They suffered a legal whipping, but the Bratz are back with more attitude than ever.
A federal appeals court last week reversed a decision in Mattel v. MGA Entertainment handing ownership of the billion-dollar brand of high fashion, high attitude, multiethnic dolls to Mattel, home of archrival California beach blonde Barbie.
As reported earlier, after Mattel proved at trial that its former employee, Carter Bryant, came up with the concept, name, and preliminary sculpture and sketches for the Bratz while still employed by Mattel, Judge Stephen Larson dropped a legal bomb on the Bratz’ owner, MGA Entertainment, and ordered:
- MGA to pay damages of $100 million for copyright and trademark infringement
- MGA to transfer ownership of the Bratz dolls and their molds to Mattel
- MGA to withdraw infringing product from store shelves
- a receiver to monitor MGA’s finances and collect royalties pending full transfer of ownership to Mattel
However, the Ninth Circuit Court of Appeals put the transfer on hold pending its review of the decision, and last week reversed major parts of that decision, leaving Mattel with little choice but to retry major portions, and probably the entire, trial from scratch.
The appeals court first questioned Judge Larson’s determination that Bryant’s employment agreement with Mattel transferred all his “ideas” to Mattel, including the name “Bratz” and the name of one of the original dolls, “Jade.” That error by itself would compel a retrial, the panel ruled. But even assuming that the trial judge’s reading of the contract was correct, the appeals court ruled that Judge Larson’s transfer of the entire Bratz trademark portfolio, which included dozens of other doll names, was excessive and unfair, because MGA had created a multi-billion dollar brand by virtue of its own added development, marketing, and investment since 2000. Rather, only those specific trademarks devised by Bryant while a Mattel employee (presumably just “Bratz” and “Jade”) could be transferred to Mattel, assuming that Bryant’s contract actually vested ownership in Mattel.
The appeals court also questioned Judge Larson’s determination that almost all Bratz dolls infringed Mattel’s copyrights in Bryant’s preliminary sketches and sculpture of the Bratz dolls. Again, the appeals court ruled that the trial judge was too sweeping in his interpretation of Bryant’s employment agreement with Mattel. The judge had determined that the agreement transferred ownership of any “design” devised by Bryant during his employment with Mattel. But it was also possible to interpret that the agreement only transferred ownership of designs devised during Bryant’s working hours and/or within his normal working duties as a collectible Barbie fashion and hair stylist, not a doll designer, and the appeals court ordered Judge Larson to make that distinction at the retrial. The appeals court further ruled that even if the agreement had clearly transferred ownership of the preliminary sketches and sculpture from Bryant to Mattel, it was an error for Larson to then rule that virtually all Bratz dolls infringed Mattel’s copyrights. The main similarities between the preliminary sketches and most of the later Bratz dolls was a certain “bratty” attitude, and big-headed, pouty appearance, however, both attitude and general appearance are “ideas,” and ideas are not protectable by copyright. In the retrial, the jury would need to find similarities among specific physical details of faces, hairstyles, body features, clothing, etc. in order to support a finding of copyright infringement.
Takeaway: MGA gets the Bratz back, and has announced plans to relaunch the line in August, but it is a somewhat bittersweet victory. The question is whether there is much left of the brand after almost two years in legal limbo. In addition, there is a second, separate trial pending in which Mattel has accused MGA of racketeering and theft of trade secrets. Which gets back to our original point: 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.
Update, 4/25/11: A California jury last week gave the Bratz something to pout about, big time. In 2008, Barbie maker Mattel not only put the Bratz out of business but also won $100 million in damages against MGA, but that was overturned on appeal (above). After a retrial, the jury found that on the contrary not only had MGA not infringed Mattel’s rights, but that Mattel had stolen MGA’s trade secrets, and awarded MGA $89 million in damages. In addition, the jury ruled that Mattel’s theft was willful and malicious, raising the possibility that the court could award punitive damages that would increase total damages to three times the initial verdict. In doing so, the jury implicitly rejected Mattel’s argument that all IP rights in the Bratz belonged to Mattel because Bratz designer Carter Bryant developed the names and images while still a Mattel employee, and subject to an employment agreement that transferred all his ideas and designs to Mattel. However, the jury’s precise rationale was not apparent from the jury verdict sheet. Despite incurring an estimated $400 million in legal expenses to date, a bloodied but not bowed Mattel has declared that it will make a motion for a retrial, and reserved its right to appeal. So take that!