Last night, (NASDAQ:AMZN) responded to the lawsuit that Toys "R" Us (NYSE:TOY) whacked it with last month -- by launching a countersuit, The Wall Street Journal reported. Amazon asked the Superior Court to end the relationship for $750 million in damages. The upshot is, Amazon tattled on Toys "R" Us, accusing it of not holding up its end of the deal. Now, it sounds like Toys "R" Us could lose important Internet real estate.

For a lawsuit on kids' stuff, there was lots of strong language. No, not that kind of language, but there were fighting words, at least. According to the lawsuit provided by The Wall Street Journal, Amazon cited Toys "R" Us' "chronic failure... to meet contractual obligations," and added, "Without guaranteed selection and high in-stock rates... cannot hope to maintain a 'best-of-breed' online store for toys and games and baby products that can win customer loyalty and compete with both parties' largest competitors, such as Wal-Mart."

The deal was originally penned in 2000, when the emerging online strength of Amazon -- a longtime Motley Fool Stock Advisor pick -- helped make Toys "R" Us king of toys on the Internet, even though it was getting a real-world walloping by discounter Wal-Mart (NYSE:WMT).

Now, Amazon says that Toys "R" Us often didn't have all the top merchandise available for delivery to customers, and that terms of the agreement allowed it to seek such items from other merchants. Indeed, lacking popular toys, especially during the key holiday season, would have endangered both companies' hold on online shoppers.

It also accused the toy retailer of not offering its wares at low enough prices, a roadblock for Amazon, as it considers itself an Internet discounter, and that's one of the attributes that made it popular to begin with.

It seems a shame that just when Toys "R" Us may be looking a bit better, and coming up with some exciting ways to woo customers back to its bricks-and-mortar stores, this skirmish is under way. Toys "R" Us could use the present environment to better its circumstances, considering many of its competitors are currently crippled or out of business.

However, should the agreement between the two companies indeed terminate, there's the danger that both would cede the online toy business to their discount rivals. More than ever, it seems Toys "R" Us, which may have the right environment for a turnaround, stands the most to lose.

What do you think of these tirades over toys? Is Amazon going to reign victorious? Or do you think Toys "R" Us makes the best point? Strike up some chat about the controversy on the discussion board.

Alyce Lomax does not own shares of any of the companies mentioned.