by Thomas Carey
Research assistant Katherine Zhou provided valuable support in the writing of this article
For years, toy manufacturers Mattel, Inc. and MGA Entertainment have dueled over the popular Bratz line of dolls. We reported in 2008 that Mattel had won a series of victories on its claims of copyright infringement and unfair competition.
Not only was Mattel awarded $100 million by a jury, but the trial court later issued a permanent injunction
ordering MGA to refrain from any further sales and production of Bratz
dolls and placed the entire Bratz line of toys in a constructive trust
for the benefit of Mattel.
The basis for this remedy was that Carter
Bryant, an employee of Mattel who had been working on its Barbie doll
line, conceived of the Bratz product line in 2000 while still employed
by Mattel. He had drawn a small series of sketches, conceived of the
"Bratz" and "Jade" trade names, and commissioned a sculpture of a Bratz
After all this work, he revealed these
drawings and trade names to MGA Entertainment rather than Mattel. A
few weeks later, he jumped ship to MGA to continue his work on the
Bratz product line. In 2001, MGA released its first Bratz dolls.
MGA kept Bryant's involvement with the Bratz
project secret, but Mattel eventually found out. Mattel sued for
copyright infringement and breach of Mr. Bryant's employment agreement,
in which he agreed to assign to Mattel all of his inventions, patentable or unpatentable, including discoveries, improvements, and designs.
The trial judge instructed the jury that this language was sufficient to oblige Mr. Bryant to convey his ideas
to Mattel. The jury in turn provided Mattel with a relatively modest
award based upon copyright infringement, and a large award based upon
the unfair competition and breach of contract claims. MGA appealed.
In a July 22, 2010 opinion,
the Ninth Circuit took exception to the trial court's proceedings in
several ways. Regarding copyright infringement, the trial court had
said that the dolls' distinct look and fashion style were protectable.
The Ninth Circuit disagreed, saying that the
trial was confusing the unprotectable idea of a bratty doll with a
particular expression of that idea, for which copyright protection
could be available. While the first Bratz dolls might have been
derivative of the drawings that Mr. Bryant drew while with Mattel, the
later dolls were so different that their only common element was their
As to who owned the copyright in Mr.
Bryant's drawings, the Ninth Circuit criticized the trial judge's view
that Bryant was obligated to assign his ideas to Mattel. In fact, no
mention of "ideas" appears in the employment contract.
Because the contract is ambiguous on the
duty to assign ideas, the Ninth Circuit now wants the trial court to
hear testimony and consider evidence, such as contrasting contract
forms used by Mattel, to determine whether Mr. Bryant's contract
The heart of the appeals court's decision,
however, was its rejection of the constructive trust that the trial
court had established for Mattel's benefit. Even if Bryant's original
ideas legally belonged to Mattel, the constructive trust was deemed
inappropriate. Said the court, "It 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
If a misappropriated asset appreciates in
value while wrongfully held, the court of appeals explained, that
appreciation can be awarded to the wronged party through the imposition
of a constructive trust.
But when the appreciation occurs because of
the defendant's efforts, the constructive trust cannot shift the fruits
of the defendant's labors to the plaintiff. Since MGA's effort was
necessary to take the project from the conceptual stage to a hugely
popular brand, the constructive trust was vacated.
As the case returns to the trial court, more
fireworks are likely to ensue. The decision of the Ninth Circuit
seems, however, to grant custody of Yasmin and her friends Jade, Cloe,
Sasha, et al. to MGA for good. Now the battle is only about money, not
the care and upbringing of a hugely popular bevy of young ladies.
Thomas C. Carey is a partner at Sunstein and is chair of the Business
Department. He advises start-ups and established companies in matters
involving capital-raising, licensing, mergers and acquisitions and tax
planning. He also is experienced in outsourcing, joint ventures,
corporate governance and FDA compliance matters. He maintains long-term
relationships with senior management of corporate clients, who rely on
his judgment and expertise in strategic matters.