Epic Court Fight Leaves Barbie Reeling: Mattel Appeals Multi-Million Dollar Award to MGA in Copyrights Case

By Tierryicah Mitchell *

Mattel Barbie doll battling MGA Bratz dollThat’s right.  There is trouble in the dollhouse with no hope of a truce in sight.  Barbie vs. Bratz.  Who needs professional boxing when Mattel (Barbie) and MGA (Bratz) have been duking it out in court for years with no end in sight?  However, these dolls aren’t fighting for the love of Ken, but rather over the intellectual property rights to the Bratz franchise.  More specifically, attorneys for Mattel alleged that MGA’s creation of the Bratz doll constituted trademark and copyright infringement against the Mattel Empire.

But how did all of this fighting start?  Surely, there must have been a time when Bratz and Barbie peacefully coexisted in the dollhouse.  Sadly, there was not.  Like all epic battles, the legal war between Mattel and MGA’s conflict has a beginning, or, a first shot fired.  In this case, the proverbial gun was fired by a former Mattel designer named Carter Bryant, and the proverbial first shot was Mr. Bryant’s creation of the scantily clad, edgy Bratz doll in 2001.  An article written by Margaret Talbot on New America Foundation’s website provided the following description of the Bratz doll: “Bratz dolls have large heads and skinny bodies; their almond-shaped eyes are tilted upward at the edges and adorned with thick crescents of eye shadow, and their lips are lush and pillowy, glossed to a candy-apple sheen and rimmed with dark lip liner.”  Interestingly enough, Mr. Bryant was still a designer at Mattel when he created the Bratz doll.  Perhaps this would not have ruffled Robert Eckert, who is the CEO of Mattel, the wrong way had the Bratz doll not been a such a success.  At the peak of the Bratz doll in 2006, it generated almost $1 billion in sales.

Even though this blog will focus on the most recent legal action that has occurred, a precursory review of the procedural history is key to grasping the significance of the latest judicial ruling and Mattel’s response.  Mattel initially filed suit against MGA in 2004 alleging Mr. Bryant stole the concept for the Bratz doll.  More specifically, this original suit alleges that Mr. Bryant created the idea for the Bratz doll in 1999 while still employed for Mattel, thus violating the terms of his “inventions agreement,” which would have prohibited Mr. Bryant from taking the Bratz concept to MGA.  In 2008, a federal court jury found in favor of Mattel and awarded nearly $100 million in damages in the copyright infringement suit.  The court held that Mr. Bryant had in fact violated the exclusivity contract, and that Mr. Bryant had outside MGA help in doing so.  In addition to the damages awarded, MGA was ordered to turn over the franchise and cease the production and sales of Bratz products.  However, in a drastic turn in favor of the underdoll (PUN), a three-judge panel of the Ninth Circuit Court of Appeals overturned the 2008 decision.  The panel held that: (1) MGA deserved “sweat equity for making and marketing the dolls” and (2) that Mattel could not lawfully claim a monopoly over dolls.

During the retrial, the jury heard copyright claims as well as mutual allegations of stealing trade secrets.  In a copyright infringement suit, the jury determines whether “a copyrighted work [has been] reproduced, distributed, performed, publicly displayed, or made into a derivative work without the permission of the copyright owner.”  It should be noted that a possible defense against a copyright infringement allegation is the fair use doctrine.  The fair use doctrine allows non-copyright holders “to copy, publish, or distribute parts – sometimes even all – of a copyrighted work without permission, for purposes such as commentary, news reporting, education, or scholarship.”

In April of 2011, a federal jury determined that Mattel had failed to prove its allegations of copyright infringement.  What’s more, the jury also determined that MGA did not steal any of Mattel’s trade secrets.  A trade secret is a “piece of information whose value derives from it not being widely known.”  Trade secrets can range from the recipe of the much-coveted Coca-Cola soft drink to Google’s proprietary search algorithm.  Therefore, it follows that a trade secret is a secret that only a selected few know, and further, it is something that the company takes affirmative and great lengths to keep secret.  Most importantly, it can be easily surmised that trade secrets are costly.  Mattel learned this lesson when the jury found that Mattel had stolen 26 of 114 trade secrets from MGA and calculated damages to MGA in the amount of $310 million dollars.  That is, the court ultimately awarded MGA $172 million in damages for misappropriation of trade secrets and $137 million in attorney fees and defense costs.  Apparently, Mattel sent spies to MGA’s toy fairs and trade shows to steal MGA’s trade secrets.

In all fairness, it was not a complete loss for Mattel.  The jury awarded Mattel $10,000 in damages for MGA’s intentional interference with Mattel’s contractual relations with Mr. Bryant.  However, Mattel is not willing to hang Barbie’s boxing gloves up just yet and has filed an appeal.  According to Mattel’s attorneys, MGA’s lawsuit on trade secrets was not timely filed and therefore should not have been included in the trial.  Further, Mattel’s attorneys allege that the court abused its discretion and made errors when determining MGA’s attorney fees and defense costs.  Nevertheless, Isaac Larian, the CEO of MGA, still feels confident in the judicial system.  In a statement, Mr. Larian said, “Bratz and its ownership has always belonged to MGA and was built with the hard work and ingenuity of MGA employees . . .As for the damages and legal fees award of $310 million … I am confident we will prevail upon appeal.”

Will this case ever end?  I am inclined to think it will last forever… after all, it is a doll eat doll world.

*  Tierryicah D. Mitchell is a third-year law student at Wake Forest University School of Law. She holds a Bachelor of Arts and Science in Political Science and History from the University of North Carolina at Chapel Hill. Upon graduation in 2012, Ms. Mitchell plans to work for the federal government.