## Facts

- Fun-Damental Too, Ltd., a novelty-toy seller, developed and sold the “Toilet Bank,” a toilet-shaped coin bank that made a flushing sound when operated.
- The Toilet Bank was sold in a distinctive open-style, triangular blue package with yellow “Toilet Bank” lettering, allowing consumers to view and operate the product at the point of sale.
- Kay-Bee Toy & Hobby Shops, Inc. initially considered but declined to buy the Toilet Bank, citing its wholesale price.
- Fun-Damental later learned Kay-Bee was selling Gemmy Industries Corp.’s competing product, the “Currency Can,” a similar toilet-shaped sound-making coin bank sold at a lower price.
- The Currency Can used open-style packaging with identical dimensions and closely similar visual elements (dark blue background, yellow features and lettering), presenting a similar overall appearance on shelf.
- Fun-Damental alleged Gemmy and Kay-Bee copied its trade dress, causing consumer confusion and harming Fun-Damental’s business and goodwill.
- In the district court, Fun-Damental’s sales manager testified about retailer/customer complaints suggesting confusion between the products’ source or pricing.

## Issues

1. Whether the district court properly found a likelihood of success on Fun-Damental’s Lanham Act § 43(a) trade dress claim, including distinctiveness, nonfunctionality, and likelihood of confusion.
2. Whether, for an open-style package that exposes the product, trade dress distinctiveness may be evaluated based on the combined appearance of packaging and the visible product at the point of sale.
3. Whether customer/retailer statements offered to show actual confusion were inadmissible hearsay.

## Decision

- The Second Circuit affirmed the preliminary injunction to the extent it rested on a proper finding of likely success on the trade dress claim and likely consumer confusion.
- The court treated the relevant trade dress as the overall commercial impression created by the open-style packaging together with the visible product, reflecting how consumers encounter the item in stores.
- The court concluded Fun-Damental made a sufficient preliminary showing that its packaging trade dress was distinctive and that the asserted packaging features were not shown to be functional.
- The court found the similarity of the parties’ presentations, the proximity of the products in the same impulse-purchase market, evidence of copying, and evidence of actual confusion supported likely confusion.
- The court held the customer/retailer confusion statements were admissible because they were offered to show confusion (and that the statements were made), not to prove the literal truth of the pricing assertions, and were also admissible as then-existing state-of-mind evidence under Federal Rule of Evidence 803(3).

## Legal Principles

- To obtain a preliminary injunction in a Lanham Act trade dress case, a plaintiff must show irreparable harm and either a likelihood of success on the merits or sufficiently serious questions plus a hardship balance favoring relief.
- Trade dress under § 43(a) requires a protectable dress (distinctive and nonfunctional) and a likelihood of consumer confusion.
- For open-style packaging, the relevant trade dress may be the combined point-of-sale appearance of the packaging and the visible product, because consumers perceive them together.
- Similarity of trade dress, product proximity, and market conditions such as impulse purchasing can increase the likelihood of confusion.
- Evidence of intentional copying is probative of an intent to benefit from another’s goodwill and supports an inference of likely confusion.
- Statements reflecting consumer confusion are not hearsay when offered to show confusion or effect on the listener rather than the truth of the matter asserted, and may be admissible under Rule 803(3) to show declarants’ then-existing mental state.

## Conclusion

The Second Circuit upheld preliminary injunctive relief against a closely similar competing novelty product presentation, reasoning that the overall point-of-sale impression of an open-style package and visible product can constitute protectable trade dress and that evidence of copying and consumer confusion supported likely confusion; it also approved admitting customer confusion statements as nonhearsay and as state-of-mind evidence.


Fun-Damental Too, Ltd. v. Gemmy Indus. Corp., 111 F.3d 993 (2d Cir. 1997)