Aaron Thalwitzer

Juries. As I may have previously mentioned, I really like them. They can even the playing field, whether it’s man versus the state, man versus man, or mega-corporation versus smaller-but-still-pretty-big-corporation.

Case in point: toy titan Mattel just got slapped down by toy has-been MGA Entertainment Inc., maker of Bratz dolls, to the tune of $88.5 million in damages. The question of whether the designer invented the trademarks related to Bratz on his own time or in the course of his employment with Mattel was decided by some people off the street, who found willful misappropriation of trade secrets by Mattel. The jury decided that the “inventions” weren’t made “at any time during his employment”.

MGA is now asking for treble damages based on said willfulness.

Mattel can rest easy however, since the jury did find that MGA had interfered with Mattel’s contract with the designer of the Bratz line, and awarded Mattel $10,000 in damages. Woo-hoo!

This case has been going on for seven years, since 2004, back when Bratz were still cool among seven-year-old girls wearing lots of make-up. Basically, Mattel accused MGA of stealing its designs by hiring a key employee.

“We remain committed to protecting the intellectual property that is at the heart of business success,” Mattel CEO Robert Eckert said afterwards via email.

Mattel will move for a new trial, which is rarely granted, and then appeal.

What we can all take from this is to get a good lawyer to draw up your employment contracts, preferably one that knows a thing or two about intellectual property. The designer in question had an employment contract with Mattel, but the provision regarding assignment of inventions was ambiguous – therefore, it was a question of fact and for the jury to decide. If you’re a company, big or small, there’s no excuse for bad contracts, unless you’d rather have a jury figure out what you meant.

This is a complete reversal of the previous jury trial. In 2008 MGA was ordered to pay Mattel $100 million, which was thrown out on appeal last year, allowing MGA a second bite at the apple, and a chance to formulate a new strategy.

So, MGA accused Mattel of forging credentials to sneak into toy fairs to steal trade secrets and of concealing evidence of these activities. Apparently, even toy biz IP is rife with corporate espionage.

According to Jack Lerner, a professor at USC Gould School of Law, this new evidence permitted by the Appeals Court allowed MGA to present a “large canvas” to the jury on retrial, whereas the first trial was more restricted in scope.

As usual, Mattel had a chance to settle this thing but took the litigation route, for which the markets are now punishing them. Better luck next time.

For more information see Mattel Inc. v. MGA Entertainment, Inc., No. CV 04-09049-DOC (RNBx) (C.D. Calif.).