As the song goes, “sometimes the nearer your destination, the more you’re slip-slidin’ away.” That’s how toy manufacturer Wham-O, Inc. (“Wham-O”) must be feeling these days as it continues to try to collect on a judgment against a rival toy manufacturer that was found to infringe Wham-O’s popular backyard water slides.
In October 2007, Wham-O hydroplaned to a $6 million verdict in SLB Toys USA, Inc. (“SLB”) v. Wham-O. The jury there found that SLB engaged in willful trademark infringement, willful trademark dilution and willful false advertising in connection with SLB’s unauthorized use of Wham-O’s registered trademark of the color yellow for water slides (the “Yellow Mark”). (Trademarking a color -- now that is slick!) Shortly after the jury verdict, the court entered judgment along with a permanent injunction barring SLB, and those acting in concert with it, from using the Yellow Mark on the sliding surface of water slides or related packaging or advertising. The court also soaked SLB with Wham-O’s $2 million legal bill, deeming the case “exceptional” because SLB’s conduct was “willful and deliberate.”
Unfortunately for Wham-O, SLB did not open the payment spigot, choosing instead to continue to litigate the case on various grounds. Meanwhile, another manufacturer of rival water slides emerged – Manley Toys, Ltd. (“Manley Toys”) of Hong Kong – which, at least to Wham-O, appeared markedly similar to its old rival.
In February 2008, Wham-O brought suit against Manley Toys, alleging that it was part of an elaborate scheme to continue SLB in a new corporate form, to evade the payment of the judgment and legal fees from Wham-O’s victory against SLB, and to continue the unauthorized use of the Yellow Mark. Wham-O’s complaint suggests that Brian Dubinsky (“Dubinsky”), the former president of SLB, along with other former SLB employees, formed Manley Toys to replace SLB’s operations and to continue the same infringing conduct. In its case against Manley Toys, Wham-O sought payment of the judgment against SLB through legal theories of lien, alter ego and successor liability, and also brought new claims of Lanham Act violations against Manley Toys for its continued use of Wham-O’s Yellow Mark. Manley Toys responded with a wave of counterclaims against Wham-O for trademark infringement, as well as defamation for Wham-O’s statements to potential customers concerning infringement by Manley Toys.
To date, Wham-O’s efforts to get Manley Toys to pay SLB’s judgment and the related attorney’s fees have been unsuccessful. In July 2008, the court in the Manley Toys case dismissed Wham-O’s claims due to lack of subject matter or supplemental jurisdiction. The court held it did not have subject matter jurisdiction because there was not complete diversity among the parties and because the claim for enforcement of the judgment was not a federal question. Further, the court declined to exercise supplemental jurisdiction because the claim that Manley Toys was liable for the judgment in the SLB case was not related to Wham-O’s Lanham Act claims against Manley Toys. Finally, the court held that judicial economy would not be served by hearing the judgment claim, because Wham-O was already conducting post-judgment discovery in the SLB case.
In June 2009, as Wham-O approached the 2-year mark since its jury verdict in the SLB case, Manley Toys (and Dubinsky) sought to soak Wham-O with a motion to disqualify Wham-O’s counsel for allegedly using documents listed on the privilege log to craft discovery requests. The court, recognizing the harsh remedy of disqualification and its adverse affect, denied the motion and held that Wham-O’s counsel did not commit an ethical breach.
In his latest attempt to toy with Wham-O, Dubinsky sought sanctions for Wham-O’s refusal to provide an estimation of its damages for the Lanham Act claims against Manley Toys, which Dubinsky argues is unnecessarily holding up the case. In a joint stipulation filed on December 2, 2009, Dubinsky has sought to compel Wham-O to provide damages information and denies that Wham-O’s estimation of damages should be dependent upon Dubinsky’s (or any other defendant’s) document production. Wham-O contends that Dubinsky (and the other defendants) prefer to burden the court with a parade of discovery motions, instead of engaging in mutual phased discovery and that it cannot assess the full amount of damages until Dubinsky and the other defendants produce sales figures to reveal the extent of the alleged infringement.
On January 12, 2010, the court deferred ruling on Dubinsky’s December 2, 2009 motion, instead requiring the parties to jointly file a statement of agreement as to a comprehensive discovery plan along with separate proposals for the resolution of any areas of disagreement. As of this writing. trial is scheduled to begin in June. Meanwhile, Wham-O’s efforts to collect the judgment from the SLB case continue. However, rumors that Wham-O will be bringing out a new backyard game called “Wham-A-Lawsuit” (in colors of black and blue) appear to be greatly exaggerated.