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Leaving Reality Behind: etoy vs eToys.com & Other Battles To Control Cyberspace, by Adam Wishart and Regula Bochsler; HarperCollins; 344 pages In September 1999 online toy retailer eToys Inc. sued the Swiss art collective etoy Corporation over the Europeans’ use of the etoy.com domain name. The toy vendor alleged trademark infringement, unfair competition, and interference with prospective economic advantage. It sought an injunction to shut down etoy’s cyberpunk Web site. But after two years of litigation, both entities disappeared in the dot-com mirage. Leaving Reality Behind � a nicely silly fable for our time � chronicles this Internet gold rush. It tells the story of the collision of commerce, art, and law in the founding era of a new technology. What could be a more exemplary American train wreck? EToys was the brainchild of Toby Lenk, a Harvard MBA. Lenk and his cofounders contributed about $150,000 toward the start-up in June 1997. Venture capitalists were initially skeptical, but after the company’s first Christmas season netted 30,000 unique daily visitors to its Web site and $500,000 in sales, the cash poured in. An Electronic Beachhead In May 1999 eToys Inc. went public with a market capitalization of $2 billion. Its stock nearly quadrupled on the first day of trading, to more than $75 a share. That gave it a valuation of $8.6 billion, even though the company had a mere $30 million in revenue and had already lost more than $49 million since its founding. Meanwhile, etoy � a shadowy group of hackers, pranksters, and performance artists hanging out in Zurich � had gained international recognition for its clever parodies of the dot-com frenzy. The organization was the brainchild of “Agent ZAI,” a Swiss teenager. He recruited six fellow Gen Xers to form the “corporation” in 1994 and, a year later, to establish an electronic beachhead with the etoy URL. Another Evil Cybersquatter But eToys’s marketing strategy was predicated on being “child-sensitive” and G-rated. And management was understandably worried that parents or kids who inadvertently visited etoy.com might confuse the artists’ intentionally offensive site with eToys’s. The retailer’s trademark infringement lawsuit was predicated on characterizing etoy as just another evil cybersquatter diluting the huge value of the eToys brand. But the consequences of the suit were all too predictable. Agent ZAI and his minions launched “toywar,” a Web-based, viral counterattack on eToys. Their stance as artistic Davids confronting a greedy commercial Goliath generated lots of attention and sympathy from the mainstream press. In any case, we all know the end of the story. As of this writing, eToys is long gone. It disappeared after the bubble burst in the spring of 2000. The company lost $189 million on revenues of $151 million in 1999; the coup de gr�ce was a poor Christmas quarter in 2000. The stock dropped from $60 to 28 cents a share, the company filed for bankruptcy, and it was liquidated for a few million dollars in 2001. Lenk rode his $600 million in paper wealth all the way down to zero and netted only the salary he was paid as CEO. Popping The Bubble The once freewheeling slackers of etoy fell out � of course � in a struggle over fame and money. Agent ZAI hogged the spotlight as the toy-war impresario and imperiously refused to settle the eToys lawsuit in the hope of striking it rich if he held out for more. His cohorts stopped speaking to each other. At the end of Vanity Fair, Thackeray’s great novel of Victorian lost illusions, when Jos Sedley dies, “it was found that all his property had been muddled away in speculation, and was represented by valueless shares in different bubble companies.” Becky Sharp gets his life insurance money and a new start as a poseur and social climber (whoops, I mean “entrepreneur”). “Ah! Vanitatus Vanitatum!” Thackeray writes. “Which of us is happy in this world? Which of us has his desire or, having it, is satisfied?” Thus it was in 1847, and thus it ever shall be � but that doesn’t mean it isn’t still fun to read all about it.
Michael Stern, a former journalist and English professor, is the head of Cooley Godward’s technology transactions group. He was vice president of business affairs and general counsel of General Magic, Inc., from 1991 until 1996. E-mail: [email protected]

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