Is there confusion between the two names? eToys seems to think so, since it got etoy's website taken down in December 1999 for exactly that reason. The site was put back up later, and eToys' legal action halted, mostly because etoy was using its name, and had its website, long before eToys even existed.
And I can especially see why etoy is worried, since eToys has also filed a trademark application on "ETOYS" in the context of providing "interactive and arcade games via a global computer network." Which is, well, pretty darn close to what the artistic group has been doing for the last five years.
So if there's confusion, it really seems like eToys brought this on itself. When it set up in the first place, simply checking for the singular version of its corporate name would seem to me like a gimme. Failure to do so would seem like a clear-cut case of infringement.
Things are a little more confusing than that, though. The trademark that eToys bought was actually registered by an unrelated company in 1990 ("Etna Toys") -- the law starts to give me a headache at this point. Only a lawyer could love the difference between a trademark application and an Intent To Use declaration, I think. The resolution of this one may come down to whether it's appropriate to purchase a trademark of another company without actually purchasing the company itself, or any of its equipment, inventory, etc. In other words, are words themselves, words given legal protection by our government, subject to being bought and sold on the open market?
An interesting question. Not the same question as whether etoy.com and etoys.com should be able to coexist on the same internet despite unreconciliable philosophical differences, but ... an interesting question.
We'll keep you posted on how this one turns out. It's essentially the inverse of the fiasco in late 1999, with the lawsuit (apparently) pointed in the correct chronological order this time. Whether eToys will even exist as a company by the time this suit is resolved is, unfortunately, an open question.