Ty Must Forfeit $700,000 Award

The company that makes Beanie Baby toys must forfeit more than $700,000 after a federal judge found that owner H. Ty Warner tampered with a witness in a trademark case.

U.S. District Judge Joan Lefkow ordered Westmont, Ill.-based Ty Inc. to pay back $716,046 it had won in its trademark-infringement lawsuit against Softbelly’s Inc., another toy maker.

Ty Inc.’s Beanie Babies, plush-covered, pellet-stuffed animals, sparked a collector craze in the 1990s, making creator Warner a billionaire.

In 2000, Ty Inc. sued Van Nuys-based Softbelly’s over a plush toy it marketed as a computer-monitor cleaner, called Screenie Beanies. Ty Inc. alleged trademark infringement for use of the word “Beanie.”

According to court documents, Softbelly’s argued that the term Beanie had become generic and was not a brand name. The company planned to call Harold Nizamian, a former executive at plush-toy company Dakin Inc., as an expert witness.

Nizamian had testified in another lawsuit that the term “beanie” was synonymous with “bean bag” and represented a toy category rather than a branded toy name.

Three days before the trial between Ty Inc. and Softbelly’s was to begin in March 2002, Warner called Nizamian to try to dissuade him from testifying, according to Lefkow’s opinion, issued Feb. 9.

Warner told Nizamian -- his former boss at Dakin when Warner worked there as a salesman -- that his testimony could be “very damaging” because Ty Inc. “could lose a lot of money,” according to Lefkow’s opinion.

Nizamian did not testify in the trial and Softbelly’s lost the case.

Attorneys for Softbelly’s requested the judgment be vacated based on witness tampering. A federal judge denied that motion, but an appeals court sent the case back to district court.

Lefkow in her opinion said she did not believe Warner’s version of his 17-minute phone conversation with Nizamian.

“We respectfully disagree” with Lefkow’s opinion, said James White, a Chicago attorney who represented Warner in the case.

“We didn’t get the right to a fair trial the first time around because we didn’t get to call our star witness,” said Andy Hale, a Chicago attorney who represented Softbelly’s. “I think [Lefkow’s ruling] was fair justice.”