2000) ........................................................... 7, 8

Sierra On-Line, Inc. v. Phoenix Software, Inc.,

739 F. 2d 1415 (9th Cir. 1984).................................................................................................. 6

Syncsort Inc. v. Innovative Routines, Intern., Inc.,

2011 WL 3651331 (D.N.J. Aug. 18, 2011)............................................................................... 7

Trump's Castle Assoc. v. Tallone,

275 N.J.Super. 159, 645 A.2d 1207 (App.Div.1994) ............................................................... 8

U.S. Philips Corp. v. KBC Bank N.V.,

590 F3d 1091 (9th Cir. 2010).................................................................................................... 6

VFD Consulting, Inc. v 21st Services,

425 F.Supp.2d 1037 (N.D. Cal 2006) ....................................................................................... 7

STATUTES

N.J.S.A. 56:15-3........................................................................................................................ 1, 12

OTHER AUTHORITIES

Restatement (Third), Unfair Competition § 39 (Tentative Draft No. 4, 1993)............................... 8

Restatement of Torts § 757, comment b (1971).............................................................................. 8

www.toysrus.com.......................................................................................................................... 13


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MEMORANDUM OF POINTS AND AUTHORITIES

I. INTRODUCTION

The status quo in this matter will drastically change on October 21, 2012.

Through an exclusivity agreement that it never intended to honor, Toys “R” Us (“TRU”)

obtained from Fuhu, Inc. (“Fuhu”) a sophisticated business plan in a niche consumer electronics

market – full-featured Android tablets for children – a market in which TRU had no expertise,

experience, or background. TRU not only failed to honor its obligations under the exclusivity

agreement, but TRU is now using Fuhu’s business plans, trade dress, and trademark to enter this

burgeoning niche market to compete directly against Fuhu. TRU’s entry into this market was

made possible because TRU shamelessly copied the trade dress and trademarks of Fuhu, and

misappropriated Fuhu’s sophisticated, complex trade secret business plan. All this occurred

despite the parties’ non-disclosure agreement (“NDA”), drafted by TRU, that 1) classifies

virtually every communication between the parties as protected confidential information and 2)

states that injunctive relief is appropriate for any breach of the NDA because of the admitted

irreparable harm caused by misuse of the trade secrets.

The strictness of the NDA is a function of the harm that is suffered when a retail product

is involved. Once the product goes on the market (and, as in this case, the first-mover advantage

of Fuhu is continually undermined), then the harm has not only occurred, but it also continues on

a daily basis. New Jersey law, which governs the trade secret aspect of this case by agreement of

the parties, highlights the issue succinctly in a statute:

Actual or threatened misappropriation may be enjoined. Upon

application to the court, an injunction shall be terminated when the

trade secret has ceased to exist, but the injunction may be

continued for an additional reasonable period of time in order

to eliminate commercial advantage that otherwise would be

derived from the misappropriation.” N.J.S.A. 56:15-3

(emphasis added).

TRU announced its purloined product – the TABEO – on September 10, 2012, to great

fanfare (see Exhibit A of Fuhu’s Complaint). The TABEO will be available in TRU stores on

October 21, 2012, and TRU is currently taking pre-orders for the all-important upcoming


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holiday season, drastically changing the status quo. Therefore, Fuhu is currently experiencing

irreparable, incalculable harm and will continue to do so at least through January, 2013. For that

reason, and the reasons detailed below, Fuhu seeks injunctive relief from this Court to prevent

TRU from unfairly capitalizing on Fuhu’s trade dress, trademarks, and trade secrets. Fuhu

welcomes fair competition, but Fuhu should not be required to compete against products based on

its own intellectual property that was misappropriated under false pretenses.

II. FACTUAL BACKGROUND

A. Background of Fuhu and the Development of the NABI Tablet.

Based in El Segundo, California, Fuhu is a leading provider of cloud-served solutions that

enrich the user experience and enhance the way people enjoy content through a range of

consumer devices. Declaration of James Mitchell (“Mitchell Decl.”), ¶¶ 16-17. Among other

things, Fuhu has developed various software applications geared toward the children’s market,

i.e., to enable kids to discover, learn, and play by accessing dynamic content appropriate to their

age, gender, and/or interests in a child-safe online environment. Id., ¶¶ 19-20.

By early 2011, Fuhu had embarked on a business strategy that would leverage its expertise

in the child-oriented applications market by exploiting a “first-mover advantage” in a new market

segment—Android tablet computers designed for kids. Although Android tablets had been in

general circulation by this time, no manufacturer had yet released any full-featured tablets

focused on this market segment. Fuhu’s business strategy was designed to achieve volume and

dominant market share based on a multi-faceted branded ecosystem encompassing, among other

things, hardware, software, bundled content and services. Id., ¶¶ 23-24.

One manifestation of Fuhu’s business plan was the NABI, the first full-featured Android

tablet made especially for kids. The NABI tablet featured Web browsing, streaming movies and

TV shows, e-books reading books, and educational programs and games, all provided under

Fuhu’s MONARCH operating system (OS), which is specially designed to make the NABI tablet

features accessible to children and controllable by parents. Id., ¶¶ 19-53.


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B. TRU and Fuhu Enter into Exclusivity Agreement for the NABI.

TRU is a national supplier of toys and other children’s products. In September 2011,

Fuhu and TRU commenced negotiations regarding Fuhu’s newly-developed NABI tablet. TRU

had learned of the NABI through a mutual business partner and expressed interest in becoming

the exclusive national supplier of the NABI. Id., ¶ 69. To facilitate those discussions and protect

the confidentiality of each party’s proprietary information and trade secrets, Fuhu and TRU

entered into a very strict NDA. The NDA became effective as of the initial disclosure of any

Confidential Information, as defined in the NDA, by either party to the other, which, in this case,

was no later than September 7, 2011. Id., ¶¶ 67-68. The strictness of the NDA was essential

because both parties knew that aspects of the confidentiality would become public when the

product was marketed. Id., ¶ 67.

Fuhu and TRU continued negotiating during the ensuing weeks. Id., ¶¶ 70-85. In the

course of those negotiations, Fuhu shared with TRU its specific business plans and strategies for

the NABI. Id., ¶¶ 70-85, Ex. G. These business discussions, subject to the NDA, disclosed

Fuhu’s rollout plans, product sourcing information, and strategies for monetizing the new tablet.

Id.

In order to become the NABI’s exclusive distributor, TRU offered to provide significant

marketing and merchandising support and volume commitment. Mitchell Decl., ¶¶ 72-85.

Although Fuhu was not eager to restrict its retail rights for the NABI, TRU’s large scale and

strengths in Fuhu’s target demographic presented significant commercial advantage. See, e.g.,

Mitchell Decl., ¶ 80 and Ex. A. Fuhu provided a detailed web marketing plan for NABI pages on

the TRU website. Id., ¶ 84 and Ex. N. TRU provided Fuhu with materials showing its

unparalleled strength in children’s markets. Mitchell Decl., ¶ 80, Ex. A.

The parties’ negotiations culminated in the Exclusivity Agreement. Mitchell Decl., ¶ 83-

84, Ex. N. TRU agreed in the Exclusivity Agreement that it would undertake specific marketing

initiatives and merchandising actions. Id. Without those commitments, Fuhu would not have

entered into the Exclusivity Agreement. Id., ¶ 85.


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C. TRU Fails to Promote the NABI in Direct Violation of the Exclusivity Agreement.

TRU began accepting pre-orders for the NABI on TRU’s toysrus.com website on

November 17, 2011, and Fuhu started delivering NABI tablets in response to those pre-orders

shortly thereafter. Mitchell Decl., ¶¶ 86-87. As Fuhu’s business plan predicted, the NABI was an

immediate success. Mitchell Decl., ¶ 8 and Ex. H; ¶¶ 9-10, 86-90. The majority of tablets were

sold out online within a few weeks of the product launch, and TRU discontinued further pre-

orders to focus on in-store sales. Mitchell Decl., ¶ 90. TRU personnel advised Fuhu that the

TRU could have sold approximately 20,000 NABI tablets per day through the holidays and that

they expected high demand at their stores. Mitchell Decl., ¶ 90.

Despite the obvious hit on its hands, TRU, which had been extremely eager to obtain the

exclusive retail rights to the NABI, inexplicably did not live up to its marketing and

merchandising commitments. To the contrary, instead of promoting the NABI per its agreement

with Fuhu, TRU did virtually no promotion. Mitchell Decl., ¶¶ 8-10, 89-90. TRU ordered the

NABI in quantities that were commercially unreasonable given the reported demand. Id. In the

end, TRU’s total orders for the 2011 holiday season were hardly more than what TRU said it

could sell on its website in a single day. Id., ¶ 10.

Fuhu understandably grew frustrated with TRU’s lackluster support of its product. After

further conversations and overtures for additional promotional and sales support proved futile,

Fuhu terminated the exclusivity of TRU’s distribution rights in January, 2012. Mitchell Decl., ¶¶

90-93, Exs. E & F. The reason for TRU’s inexplicable behavior in failing to promote the NABI

became clear several months later. Id., ¶¶ 11, 94.

D. TRU Launches its Own Kid Tablet, the TABEO, to Compete Directly with the NABI.

On September 10, 2012, TRU publicly announced the release of its own TRU-branded,

“proprietary” tablet for children, the TABEO, which is reported to be TRU’s first house brand

electronics product. Id., ¶¶ 7, 94-119; see also Exhibit A to Complaint.


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It is clear that TRU made the difficult move from toy retailer into house brand electronics

by misappropriating the trade secrets and proprietary information that Fuhu shared with TRU.

Quite simply, the TABEO copies many of the features of the NABI that were disclosed in Fuhu’s

business plan and during the parties’ negotiations. Id., ¶¶ 7, 94-119.

Among other things, the TABEO recreates Fuhu’s confidential business strategies

regarding creation of a unique, branded experience with a similar tag line, feature set, online

digital distribution of apps, games, and other content, parental controls, accessories, and use of

generic hardware to reduce the risks of entering the tablet business. Mitchell Decl., ¶¶ 7, 94-119.

The TABEO’s inclusion of these features and strategies is no coincidence. TRU had access to the

Fuhu business plans and strategies that led to the NABI’s success. Id., ¶¶ 7, 94-119.

Moreover, the TABEO improperly emulates the look and feel, i.e., the trade dress, of the

NABI. When the TABEO product is compared next to Fuhu’s NABI products, as can be done

easily in online retail venues, the similarities between the shapes of the respective bumpers are

further emphasized. Mitchell Decl., ¶ 108. Below is a true and correct representation of TRU’s

TABEO product bearing the Infringing Trade Dress (on the left) next to the corresponding NABI

product (on the right). Mitchell Decl., ¶ 108.

Both the original NABI tablet and NABI 2 (released in summer 2012) have consistently

and continuously featured distinctive, non-functional trade dress, as illustrated in the image of the

NABI on the right above. Mitchell Decl., ¶¶ 54-66, 108. Specifically, all NABI tablets feature a

removable “bumper” that fits snugly around the outer edge of the tablet. Mitchell Decl., ¶ 57.

The NABI bumpers come in a range of colors, but all feature concave sides that give rise to


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exaggerated, flared corners, giving the NABI tablet an original, unique, soft, and friendly look,

reminiscent of the four wings of a butterfly. Id. Fuhu not only incorporates its iconic Butterfly

Design into the NABI bumpers themselves, but the company consistently has highlighted this

trade dress in its distinctive product packaging and advertising. Mitchell Decl., ¶¶ 58-61.

Specifically, the box for the NABI tablet, which is delivered wearing the NABI bumper, features

the outline of the NABI bumper including the Butterfly Trade Dress, in actual or nearly actual

size on the box top. Mitchell Decl., ¶ 59.

TRU also is using Fuhu’s NABI trademark to market, promote, and sell other products on

TRU’s web site. Mitchell Decl., ¶¶ 111-119. Specifically, when the term “nabi” is entered in the

search box on the TRU web site, instead of returning no results or showing the NABI, TRU

improperly uses NABI to return results for its own TABEO and other competing tablets, Kurio

and Meep, as well as TRU’s accessories for TABEO. Mitchell Decl., ¶ 116.

III. FUHU IS ENTITLED TO IMMEDIATE INJUNCTIVE RELIEF.

The main purpose of injunctive relief it to preserve the status quo. The sole purpose of a

temporary restraining order is to preserve the status quo pending hearing on the moving party’s

application for a preliminary injunction. Granny Goose Foods, Inc. v. Brotherhood of Teamsters

& Auto Truck Drivers (1974) 415 US 423, 439, 94 S.Ct. 1113, 1124. A preliminary injunction, of

course, is not a preliminary adjudication on the merits but rather a device for preserving the status

quo and preventing the irreparable loss of rights before judgment. Sierra On-Line, Inc. v.

Phoenix Software, Inc., 739 F. 2d 1415, 1422 (9th Cir. 1984), see also U.S. Philips Corp. v. KBC

Bank N.V., 590 F3d 1091, 1094 (9th Cir. 2010). The status quo in this case will change

drastically on October 21, 2012, when TRU has announced that the TABEO will be available.

Mitchell Decl., ¶ 7.

A plaintiff seeking a preliminary injunction must show “[1] that he is likely to succeed on

the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3]

that the balance of equities tips in his favor, and [4] that an injunction is in the public interest”; or,

in lieu of factors [1] and [3], there are “serious questions” going to the merits and the “balance of

hardships that tips sharply towards the plaintiff.” American Trucking Associations, Inc. v. City of


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Los Angeles, 559 F.3d 1046, 1053 (9th Cir. 2009) (“likelihood of success” test); Alliance for the

Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011) (“serious questions” test).

In manufacturing and retailing the TABEO, TRU has misappropriated Fuhu’s trade

secrets and infringed Fuhu’s trademarks and trade dress. As shown below, TABEO’s

specifications, features, and marketing derive directly from the proprietary business plan

information Fuhu shared with TRU under the safeguards of the parties’ NDA. TRU disregarded

the NDA and misappropriated Fuhu’s trade secret information for its own commercial benefit.

Moreover, TRU is compounding its misconduct by offering for sale a kids tablet that emulates

distinctive trade features of the NABI. Under principles of equity, TRU cannot be permitted to

market and distribute its TABEO in this manner. Immediate injunctive relief is necessary and

warranted.

A. Fuhu is Likely to Succeed on the Merits of its Claims for Misappropriation of Trade Secrets

In Paragraph 8 of the NDA, Fuhu and TRU expressly agreed that the NDA would be

governed and construed by the substantive law of New Jersey. Mitchell Decl., Ex. M (NDA § 8).

Accordingly, that state’s substantive law applies to Fuhu’s misappropriation of trade secrets

claim. See e.g., VFD Consulting, Inc. v 21st Services, 425 F.Supp.2d 1037 (N.D. Cal 2006)

(contractual choice of law provision governs trade secrets dispute arising out of agreement)

Under New Jersey law, the basic elements of a claim of trade secret misappropriation are:

(1) a trade secret exists; (2) it was communicated in confidence; (3) the secret information was

disclosed in breach of that confidence; (4) the secret information was acquired by the competitor

with knowledge of the breach of confidence; (5) the secret information was used by the

competitor to the detriment of the plaintiff; and (6) the plaintiff took precautions to maintain the

secrecy of the trade secret.” See, e.g., Syncsort Inc. v. Innovative Routines, Intern., Inc., 2011

WL 3651331, *12 (D.N.J. Aug. 18, 2011); accord Osteotech, Inc. v. Biologic, LLC, 2008 WL

686318, *3 (D. N.J. Mar. 7, 2008) citing Rycoline Prod., Inc. v. Walsh, 334 N.J.Super. 62, 71,

756 A.2d 1047, 1052 (App. Div. 2000) (stating elements for New Jersey trade secrets claim).


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Here, TRU purposefully misappropriated Fuhu’s confidential business plan related to the

NABI, which were disclosed in strict confidence, to take a short cut in its own efforts to develop

and promote its competing TABEO product. At the very least, Fuhu has raised “serious

questions” about the merits of these claims and the balance of hardships tips sharply in favor of

an injunction. Alliance for the Wild Rockies, 632 F.3d at 1135.

1. Fuhu has Protectable Trade Secrets that It Confidentially Shared with TRU.

A trade secret under New Jersey law is “‘any formula, pattern, device or compilation of

information which is used in one's business and which gives him an opportunity to obtain an

advantage over competitors who do not know or use it,’ Restatement of Torts § 757, comment b

(1971), or ‘any information that can be used in the operation of a business or other enterprise and

that is sufficiently valuable and secret to afford a potential economic advantage over others.’

Restatement (Third), Unfair Competition § 39 (Tentative Draft No. 4, 1993).” Commc'ns

Workers of America v. McCormac, 417 N.J.Super. 412, 438 9 A.3d 1106, 1123 (N.J.Super.

2008); accord Hammock v. Hoffman–LaRoche, Inc., 142 N.J. 356, 384, 662 A.2d 546 (1995).

Courts applying New Jersey law have held that business plans and similar information

regarding a company’s operations can qualify as trade secrets. See, e.g., Osteotech, 2008 WL

686318, *3 (D. N.J. Mar. 7, 2008) (“Plaintiff also alleges that Defendants used Plaintiff's business

plans of using certain trademarks to file trademark applications that mirrored Plaintiff's intended

use. [Citation.] Indeed, these allegations, as incorporated into Plaintiff's misappropriation claim,

set forth the fifth element of its claim under Rycoline.”); Trump's Castle Assoc. v. Tallone, 275

N.J.Super. 159, 162, 645 A.2d 1207 (App.Div.1994) (stating that trade secrets can consist of

“aspects of business operations such as pricing and marketing techniques”); see also Rohm &

Haas Co. v. Adco Chemical Co., 689 F.2d 424, 433 (3d Cir. 1982) (explaining that even where

each and every element of a company’s business process is known to the industry, the specific

combination of those elements may be a trade secret if it produces a product superior to that of

competitors).


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Here, Fuhu’s business plans regarding the sourcing, marketing, and specific monetization

of its NABI tablet qualify as trade secrets. First, the parties agreed in the NDA that business plans

constituted proprietary and trade secret information:

Each party acknowledges that all of the information provided to the other party (the “Receiving Party”) is confidential, proprietary and a trade secret of the party disclosing such information (the “Disclosing Party”). Such information shall include, without limitation, the following: the existence of the Proposed Transaction, any proposed terms and conditions thereof, and any communications sent to each other in connection therewith, any business secrets or methods, processes, formulas, designs, inventories, techniques, marketing plans, strategies, forecasts, new products, blueprints, specifications, maps, computer software programs, promotional ideas, unpublished financial statements, budget projections, licenses, prices, costs, policies, manuals or instructions, reports, lists of names and/or addresses of customers, prospective customers, suppliers or prospective suppliers, other customer or supplier or prospective customer or supplier information or requirements, personnel information, the terms of any of the Disclosing Party’s contracts, leases or other arrangements or leasing information or any other confidential or proprietary information, records, observations or data of the Disclosing Party (whether or not patented, copyrighted or otherwise protected under applicable law) ....

Mitchell Decl., Ex. M (NDA § 1) (emphasis added).

The NDA reflects the parties’ understanding that they were divulging their most

proprietary and valuable information in order to pursue the Exclusivity Agreement.

Second, Fuhu’s business plans and related strategies for the NABI were developed

through enormous effort and expense, and afforded Fuhu a significant economic advantage over

potential competitors seeking to enter the burgeoning kids tablet niche market. Mitchell Decl.,

¶¶ 67-68. TRU recognized the inherent value of Fuhu’s confidential business strategies

surrounding the NABI and the NABI ecosystem, which is why it was so eager to enter into the

Exclusivity Agreement (which it had no intention to honor). Id., 69-84.

Fuhu’s trade secrets, divulged to TRU pursuant to the NDA, individually and in

combination, comprised specific, concrete strategies that contemplated a unique combination of

numerous components and concepts that together move from the simple business idea of selling a

kids version of a tablet to a entire business strategy for creating a defensible, profitable, scalable,

and extensible ecosystem for such a product. Mitchell Decl., ¶¶ 24-25. As set forth in detail in

the accompanying Declaration of James Mitchell, Fuhu disclosed detailed information to TRU


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that demonstrated the unique way Fuhu intended to monetize the NABI ecosystem. Mitchell

Decl., ¶¶ 69-92, Ex. G (summary of trade secrets).

The information that Fuhu disclosed to TRU under the NDA included, without limitation,

Fuhu’s plan to create an entire ecosystem built around NABI, including, profile-based parental

controls in NABI (kid) mode, a parental mode that allows parents to unlock the device and use

the full functionality of the tablet, an instant-on experience achieved through Fuhu’s innovations

in the device operating system, pre-loading content to provide a good user experience “out of the

box”, detailed strategy for accessories, and online components for distribution of digital content

such as apps, games, music, and videos, and related strategies for securing content for the same.

Mitchell Decl., ¶¶ 69-92, Ex. G. Fuhu explained how these features of its strategy would help

reduce returns, a key competitive advantage in Fuhu’s NABI strategy. Id. Fuhu also explained

how its strategy reduces the risks of entering the tablet business, by starting with a high-quality,

general purpose tablet and transforming it into a unique-branded experience tailored to the target

demographic of kids and parents, thus realizing higher quality, lower pricing, and fewer returns.

Id. Fuhu also explained how profit margins could be improved by leveraging the “toyetic” nature

of the NABI product to drive sales of accessories and content. Mitchell Decl., ¶ 24. Fuhu

emphasized that large volume was an important requirement for achieving low prices and for

securing sufficient manufacturing capacity and keeping prices low. Mitchell Decl., ¶ 79.

2. TRU Misappropriated Fuhu’s Trade Secrets to Develop Its Own Branded Tablet and Copycat Ecosystem

Fuhu can satisfy the remaining elements of its misappropriation of trade secrets claim.

Fuhu communicated its NABI business plan and other trade secrets in confidence to TRU,

pursuant to the terms of the NDA. The NDA, which was entered into for the purpose of

facilitating TRU to become the exclusive distributor/seller of Fuhu’s NABI, specifically states

that:

. . . the Receiving Party shall use such Confidential Information [including Fuhu’s trade secrets] only for such purpose as the Disclosing Party may agree in advance.


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Id., Ex. M (NDA § 2(b)) (emphasis added). Fuhu never agreed to TRU using Fuhu’s business

plan for the NABI to create a competing product, the TABEO.

TRU breached that confidence by impermissibly using that trade secret to develop and

promote a competing TABEO product instead of fulfilling its obligations to exclusively

distribute/sell Fuhu’s NABI product. The features, accessories, and marketing strategies for the

TABEO are taken directly from Fuhu’s business plans for the NABI.

For example, TRU’s advertising and promotional materials for the TABEO are based

directly on the business plan for the NABI Fuhu shared with TRU on a basis of strict

confidentiality. The just-released public information regarding the TABEO product reveals that,

as outlined in the trade secret business plan for the NABI, the TABEO:

• uses a product tag line;

• has a variety of product features/applications – games, educational materials,

entertainment materials, including shipping the tablet with several pre-installed

applications;

• has a dedicated “app” store;

• incorporates parental controls;

• offers extensive accessory lines;

• takes advantage of cost-effective generic hardware, including by making high-

volume orders with hardware manufactures;

• supports the kids tablet with a website;

• gives the kids tablet flared corners.

In combination, this business plan is a sophisticated and complex undertaking that requires

substantial trial time, experience, expertise and know-how. See Declaration of Professor William

Bleuel, filed herewith. As Professor Bleuel, with over forty years of business and academic

experience states in paragraph 40 of his Declaration:

“Indeed, it is the nature of business plans that they are not generally known. They are customized to give a business a competitive advantage.”


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3. Preliminary Injunctive Relief is Also Potentially Available under New Jersey’s Version of the Uniform Trade Secret Act.

On January 9, 2012, New Jersey adopted its own version of the Uniform Trade Secrets

Act, which became effective immediately. As relevant here, New Jersey’s UTSA specifically

recognizes that courts have power to fashion a remedy that is tailored to remove the commercial

advantage gained through misappropriation – even if after misappropriation the trade secret loses

its trade secret status. “Upon application to the court, an injunction shall be terminated when the

trade secret has ceased to exist, but the injunction may be continued for an additional reasonable

period of time in order to eliminate commercial advantage that otherwise would be derived from

the misappropriation.” N.J.S.A. 56:15-3.

Therefore, because Fuhu’s business plan was confidentially disclosed to TRU, even if

there is a finding that the business plan subsequently lost its trade secret status, TRU can and

should still be enjoined from selling TABEO to compensate for the commercial advantage it

unfairly obtained by misusing Fuhu’s trade secrets. In this case, a preliminary injunction of a

minimum three month duration is appropriate to compensate for the research, testing, and trial

and error that TRU was able to avoid.1

Even after NABI went on sale, however, there were numerous trade secrets that would

remain as such. These include, for example, and without limitation, critical and highly

confidential information regarding Fuhu’s relationships with numerous suppliers and partners,

including, but not limited to, hardware component sources, accessory sources and licensees,

manufacturing service providers, developers of games and apps, merchandising rights licensors,

packaging and marketing resources, alternative sources for products and supplies, and various

aspects of the unique software imbedded in the product. Mitchell Decl., ¶ 67, Bleuel Decl., ¶ 43.

1 New Jersey adopted the U.T.S.A. prospectively in January 2012.


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B. Fuhu is Likely to Succeed on the Merits of its Trademark and Trade Dress Infringement Claims

1. TRU Infringes Fuhu’s NABI word mark

Fuhu’s trademark infringement claims require Fuhu to establish that (1) it has a valid,

protectable trademark in its NABI trademark, and (2) TRU used, without authorization, a mark

similar to the NABI trademark that is likely to cause consumer confusion, deception, or mistake.

Grocery Outlet Inc. v. Albertson’s Inc., 497 F.3d 949, 951 (9th Cir. 2007).

a. Fuhu has a valid, protectable trademark in its NABI word mark

Consistent with Fuhu’s published trademark application for the NABI word mark

(application no. 85/426283), Fuhu’s use in commerce of the NABI mark dates back at least to

September 1, 2011. Mitchell Decl., ¶ 56, Ex. J. Since then, Fuhu has continuously used the mark

in association with its child-oriented tablet and with other items in the tablet ecosystem, including

accessories such as bumpers. Mitchell Decl., ¶ 56, Ex. J; see also ¶¶ 57-65. Fuhu has priority

over any use by TRU to refer to tablets or tablet accessories. Given the distinctive nature of

“nabi” as applied to tablet computers and accessories for tablet computers, it is highly likely that

Fuhu has a valid and protectable trademark in the NABI word mark.

b. TRU Uses the NABI Mark Without Authorization, Which is Likely to Cause Confusion in the Market.

TRU is using the NABI word mark, unmodified, and without Fuhu authorization, in a way

that demonstrates that TRU’s intent is to trade off NABI’s good name and reputation. TRU does

so by returning search results for its own TABEO products and accessories when users of

www.toysrus.com search for the word “nabi”. TRU reiterates back to the user that it is returning

results for the search term “nabi,” and then presents no actual NABI products, but only those

from TRU and third parties. Mitchell Decl., ¶ 116.

Likelihood of confusion is legally certain here. If the goods produced, or the services

offered, by the infringer compete for sales with those of the trademark owner, infringement will


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be found if the marks are sufficiently similar such that confusion can be expected. AMF

Incorporated v. Sleekcraft Boats, 599 F.2d 341, 348 (9th Cir. 1979).

The factors for likelihood of confusion include: (1) the strength of the mark, (2) the

similarity of the marks, (3) the relatedness of the goods and services, (4) evidence of actual

confusion, (5) intent of the infringer, (6) the marketing channels used to sell the respective goods

and services, (7) the sophistication of the customers, and (8) the likelihood of expansion of the

product lines. AMF, 599 F.2d at 348-49; Eclipse Associates Limited v. Data General

Corporation, 894 F.2d 1114, 1117 (9th Cir. 1990). Each of these factors is not required to be

examined by the Court. Rather, the Court should consider those factors that are relevant to this

case and relevant at this stage of the proceedings. Eclipse, 894 F.2d at 1117-19.

In this case, TRU is offering its TABEO tablet and associated accessories. These are

direct competitors for Fuhu’s NABI tablet and NABI accessories. Therefore, the Court only need

compare Fuhu’s NABI word mark with the mark used by TRU.

Contrasting how TRU deals with searches for Fuhu’s NABI mark with how it deals with

other searches provides compelling evidence that TRU is deliberately using the NABI word mark

to confuse customers and increase its own sales. Mitchell Decl., ¶ 114. This strongly suggests

that TRU has intentionally associated Fuhu’s NABI word mark with TRU’s own line of directly

competitive products. TRU’s intentional use of a mark identical to Fuhu’s word mark is

probative of a likelihood of confusion. AMF, 599 F.2d at 354 (“When the alleged infringer

knowingly adopts a mark similar to another’s, reviewing courts presume that the defendant can

accomplish his purpose: that is, that the public will be deceived.”); Playboy Enterprises, Inc. v.

Netscape Communications Corp., 354 F.3d 1020, 1029, 69 U.S.P.Q.2d 1417 (9th Cir. 2004) (“A

defendant’s intent to confuse constitutes probative evidence of likely confusion.”).

2. TRU Infringes Fuhu’s Trade Dress

To succeed in a trade dress infringement claim, Fuhu must show “(1) that it owns a

protectable trade dress that is not functional, (2) that the trade dress is either inherently distinctive

or has acquired distinctiveness through secondary meaning, and (3) that [TRU’s] trade dress


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creates a likelihood of confusion as to the source, affiliation, connection to or sponsorship of the

product.” Disc Golf Ass’n, Inc. v. Champion Discs, Inc., 158 F.3d 1002, 1005 (9th Cir. 1998).

a. Fuhu’s Iconic Butterfly Trade Dress

Fuhu is the owner of valid trademark rights in its iconic Butterfly design. First, beginning

at least as early as August, 2011, and continuing to the present time, Fuhu owns, has used and

continues to use one or more of the following trademarks in connection with its NABI products

and ecosystem, marketed throughout California and the United States. Mitchell Decl., ¶ 56, Ex. J.

Mark Federal Application No. Image

NABI 85/426283 ---

NABI. YOUR TABLET.

YOUR WORLD.

85/728299 (ITU filed 09/13/2012) ---

NABI & Butterfly Design 85/564634

Design Only

(Compressed Butterfly)

Common Law

Design Only (Extended

Butterfly)

Common Law

Fuhu has thoroughly integrated the iconic Butterfly design into and on its products,

packaging, advertising, and media; has seamlessly connected its Butterfly design trademarks with

its Butterfly trade dress; and has garnered widespread publicity. Mitchell Decl., ¶¶ 57-65. The

Butterfly trade dress, which is designed to evoke a butterfly, is non-functional. Id., ¶¶ 60, 66.

By virtue of Fuhu’s consistent and exclusive use of the non-functional iconic Butterfly

shape-not only in connection with the NABI bumpers and as worn by the NABI tablets, but also

as echoed throughout the NABI products packaging, brochures, and animated television

advertising segments – the butterfly design trademarks and the Butterfly trade dress have acquired


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secondary meaning: they have become associated in the minds of the consuming public with

Fuhu and its high-quality tablets and related products, and they serve to identify these products as

emanating solely from Fuhu. Mitchell Decl., ¶¶ 62-66.

Thus, Fuhu has a valid, protectable, non-functional iconic Butterfly trade dress.

b. TRU’s Trade Dress is Confusingly Similar to Fuhu’s Iconic Butterfly

Again, because TRU’s offered goods compete directly with Fuhu’s, infringement will be

found if the marks are sufficiently similar such that confusion can be expected. AMF, 599 F.2d at

348.

The TABEO and NABI are sufficiently similar. TRU incorporated Fuhu’s iconic

Butterfly shape and trade dress into the trade dress of its own bumper in order to promote its

competing TABEO tablet. Specifically, TRU’s TABEO tablet wears a bumper displaying flared

corners (the “Infringing Trade Dress”) that is identical or nearly identical to Fuhu’s Butterfly

trademarks and trade dress. Mitchell Decl., ¶ 108. Below is a true and correct representation of

TRU’s TABEO product bearing the Infringing Trade Dress (on the left) next to the corresponding

NABI product (on the right). Mitchell Decl., ¶ 108.

The full list of AMF factors include: (1) the strength of the mark, (2) the similarity of the

marks, (3) the relatedness of the goods and services, (4) evidence of actual confusion, (5) intent of

the infringer, (6) the marketing channels used to sell the respective goods and services, (7) the


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sophistication of the customers, and (8) the likelihood of expansion of the product lines. AMF,

599 F.2d at 348-49; Eclipse, 894 F.2d at 1117.

(1) Fuhu’s Trade Dress is Fanciful and Strong

Because the Butterfly design is fanciful or arbitrary, it is inherently distinctive. This

distinction has been strengthened by its commercial strength, as reflected in the sales and

publicity described in the Mitchell declaration. Mitchell Decl., ¶¶ 62-66.

(2) The Marks Are Virtually Identical

As apparent from the side-by-side images, the TABEO’s trade dress is virtually identical

to the iconic Butterfly design. Indeed, TRU even chose a shade of green for its default TABEO

bumper that was identical to the shade of the best selling NABI design during the period TRU

sold the NABI. Mitchell Decl., ¶ 108.

(3) TRU Intended To Trade On Fuhu’s Goodwill

The previously described use of Fuhu’s NABI word mark buttresses the conclusion that

TRU intended to trade on Fuhu’s goodwill when it selected the trade dress for the TABEO. From

TRU’s TABEO marketing material, it is apparent that TRU was attempting to make a look-alike

product to leverage the positive reviews and success of Fuhu’s NABI. Mitchell Decl., ¶¶ 94-108.

(4) The Goods Are Related

As previously mentioned, TRU’s TABEO products compete directly with Fuhu’s NABI

products. Where the marks are virtually identical and they are used with identical products or

services, a likelihood of confusion would follow as a matter of course. Brookfield Commc’ns,

Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 106 (9th Cir. 1999).

(5) Actual Confusion

Although, Fuhu is unaware of any instances of actual confusion to date, it is likely that

confusion has resulted and will continue to result from TRU’s use of the Butterfly trade dress. In

any event, Fuhu need only show there is a likelihood of confusion, which Fuhu has done.

Eclipse, 894 F.2d at 1118. An absence of actual confusion is not dispositive and generally

unnoteworthy, because evidence of actual confusion is difficult to obtain. See Brookfield, 174

F.3d at 1050.


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(6) The Customers Are Moderately Sophisticated

TRU’s customers are harried parents and their children, who will focus on look and feel of

the products, especially children who cannot yet read. NABI tablets were the first full-featured

Android tablets made especially for children. Therefore, it is reasonable to surmise that parents

and children in this market would note the overwhelming similar in visual appearance between

the TABEO and NABI products.

(7) Distribution Channels

Convergent marketing channels increase the likelihood of confusion. AMF, 599 F.2d at

353. TRU distributes its TABEO online and through its retail stores. The NABI is distributed

online and through retail stores. In fact, during the 2011 holiday season, the NABI was

exclusively distributed through TRU’s website and retail stores, the exact same channels as the

TABEO. The distribution channels are similar.

(8) The likelihood of expansion of the product lines

Both TABEO and NABI already have directly competitive and offerings in the form of

tablets and accessories. To the extent the product lines expand, they are likely to remain directly

competitive.

C. Fuhu Will Suffer Irreparable Injury from TRU’s Sales of the TABEO

TRU’s misconduct and its imminent planned sales of the TABEO product in the

upcoming 2012 holiday shopping season is irreparably injuring Fuhu’s first-mover status in the

market for kids tablets. Bleuel Decl., ¶¶ 11a, 27-28. First, under the parties’ NDA, TRU has

already explicitly acknowledged that misappropriation of Fuhu’s trade secrets, such as the NABI

business plan, and other misuses of Fuhu’s confidential or proprietary information would cause

Fuhu immediate and irreparable harm.

If the Receiving Party breaches this Agreement or discloses any Confidential Information other than as permitted by this Agreement, the Disclosing Party shall suffer immediate and irreparable harm for which money damages shall not constitute a full and adequate remedy. The parties acknowledge that equitable relief, including injunction and specific performance, without the necessity for posting any bond, in the event of any actual or threatened breach of the provisions of this Agreement,


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in addition to all other remedies available at law or in equity, is thereby warranted.

Mitchell Decl., Ex. M (NDA § 8) (emphasis added). See North Atlantic Instruments, Inc. v.

Haber, 188 F.3d 38 (2d Cir. 1999) (finding irreparable harm on the basis of both a contractual

provision and the impossibility of measuring the harm from a loss of trade secrets in monetary

terms).

Additionally, if TRU is allowed in the upcoming 2012 holiday shopping season to use the

fruits of its misconduct to further deprive Fuhu of its first-mover status in the niche market for

kids tablets, then Fuhu will not be able to recover that status after trial and money damages would

be both inadequate and difficult to calculate. Bleuel Decl., ¶¶ 11a, 27-28. See Grand River

Enterprise Six Nations, Ltd. v. Pryor (2nd Cir. 2007) 481 F.3d 60, 67 (loss of current or future

market share may constitute irreparable harm); see also Computer Associates International, Inc.

v. Bryan, 784 F. Supp. 982, 986 (E.D.N.Y. 1992) (“[T]he potential loss of an industry leader's

present market and loss of the advantage of being the pioneer in the field and the market leader,

may constitute irreparable harm.”). Natural Organics, Inc. v. Proteins Plus, Inc., 724 F. Supp.

50, 53 (E.D.N.Y. 1989); “if injunctive relief is denied [plaintiff] will lose its present market for

Spiru–Tein [protein supplement]. Competitors are beginning to market protein supplements and

[plaintiff] will lose the advantage in being an early starter (or indeed, the first) in the market;”

granting preliminary injunctive relief).

A first mover in a market reaps many advantages. Among other things, the first move can

establish a brand name so that the brand may become synonymous with the market. Similarly,

the first mover can set the standard of the attributes the product class should possess. Bleuel

Decl. ¶ 13. Many, if not all, of those advantages would be irreparably and incalculably

undermined if TRU were permitted this holiday season to establish a beachhead in the market

kids tablets that is built upon the TRU’s copying of the NABI. Bleuel Decl., ¶¶ 27-28.

Intimately related to the harms to Fuhu’s first-mover status are the harms to goodwill. See

Rent-A–Center, Inc. v. Canyon Television & Appliance, 944 F.2d 597, 603 (9th Cir. 1991)

(damage to the goodwill of a business is often difficult to calculate, thus supporting a finding of


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irreparable injury). Fuhu CEO Jim Mitchell and Professor William Bleuel also address the

irreparable harm related to goodwill. See, e.g., Mitchell Decl., ¶¶ 24-25, Bleuel Decl., ¶ 27

(“[Fuhu’s overall good will in the market is considerably diminished relative to where it

otherwise would have been”). See also Acolyte Technologies Corp. v. Jeja Intern. Corp. Ltd.,

2011 WL 4025111 (S.D. Cal. Sept. 12, 2011) vacated on other grounds by Acolyte Technologies

Corp. v. Jeja Intern. Corp. Ltd., 2011 WL 4837490 (S.D. Cal. Oct. 12, 2011) (granting TRO

based on CEO’s declaration of irreparable harm arising from loss of goodwill and market share

due to defendant’s threatened sale of competing infringing product); Lillge v. Verity, 2007 WL

2900568, *7 (N.D. Cal. Oct. 2, 2007) (“the risk of losing established customers to defendants'

new business due to defendants' improper use of plaintiff's proprietary information would

obviously create lasting, irreparable harm.”).

D. The Balance of Hardships Weighs Decidedly in Fuhu’s Favor.

In this case, Fuhu will suffer the greater injury if injunctive relief is not granted. Fuhu is

the party whose trade secrets and other confidential information was stolen by TRU, and whose

other intellectual property rights are being infringed by TRU. TRU engaged in such misconduct

in order to develop and promote its competing TABEO product, all while misleading Fuhu into

thinking that it had developed an exclusive relationship with the largest toy retailer in the United

States to promote Fuhu’s NABI product. See Mitchell Decl., ¶¶ 69-90. Courts have consistently

reiterated that when weighing the relative hardships in granting preliminary injunctive relief,

wrongdoers should not be heard to complain. See, e.g., Processed Plastic Co. v.

Communications, Inc., 675 F.2d 852, 859 (7th Cir. 1982) (after a company intentionally copied a

toy car, that company did not suffer hardship because, inter alia, it “cannot now complain that

having to mend its ways would be too expensive.”); see also Acolyte Technologies Corp. v. Jeja

Intern. Corp. Ltd., 2011 WL 4025111 (S.D. Cal. Sept. 12, 2011) vacated on other grounds by

Acolyte Technologies Corp. v. Jeja Intern. Corp. Ltd., 2011 WL 4837490 (S.D. Cal. Oct. 12,

2011) (finding hardships in plaintiff’s favor, explaining that “[d]efendants have no right to build a

business by infringing Plaintiff's patents”). Therefore, TRU also should not be heard to complain


MANATT, PHELPS &

PHILLIPS, LLP

ATTORNEYS AT LAW

PALO ALTO

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about its inability to sell and promote the TABEO – especially because of its relative size and

strength as compared to Fuhu.

Moreover, the impact on Fuhu if an injunction does not issue will be significant. Fuhu is

a small start-up company with one product. By contrast, TRU is a national company, with the

TABEO being just one of thousands of its products.

According to TRU’s investor relations web page, TRU sells merchandise in 876 Toys “R”

Us and Babies “R” Us stores in the United States and Puerto Rico, and in more than 635

international stores and over 145 licensed stores in 35 countries and jurisdictions, as well as in the

FAO Schwarz flagship store on Fifth Avenue in New York City, as well as a prominent retail web

site. Mitchell Decl., ¶ 14. In contrast, Fuhu has no stores, and the NABI device and ecosystem is

currently Fuhu’s primary line of business and source of revenue. Mitchell Decl., ¶ 23. See

International Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 827 (9th Cir. 1993) (“Given

that Metrosound is much smaller and younger than Jensen and given that Jensen failed to

vigorously protect its trademark claim, the court found the balance did not tip in Jensen's favor.”).

E. Public Interest Favors Protection of Fuhu’s Trade Secrets and Other Intellectual Property Rights

Public interest weighs in favor of granting Fuhu preliminary injunctive relief. The public

has a significant interest in protecting trade secrets and other intellectual property rights, as well

as in promoting fair competition. None of those interests will be furthered if TRU is allowed to

continue its unlawful scheme by completing consumer sales and taking pre-orders for the TABEO

product, and otherwise infringing on the intellectual property rights of Fuhu related to the NABI.

See Acolyte Technologies Corp. v. Jeja Intern. Corp. Ltd., 2011 WL 4025111 (S.D. Cal. Sept. 12,

2011) vacated on other grounds by Acolyte Technologies Corp. v. Jeja Intern. Corp. Ltd., 2011

WL 4837490 (S.D. Cal. Oct. 12, 2011) (“Public policy favors enforcing Plaintiff's rights secured

by its patents, and the public has an interest in fair competition.”).

IV. THE PARTIES HAVE AGREED THAT NO BOND SHOULD BE REQUIRED

No bond should be required because the parties agreed that if there was a violation of the

NDA, no bond would be required in order to obtain preliminary injunctive relief.


MANATT, PHELPS &

PHILLIPS, LLP

ATTORNEYS AT LAW

PALO ALTO

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If the Receiving Party breaches this Agreement or discloses any Confidential Information other than as permitted by this Agreement, the Disclosing Party shall suffer immediate and irreparable harm for which money damages shall not constitute a full and adequate remedy. The parties acknowledge that equitable relief, including injunction and specific performance, without the necessity for posting any bond, in the event of any actual or threatened breach of the provisions of this Agreement, in addition to all other remedies available at law or in equity, is thereby warranted.

Mitchell Decl., Ex. M (NDA § 8) (emphasis added).

V. CONCLUSION

October 21, 2012 will bring a drastic change to the status quo. TRU’s wrongdoing will

bear fruit that day as a result of years of Fuhu’s hard work and innovation. Fuhu, therefore,

respectfully requests from this Court the injunctive relief set out in Fuhu’s accompanying

proposed order. Such relief will maintain the status quo and prevent TRU from wrongfully

benefiting from Fuhu’s innovative intellectual property.

Dated: September 25, 2012

MANATT, PHELPS & PHILLIPS, LLP

By: _ /s/ Ronald S. Katz Ronald S. Katz Attorneys for Plaintiff FUHU, INC.

304822346.2


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