On July 22, 2010 a three judge panel of the Ninth U.S. Circuit Court of Appeals overturned a 2008 ruling in MGA Entertainment Inc. v. Mattel Inc.  The panel was comprised of chief judge Alex Kozinski, and circuit judges Stephen Trott and Kim McLane Wardlaw, with Kozinski penning the opinion.  The panel reversed an earlier order of U.S. District Judge Stephen Larson which ruled that Mattel had the rights to most of MGA’s Bratz doll line.

Judge Larson had ruled that the majority of MGA’s Bratz dolls were substantially similar to designer Carter Bryant’s drawings.  The jury later found that the designer had come up with the idea and initial drawings for the Bratz line while employed at Mattel.  The jury awarded Mattel $100 million in damages, which amounted to about 5 percent of the $1.8 billion that Mattel demanded.  Larson ruled that most of MGA’s Bratz doll line infringed Bryant’s initial drawings of the dolls that, under the jury’s finding and Larson’s pretrial ruling, belonged to Mattel, according to Bryant’s employment agreement with the company.

The Ninth Circuit panel disagreed that most of MGA’s Bratz dolls were substantially similar to the designer’s sketches.  Chief Judge Kozinski reasoned: “[e]ven assuming that MGA took some ideas wrongfully, it added tremendous value by turning the ideas into products and, eventually, a popular and highly profitable brand.”  He went on to conclude that “[i]t is not equitable to transfer this billion-dollar brand, the value of which is overwhelmingly the result of MGA’s legitimate efforts, because it may have started with two misappropriated names.”  The opinion stated that much of the jury verdict and damages award should be vacated and the case will likely need to be retried.

The case could ultimately have ramifications for employers by making it more difficult for them to claim ownership of their employee’s ideas, especially if they were created in a private context.

The 2008 trial was bifurcated into two different phases.  The parties are gearing up for the second phase of the trial, which will focus on Mattel’s racketeering claims against MGA, though a trial date has not yet been set by the district court.

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