A federal district court judge last week threw out a lawsuit brought by Mattel Bratz® rival MGA. The suit accused Mattel of anti-competitive conduct since August of 2010. Judge David O. Carter tossed MGA’s suit because it alleged the same facts underlying MGA’s claims to the Bratz® trademarks in defending an earlier case against Mattel. Last Spring a California jury ruled for MGA and held Mattel liable for $309 Million in damages…. Appeal is expected. In 2008, Mattel sued MGA claiming it stole the Bratz® doll designs and brand by hiring away Mattel’s designer who created the Bratz® dolls. The epic custody battle for the Bratz® kingdom emphasizes the importance of employment agreements that carefully describe the scope of proprietary rights and intellectual property claimed by the employer. Employment agreements must circumscribe which employee activities are within the “scope of employment.” To appropriately capture the fruit born of ideas arising from work performed by a designer or inventor while employed by a company, the activity producing the intellectual property must be carefully delineated within the employment agreement. Additionally, such agreements must reflect actual workplace practices when claiming or waiving ownership of employee inventions and works of authorship or the agreements may not be upheld.
Prior to MGA’s $309 Million judgment last Spring, the Ninth Circuit overturned and remanded a California district court’s 2008 award of $100 Million in damages to Mattel, finding that MGA spirited away the ideas, names and preliminary designs for Bratz® dolls when it hired designer Carter Bryant. Bryant allegedly created names and preliminary designs for the Bratz® dolls while employed by Mattel. During that trial, the judge determined that because Bryant conceived, pitched, and refined his doll concepts for competitor MGA Entertainment while working for Mattel as a Barbie Collectible fashion and hair designer, Mattel owned the Bratz® designs and trademarks. With these instructions from the judge, the jury determined that some Bratz® doll designs infringed Mattel’s copyrights and awarded damages to Mattel. The district court judge then established a “constructive trust,” diverting MGA’s trademarks and future revenue from the Bratz® product line to Mattel.
Upon appeal in 2009, the Ninth Circuit tossed out the billion dollar constructive trust imposed over the Bratz® product line as overly broad. Reviewing the jury’s determination that only two marks, BRATZ and JADE, were created by Bryant as original name ideas for the Bratz® dolls, the Ninth Circuit found that the constructive trust erroneously included trademarks unrelated to Bryant’s original ideas and preliminary designs. Mattel’s injunction prohibiting MGA from producing or marketing any female Bratz® doll or any future dolls substantially similar to the Bratz® dolls was similarly vacated by the Ninth Circuit as overreaching and prohibiting production of dolls not substantially similar to Bryant’s original ideas and preliminary designs for MGA.
The Ninth Circuit also noted that, in the context of a summary judgment motion where outcome is determined as a matter of law and there should be no material issue regarding the facts, that it was unreasonable to infer that the definition of invention includes “ideas” through the use of the phrase “including but not limited to…”. The Ninth Circuit points out that the record showed evidence of competing interpretations of how “inventions” is defined among Mattel witnesses. Mattel drafted other agreements that expressly included “ideas” from the definition of “inventions.” A Mattel executive stated that it was common knowledge in the industry that the definitions of “invention” and “design” do not include “ideas.” Mattel designers gave statements that industry practices tended to include ideas as rights owned by employers. Clearly the definitions of “invention” and “design” are material to the question of what constitutes a trade secret. And if the definitions were in contention, it was therefore improper for the judge to decide that issue on a summary judgment motion.
Why go there? Had Bryant’s employment agreement been carefully crafted to capture intellectual property arising from Bryant’s hair and fashion design duties for Mattel and Bryant expressly retained his non-Mattel personal design work, this expensive legal saga may have been avoided.