Carter Bryant v. Mattel, Inc. / Mattel Inc. v. MGA Entertainment, Inc.

04-cv-09049
November 2, 2004
Federal Court
California
United States District Court, Central District of California

Most recently, Mattel, Inc.’s (Mattel) asked a federal court of appeals in San Francisco to reverse the $310 million in damages and attorneys' fees the District Court for the Central District of California ordered Mattel to pay over in a prolonged battle over the ownership rights to the billion dollar “Bratz” doll empire against a former employee and Bratz designer, Carter Bryant, and MGA Entertainment (MGA). In particular, Mattel challenged the $17.25 million that MGA won on its counterclaims for trade secrets misappropriation by Mattel. It argued that the claims were time-barred. It added that MGA also failed to prove that its alleged trade secrets were really trade secrets.

Mattel's most recent action is not its first attempt to fight the heavy judgment. On August 4, 2011 the District Court denied Mattel’s motions for judgment as a matter of law (JNOV) and for a new trial. It found that the factual record supported an eight-person jury’s conclusions that MGA had used reasonable efforts to maintain its trade secrets for the Bratz dolls, which Mattel misappropriated by misrepresentation. Although the District Court remitted MGA’s damages award of $88.5 million to $85 million, it also ordered Mattel to pay an additional $139.9 million in attorneys’ fees and costs.

In 2004, Mattel first claimed copyright infringement and theft of its trade secrets by MGA and Bratz designer, Carter Bryant. Four years later, a federal jury awarded Mattel $100 million. However, the verdict was overturned on appeal and sent back for retrial on which the scope of Mattel's claims was limited. Mattel could only pursue the copyright infringement claims against the four original MGA dolls and two later models ("Formal Funk Dana" and "Ooh La La Cloe”), but could proceed with most of its trade secret theft claims.

However, an eight-person jury returned a verdict against Mattel on April 21, 2011. Specifically, the jury found that Mattel did not own a copyright in the creative designs behind the dolls. It also found that the ideas, designs and name of the doll collection were not Mattel’s trade secrets and, generally, MGA did not misappropriate any of Mattel’s trade secrets. The jury, however, found that Mattel misappropriated 26 of MGA’s trade secrets, awarding MGA $3.4 million for each misappropriated trade secret for an approximate total of $88.5 million.

Carter Bryant, MGA Entertainment Hong Kong, MGA Entertainment Inc., MGAE De Mexico
Mattel, Inc.
Common Law (Restatement)

Case Report

This case being litigated in the Central District of California involves the intellectual property rights in Bratz, a girls’ fashion doll brand worth $400 million per year at the height of its popularity. The original idea for Bratz came from designer Carter Bryant, a former employee of Mattel, Inc. (Mattel) who left and began working for MGA Entertainment, Inc. (MGA) in late 2000, around the same time as his conception of the Bratz dolls. Mattel sued Bryant and MGA claiming copyright infringement and theft of trade secrets, and in 2008 a federal jury found that Bryant developed the concept for the dolls while working for Mattel before pitching it to MGA, awarding Mattel $100 million. However, the verdict was overturned on appeal and sent back for retrial. Also at issue in this case is Mattel’s claim against MGA for trade secrets allegedly misappropriated by nine former employees who were also recruited by MGA.

The Court Battle
On January 5, 2011, the district court issued an Amended Order on the Parties’ Motions for Summary Judgment (superseding its December 27, 2010 decision). The extensive, 163-page ruling addressed claims based in trade secrets, copyright, trademark, breach of fiduciary duty, conspiracy, and racketeering. With regard to the trade secrets claims centered around Bryant, the court found many genuine issues of material fact to be in dispute: 1) the interpretation of Bryant’s inventions assignment agreement with Mattel, including whether it was unconscionable or contrary to a reasonable employee’s expectations; 2) the timing of Bryant’s conception of the Bratz dolls in relation to his leaving Mattel; and 3) whether the doll concept, or the names “Bratz” and “Jade”, qualify as trade secrets.

With regard to the trade secrets claims based on the conduct of the other nine former Mattel employees, the court individually analyzed the value and secrecy elements of each alleged trade secret and the misappropriation allegations against each former employee. The court found genuine issues of material fact as to: 1) whether Mattel’s unreleased product plan for a line of dolls with interchangeable heads and fashions qualified as a trade secret; 2) whether various files and computer programs regarding Mattel’s sales projections, inventory and distribution systems, and market analysis tools qualified as trade secrets; and 3) whether the alleged acts by the nine former Mattel employees constituted misappropriation. Consequently, the parties’ motions for summary judgment were denied on all but a few of these issues, leaving the vast majority of the issues in the trade secrets claims to be decided by the jury. The decision also held that the trade secrets claims, governed by California’s Uniform Trade Secrets Act, were not preempted by the federal Copyright Act.

On January 1, 2011, MGA moved for reconsideration of the court’s ruling on copyright preemption, arguing 1) that new facts and law had come to light after the court’s decision, and 2) that the ruling was “legally erroneous” on the preemption issue. With regard to the latter, MGA argues that Mattel’s trade secrets claims cover the same material and involve the same rights as the copyright claims.. MGA also notes that the “secrecy” element of Mattel’s trade secrets claim does not distinguish it from the copyright claim because a copyright holder has a right to maintain the secrecy of his work.

In its reply, Mattel argues that there is no basis for reconsideration of the court’s ruling, as the “new facts” that MGA refer to were available to the court before its ruling, and “new law” MGA points to is the very decision they wish to have reconsidered. Furthermore, Mattel argues that the state law trade secrets claims are not preempted because, in accordance with the Ninth Circuit test for preemption, the state law claim includes an “extra element” not required by the federal claim. While secrecy is permitted in copyright law, it is not a required element of a claim for copyright infringement. Thus, Mattel argues, copyright law does not preempt the trade secrets claims.

The Jury Verdict
On April 21, 2011, an eight-person jury returned a verdict against Mattel. Specifically, the jury found that Mattel did not own a copyright in the creative designs behind the dolls. It also found that the ideas, designs and name of the doll collection were not Mattel’s trade secrets and, generally, MGA did not misappropriate any of Mattel’s trade secrets. The jury, however, found that Mattel misappropriated 26 of MGA’s trade secrets, awarding MGA $3.4 million for each misappropriated trade secret for a total of $88.5 million.

Mattel moved for judgment as a matter of law (JNOV) regarding parts of the jury verdict and for a new trial. On August 4, 2011, the District Court denied Mattel's motions for JNOV and for a new trial. It found the factual record supported the jury's conclusion that MGA used reasonable efforts to maintain its trade secrets, which Mattel had misappropriated by misrepresentation. The District Court also remitted MGA's damages award from $88.5 million to $85 million. However, it ordered Mattel to pay an additional $139.9 million in attorneys' fees and costs, for a total payment of $310 million to MGA.

Most recently, Mattel asked a federal court of appeals in San Francisco to reverse the $310 million in damages and attorneys' fees. In particular, Mattel challenged the $17.25 million that MGA won on its counterclaims for trade secrets misappropriation by Mattel. It argued that the claims were time-barred. It added that MGA also failed to prove that its alleged trade secrets were really trade secrets.