IP/Internet/New Media Blog

Ninth Circuit Throws Curve Ball in Bratz Dolls Trademark Suit and Stops Mattel From Taking Bratz Line

By Galen Gentry

Mattel scored a sweeping victory in its trademark infringement trial against MGA concerning the Bratz Dolls. MGA, the Bratz Dolls’ maker, was ordered to pay $100 Million in damages, turn over the dolls, and cease making them. But the 9th Circuit Court of Appeal issued a stay, and allowed Bratz to keep making the dolls. The Appeals court then took the extraordinary step of ordering the parties to mediate their dispute. The suit is a cautionary tale for small businesses. Mattel and other giant companies vigorously litigate their trademark rights. Had MGA been smaller and less well capitalized it would almost certainly have been destroyed by Mattel.

One of the most important trademark infringement trials of the year concerned Mattel Inc.’s complaint against MGA Entertainment over the Bratz dolls. At the trial level Bratz lost on all fronts. In 2008 the jury ruled after a trial in federal court in Riverside that Bratz was created by a toy designer while the designer was still working for Mattel. As a result control of the Bratz line was awarded to Mattel and MGA was ordered to pay $100,000,000.00 in damages.

MGA appealed and argued that several rulings made by the judge, Stephen Larson, should be overturned including the assignment of the Bratz ownership to Mattel, an injunction preventing MGA from making any more Bratz dolls, and an order instructing MGA to remove all Bratz products from store shelves by January 21, 2010. One of the grounds upon which MGA appealed was that Mattel employment contract with the doll designer, Carter Bryant, was invalid. The 9th Circuit issued an interim order on December 9th. The order allowed both retailers to continue selling MGA’s Bratz dolls through next year. The Court will issue a more detailed order later in 2010.

After the jury trial MGA was ordered to transfer ownership of the Bratz trademark and copyright to Mattel. The trial judge in the matter ruled that MGA had developed the doll from intellectual property that rightly belonged to Mattel and he ordered that Mattel take over the manufacturer and sale of the doll after the 2009-2010 Christmas season. But the Court of Appeals relieved MGA of its obligation to buy back and destroy all the remaining Bratz dolls on store shelves and said MGA can continue to sell the Bratz dolls that are currently in stores until a final court decision in the case is made.

The ruling is a huge victory for MGA. Reading between the lines of the appellate court ruling the court seems to be saying it is not pleased with the original decision at the trial level. The Ninth Circuit questioned why Mattel wasn’t simply given a royalty or an ownership stake in MGA Bratz toys. The appellate judges evinced concern regarding the employment agreement between Carter Bryant and Mattel. The appellate court’s decision to modify the injunction which would have wiped out MGA and its order that MGA and Mattel attempt to mediate their dispute may indicate that the panel believes that both Mattel and MGA have some merit to their claims.

Mediation is unlikely to work. Mattel has historically guarded its trademarks vigorously. Mattel obtained a total victory at the trial level and is unlikely to give that up. The big losers are toy retailers who will have to gamble on which manufacturer will have the right to sell hugely popular Bratz dolls next season.

Both MGA and Mattel are preparing new doll lines. MGA has Moxie Girlz and Best Friends Club. Mattel has Fashionista Barbies which it delivered to retailers this past October. However the Bratz dispute ends, the popularity of the dolls has slipped from its 2005 peak when they generated more than $1 Billion in sales.