Why IP Assignment Agreements Matter, Part 2

Beat on the Bratz, Beat on the Bratz...

A cautionary tale for start-ups, or any company that deals in intellectual property, is offered up by the Barbie versus Bratz tussle, otherwise known as Mattel v. MGA Entertainment in federal District Court in Riverside, California.

If you have a pre-teen daughter, you can skip this paragraph, because you already know that Bratz are the pouty-lipped, multi-ethnic, high attitude, high fashion rivals to Mattel’s perennial favorite leggy California beach blonde. Sales of the Bratz line have have topped $3.1 billion since their 2001 launch, and have also spawned several movies, a television series, video games, and even a line of diamond jewelry.

The crux of the case was Mattel’s allegation that Bratz designer Carter Bryant came up with the idea, name, and many of the original Bratz sketches while he was still employed as a Barbie designer at Mattel. Mattel claimed that (like most companies that create intellectual property) it requires employees to sign agreements assigning all their rights to any IP created during their employment to Mattel, that Bryant had signed such an agreement, and that Bryant had created Bratz while under Mattel’s employment.

Unfortunately for MGA, Mattel proved its allegations, which meant that not only did MGA lose the case, it lost its entire multi-billion dollar product line! Trial judge Stephen Larson entered orders which among other things:

  • transferred ownership of the Bratz dolls and their molds to Mattel
  • required MGA to withdraw infringing product from retail shelves
  • appointed a receiver to monitor MGA’s finances and collect royalties from sales of Bratz products pending full transfer of ownership to Mattel

In short, a devastating turn of events for the once flush MGA. Now the Bratz dolls really have something to pout about. They got a legal b*-slapping from Barbie.

The transfer of ownership was supposed to occur this month, but an eleventh hour ruling from the the federal Ninth Circuit Court of Appeals put a hold on the transfer until it completes a full review of the trial court’s orders.

Takeaway: when accepting contributions of intellectual property, especially from independent contractors and new employees, know who originally created it and where it really came from, and back it up with documentation.

© 2010 – 2011, Richard R. Bergovoy. All rights reserved.

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