Toys R Us Sued By Nabi Tablet For Trade Secret Theft

(Reuters) - The maker of the Nabi tablet computer for children sued Toys R Us Inc on Monday, saying the world's largest toy retailer stole trade secrets in preparing to introduce the rival Tabeo tablet this month.

The lawsuit filed in federal court in San Diego, California, seeks to stop Toys R Us from selling Tabeo ahead of the all-important holiday season. Nabi creator Fuhu Inc contends that Toys R Us agreed to become the exclusive seller of the Nabi last year to learn product secrets before bringing Tabeo to market.

The introduction of Tabeo heated up the market for tablets designed specifically for children, which also includes players like LeapFrog Enterprises Inc's LeapPad.

Fuhu accused Toys R Us of fraud, breach of contract, unfair competition and trade secret misappropriation. Fuhu also said that Toys R Us copied Nabi's butterfly-shaped bumper,which is used to help protect the tablet, for Tabeo.

According to the lawsuit, Toys R Us agreed in October 2011 to become the exclusive Nabi distributor, but in the end did "virtually no promotion" and only ordered for the holiday season a little more than what Toys R Us said could be sold in one day.

The companies ended their exclusive agreement in January.

Fuhu said in the lawsuit that the reason for Toys R Us's behavior did not become clear until it introduced Tabeo this month.

"Toys R Us used Fuhu's trade secrets and confidential information to start selling Tabeo, which systematically attempts to replicate the Nabi experience, far earlier than Toys r Us could have done otherwise, if at all," the lawsuit said.

Aside from the order to stop selling Tabeo, Fuhu is asking that any Tabeos be turned over to Fuhu. It is also seeking unspecified monetary damages.

A spokeswoman for Toys R Us said the company could not comment on the lawsuit as it has yet to have an opportunity to review it.

The case is Fuhu Inc v Toys "R" Us Inc, Case. No. 12-CV-2308, U.S. District Court, Southern District of California.

(Reporting by Brad Dorfman; Editing by Leslie Gevirtz)