Thursday, August 26, 2010

Mattel v. MGA: Barbie and Bratz Duke it Out in the Court of Law

Mattel, Inc. and MGA Entertainment, Inc. have been in a legal battle over ownership rights to Bratz dolls since 2001.

Mattel, Inc., the world's largest toymaker, has been marketing Barbie dolls for nearly half a century. While still employed at Mattel, Carter Bryant came up with some designs that ultimately turned into Bratz dolls. Bryant showed his ideas to some MGA employees and ended up signing a consulting agreement with MGA before he left Mattel's employ. When Mattel learned about MGA's Bratz doll line, and about Bryant's involvement in designing them, Mattel filed suit against MGA. Mattel argued, Bryant had a duty to disclose and assign his sketches and designs to Mattel, under the terms of Bryant's employment agreement with Mattel. The jury found in favor of Mattel and awarded it $10 million in damages for copyright violations. The District Court imposed constructive trust over all trademarks including the terms "Bratz" and "Jade", and further enjoined MGA from producing and marketing most Bratz dolls. MGA appealed the lower court judgment.

On July 22, 2010, in MGA Entertainment, Inc. v. Mattel, Inc., No. 09-55673, the Ninth Circuit Court of Appeals reversed a 2008 lower court order which awarded Mattel, Inc. ownership rights to Bratz dolls. The appellate opinion, written by Chief Judge Alex Kozinski, reasoned that Bryant had not designed Bratz dolls at Mattel, but had come up with some sketches and ideas. Bryant's employment agreement with Mattel "could be interpreted to cover ideas, but the text doesn't compel that reading. The district court thus erred in holding that the agreement, by its terms, clearly covered ideas." The court further reasoned that even if MGA miappropriated the names "Bratz" and "Jade", the trademark owed much of its value to "MGA's own development efforts, marketing and investment." The court also vacated the copyright injunction based on a holding that the employment agreement assigned works created outside Bryant's scope of employment. In doing so, the Ninth Circuit stated "the entire case will probably need to be retried."

Having prevailed on their appeal to the Ninth Circuit Court of Appeal, the "MGA parties" have now filed counterclaims against Mattel including trade secret misappropriation, Civil RICO, and wrongful injunction. Legal commentators are fascinated by this move, and wonder how the counterclaims will stack up against Mattel's causes of action.

MGA Entertainment (Micro-Games America Entertainment) is a privately-held "consumer entertainment products company". The company's founder and CEO, Isaac Larian, controls more than 80% of the company. MGA employs 1,500 employees and had revenues of $2 Billion in 2006. The company is headquartered at 16300 Roscoe Boulevard, in Lake Balboa area of Los Angeles, California. In the past, MGA contemplated an initial public offering of its shares, but did not go through with it due to the pending litigation with Mattel, Inc.

The materials for this blog were gathered from various sources including WSJ, Bloomberg articles, JOLT Digest, article, Wikipedia, MGA's web site, and Mattel's web site. For further information, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the State Bar of California and the Bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.