Squishmallows maker can sue Build-A-Bear over alleged plush toy knockoffs

NEW YORK, July 16 (Reuters) - A U.S. judge rejected Build-A-Bear Workshop's (BBW.N) effort to dismiss a lawsuit claiming that its Skoosherz plush toys were unauthorized knockoffs of Squishmallows, the popular plush toys made by a unit of Warren Buffett's Berkshire Hathaway (BRKa.N).

In a decision on Monday, U.S. District Judge Josephine Staton in Los Angeles said it would be "particularly inapt" to dismiss Kelly Toys' lawsuit, which seeks unspecified damages, in light of the apparent similarities between the products.

The judge cited online accounts associated with Build-A-Bear where users posted comments such as "so now ur making squishmallows?" and "Cmon plagiarism" when discussing Skoosherz.

"This case is not an instance where the works are so dissimilar by plain sight that any person observing them could confidently conclude that they do not share substantial similarities," Staton wrote.

Build-A-Bear and lawyers for the St. Louis-based company did not immediately respond to requests for comment on Tuesday.

Moez Kaba, a lawyer for Los Angeles-based Kelly Toys and its parent Jazwares, said: "We look forward to continuing to vigorously pursue our claims against those who infringe our client's intellectual property rights."

Created in 2016, Squishmallows exploded in popularity during the COVID-19 pandemic, becoming a TikTok sensation and winning fans like Lady Gaga and Kim Kardashian.

They have been part of Buffett's Omaha, Nebraska-based conglomerate since Berkshire bought Jazwares' parent, the insurance holding company Alleghany, in October 2022.

Kelly Toys accused Build-A-Bear of intentionally undermining its goodwill and causing confusion by copying Squishmallows' look and feel, including "simplified Asian style Kawaii faces" and "velvety velour-like" fabric.

Build-A-Bear introduced Skoosherz in January, in anticipation of Valentine's Day, saying they were "uniquely styled for optimal hugging benefits."

It is separately suing Kelly Toys in St. Louis federal court, seeking a declaration it did nothing wrong.

Build-A-Bear claimed it based Skoosherz on its existing plush animals, and its advertising left no doubt who made them.

Both lawsuits were filed on Feb. 12.

The cases are Kelly Toys Holdings LLC et al v Build-A-Bear Workshop Inc, U.S. District Court, Central District of California, No. 24-01169; and Build-A-Bear Workshop Inc v Kelly Toys Holdings LLC et al, U.S. District Court, Eastern District of Missouri, No. 24-00211.