Archive for July, 2010

The Bratz Are Back

Thursday, July 29th, 2010

Did You Miss Me?

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!

Sports Licensing Corner: They Call Alabama The Crimson Tide (TM)

Thursday, July 22nd, 2010

"The Sack," by Daniel Moore

If an artist depicts a trademark in his work, is it art or trademark infringement?

In a case that has already been in litigation for five years, a federal trial judge has ruled in University of Alabama vs. New Life Art, Inc. that artist Daniel A. Moore infringed the University of Alabama’s trademarks when he sold paintings, posters, mugs, calendars, and other Bama sports memorabilia, but also ruled that the paintings and posters were nevertheless exempt as artistic expressions protected under the First Amendment.

Given the large amounts of money generated by college sports licensing, the case has struck a nerve– Alabama has filed an appeal to the federal Eleventh Circuit Court of Appeals, and 27 other universities have requested to file an amicus brief in support of the university.

Moore has estimated that his football art tallied sales “in the low millions,” during his 30 year career. From 1991 until 2000, Moore’s company New Life Art, Inc. had a license agreement under which it paid royalties to the University of Alabama, but then Moore insisted that the law did not require his paintings to be licensed, especially when his posters in most cases depicted no explicit trademark material.

Not so, replied the University of Alabama, arguing that all of Moore’s artwork at least portrayed Bama’s famous crimson and white “Crimson Tide” team colors, which the University argued is its trade dress –packaging that identifies University of Alabama sports products and services in the public mind– and that Moore’s depiction of it would likely mislead the consuming public into thinking his paintings were manufactured, sponsored, endorsed, or affiliated with the University.

Judge Robert Propst agreed that Bama’s team colors had attained trade dress status, and that there was some, albeit small, likelihood that the public would be confused as to the University’s creation or sponsorship of Moore’s art.

However, he ruled that at least as regards his large scale paintings and posters, Moore’s work had “high artistic skill” and expressive content; his use of the Bama colors had artistic relevance to his work, and did not intentionally mislead the public as to the University’s sponsorship or affiliation with it; therefore it was protected by the First Amendment, which superseded the University’s trademark infringement claims made under the Lanham Act.

The mugs, calendars, and other souvenir paraphernalia did not contain significant artistic content and therefore were held to be infringing.

As support, the judge quoted at length from another famous sports art case, ETW Corp. vs. Jireh Publishing, Inc., in which the Sixth Circuit Court Of Appeals held that an artist’s limited edition poster portraying Tiger Woods’ historic first Masters golf tournament championship was not an infringement of Woods’ trademarks in his name and images, because some of Woods’ claimed trademarks were not actually trademarks at all, while the use of other trademarks was either de minimus or protected by the artist’s exercise of his First Amendment rights.

Even if Moore ultimately prevails, it is unlikely that there will be a huge economic impact on university sports licensing. Both Moore’s paintings and the Tiger Woods posters were not mass-market items, but more of the “limited edition/collectors item” variety, with high artistic skill and a relatively high price tag. However, Bama and other big sports universities are playing to win.

Entertainment Licensing Corner: Darth Laser

Thursday, July 8th, 2010

Don't call this bad boy a "lightsaber": Wicked Lasers' Spyder III

It is one of those fun stories that gets widely published by the mass media and the tech-oriented blogosphere: the maker of the Star Wars movies threatening to sue the maker of “the world’s most powerful portable laser” because of its supposed resemblance to a Star Wars lightsaber. (For officially licensed Star Wars candy lightsabers, see here. For non-Star Wars candy Lifesavers, see here.)

But not only Star Wars geeks, but also we IP geeks like this kind of story because: 1) Lucasfilm, Ltd. is one of the most successful licensors of all time, earning an estimated $24 billion in revenues from Star Wars licensed merchandise; and 2) there are lots of neat IP angles to the story.

So is Lucasfilm the righteous Luke Skywalker here, just trying to protect what belongs to it, or an evil Darth Vader, trying to intimidate a brave entrepreneur with its legal storm troopers?

First, some background. Hong Kong-based Wicked Lasers recently began selling its $197.97 Pro Arctic Spyder III laser, which it describes as “the most dangerous laser ever created.” With a tubular white grip, it inevitably prompted excited coverage in the blogosphere as, “your own personal lightsaber.” But nowhere on Wicked Lasers’ website or advertising are either Star Wars or lightsabers mentioned.

That was quickly followed by both a Lucasfilm press release and a Lucasfilm attorney cease-and-desist letter to Wicked Lasers, demanding that they stop selling, “a highly dangerous product… that is designed to look like a lightsaber from Star Wars.”

Unfortunately, only portions of Lucasfilm’s cease-and-desist letter were published, so it is impossible to say precisely what legal claims Lucasfilm is making against the Spyder III. But that won’t stop us from speculating:

1) Trademark infringement, for giving the impression that the Spyder III is an official Star Wars lightsaber endorsed by or affiliated with Lucasfilm. The problem with that claim is that all of the lightsaber comparisons are being made by third parties. As mentioned above, Wicked Lasers nowhere mentions Star Wars or light sabers in connection with the Spyder III.

2) Trade dress infringement. Trade dress is elements of product packaging or promotion that the public perceives as a product identifier– think of the appearance of the striated, green glass Coca-Cola bottle or the contour of a Corvette Stingray. The problem with that claim is it is difficult to argue that the handle of the lightsaber is actually part of its packaging, and not a functional part of the product itself. In fact, in Kellogg Co. vs. National Biscuit Co., the US Supreme Court ruled that the pillow shape of shredded wheat cereal was functionally dictated by cost and quality considerations, and therefore, not eligible for trade dress protection.

3) Copyright infringement. Lucasfilm has registered the handle of various lightsaber models as a form of “sculpture” with the US Copyright Office. So if another sculpture were substantially similar to the Star Wars lightsaber handle, it could be copyright infringement. The problem with that claim is that Wicked Lasers could reply that the handle of its laser is not an ornamental “sculpture,” but a functional, utilitarian device not subject to copyright. In fact, a British seller of Star Wars stormtrooper armor prevailed against Lucasfilm in an English court with a similar defense under UK law (below).

So Lucasfilm does not have a slam dunk case here.

But Star Wars is one of the world’s most lucrative licensing franchises, and Lucasfilm has aggressively defended its franchise with legal action.

In 2006, Lucasfilm sued Maryland-based High-Tech Magic for selling light sabers, and obtained a $250,000 settlement. High-Tech Magic had prominently advertised its lightsaber as, “a Star Wars Lightsaber that looks as good as those in the movies.”

Lucasfilm was not so fortunate when it sued the original designer of the Star Wars glossy white storm trooper armor helmets, who had begun selling helmets and body armor from his own website. Lucasfilm won a $20 million default judgment for copyright and trademark infringement against industrial designer Andrew Ainsworth in a Northern California court, but when it attempted to enforce the judgment in the UK, an appellate court ruled in December, 2009 that there was no copyright infringement because the storm trooper armor was not an ornamental, expressive work of art, but rather intended to be a functional, utilitarian object, and therefore not copyrightable as a sculpture. (This ruling surely pleased Star Wars fans, for whom this stuff is REAL.) Under UK law, Ainsworth is eligible to request that Lucasfilm pay his £2.5 million in attorneys fees.

Update, 8/5/10: Wookies of the universe, rejoice! Peace reigns once again in the Star Wars Empire, as Lucasfilm General Counsel David J. Anderman has sent a letter to Wicked Lasers CEO Steve Liu, offering to withdraw his prior cease and desist demand if Wicked posts a disclaimer on all web pages or advertisements related to the Spyder III: “THIS PRODUCT IS NEITHER LICENSED NOR ENDORSED BY LUCASFILM LTD.” Meanwhile, CEO Liu claims that sales of the Spyder III have tripled as a result of the publicity.

History Ain’t Changed: Supreme Court Issues Anticlimactic Bilski Patent Decision

Friday, July 2nd, 2010

System for Walking a Snake, US Patent No. 6,490,999

Hat tip, http://www.ipwatchdog.com

It was anticipated as the case that would recalibrate patent law for the Information Age. The long wait inspired many references to Samuel Beckett’s Waiting for Godot. But when the Supreme Court finally handed down its opinion in Bilski v. Kappos on Monday, it appeared that the more appropriate reference was Pete Townshend’s “Won’t Get Fooled Again”: “But the world looks just the same/And history ain’t changed.”

As detailed in a prior post, the narrow issue in Bilski was whether a method of hedging risk in commodity futures transactions met the threshold patentability requirements as a “process” under Section 101 of the Patent Act, or whether it was ineligible as akin to a law of nature, natural phenomenon, or abstract idea. The broader issue was how close a nexus an invention must have to operations or effects in the physical world to meet the threshold requirements of Section 101.

Although the case was argued before the Supreme Court on November 9, the Court did not hand down its opinion until the last day of the term, generating intense speculation that the Court’s answer to the broader issue of the case would redefine the scope of allowable business method patents – patents on improved procedures for engaging in business transactions, such as Amazon’s “one-click” shopping cart – and that such a redefinition might also affect patent eligibility for software, advanced diagnostic medical techniques, data compression, and digital signal processing, and thus have a major impact on the future of innovation in the United States.

Except that the Court never decided the broader issue.

Instead, the Supreme Court justices issued three separate opinions, which agree on some points and disagree on others, with one justice joining portions of two different opinions. All agreed that the Bilski invention itself was non-patentable, but could not agree on a broader test for a patentable “process” that transcended the Bilski facts. (more…)