Etoy, he said, would "absolutely" not rule out further legal action, and he confirmed that etoy was already suing eToys, though he referred to it as essentially a defensive action.

"Etoy is countersuing eToys, but the two things they are saying are their trademark isn't any good and we were here first. It asks for the trademark registration to be cancelled and it asks for fees and costs, which could be construed as legal fees, and it asks for a declaration that 'etoy has a superior right to use its [trade]mark in the United States.' "

Etoy, which used its etoy.com Web site two years before eToys.com used its site, has long been well known in Internet art circles, and won the prestigious Golden Nica at Ars Electronica in Linz, Austria, in 1996. The group has evolved over the years from a wilder style, signified by the orange outfits they used to wear to big events, to a more deadpan gloss on the increasingly corporate character of the Internet.

The temporary injunction helped unleash a spate of publicity about what struck many as a unique domain-name fight.

John Perry Barlow, co-founder of the Electronic Frontier Foundation, joined etoy's crisis advisory board and spoke out against eToys' lawsuit, comparing the fight to the Battle of Bull Run. He called on the entire Internet community to support etoy in its fight against the big company, and yesterday hailed eToys' apparent peace offering as an important triumph.

"I really think that when the water clears, it will be what I regard it as, meaning a victory for our side, and by that I mean not only etoy, but the noncommercial entities on the Internet, that is, practically everyone," he said.

Barlow also offered a view on eToys' step back from legal struggle that many are likely to echo; namely, that the company felt it had no choice but to talk peace, given the dramatic drop in its stock. It fell from near 70 in late November when the temporary injunction was issued down to just 26-3/4 on the Nasdaq as of closing time Wednesday.

"My first reaction was that they had seen what was happening to their stock, and realized there might be some connection," he said. "I think there was. I'm actually surprised the market would respond in this way, but it did. It shows you that the people doing Internet analysis realized there might be some need to take into account the Internet community, and if that's the case, then the Internet community has more influence than I thought we did.

"If we can band together against predatory practices and drive eToys' stock down, then we have a considerable tool. I feel very strongly that there is a culture in cyberspace despite the boom that we've experienced, and after people have been online for awhile they realize there is more at a stake than being able to shop from your home."

As for what will happen next, Barlow said he thinks that etoy must keep alive the threat of a lawsuit against eToys "as a cudgel," and etoy clearly is doing that, making sure to get eToys' attention.

"They have every reason to be nervous," said Truax, the etoy attorney. "We have been fairly passive so far. If we are not able to settle this, we're going to have to take a much, much more aggressive posture."