"Who owns Bratz?"
Despite years of litigation, that still appears to be an open question.
In an as always entertaining opinion written by Chief Judge Kozinski, the Ninth Circuit handed a big win to MGA Entertainment in its long-running battle with Mattel over the Bratz line of dolls.
The dispute has its origins in the idea of Carter Bryant for the line of Bratz dolls, which he pitched to MGA while still employed by Mattel, designing fashion and hair styles in the "Barbie Collectibles" department. MGA liked the idea and Bryant signed a consulting agreement with MGA. Bryant gave Mattel notice but before his employment ended, he provided preliminary sketches and prepared a preliminary sculpt for the Bratz to MGA. MGA subsequently released the Bratz dolls, which apparently were a huge success.
When Mattel learned of Bryant's involvement with the Bratz, the lawsuits began. Those consolidated proceedings were ultimately divided into two phases with phase 1 addressing ownership claims relating to the Bratz. The present appeal dealt with equitable orders entered by the District Court at the conclusion of phase 1. (Phase 2 was pending and would deal with the remaining claims.)
In phase 1, the jury found that Bryant thought of the "Bratz" and "Jade" names and created the preliminary sketches and sculpt while employed by Mattel. Along with a finding that MGA committed three state-law violations relating to Bryant's involvement with the Bratz, the jury found MGA liable for copyright infringement and awarded Mattel $10 million in damages (compared to the more than $1 billion Mattel apparently had sought).
Based on these jury findings, the District Court entered equitable orders. With respect to the state-law violations, the court imposed a constructive trust over all the trademarks, effectively transferring MGA's Bratz trademark portfolio to Mattel. And with respect to the copyright claim, the court enjoined MGA from producing or marketing essentially all Bratz female dolls and any future dolls substantially similar to the copyrighted Bratz works. "In effect, Barbie captured the Bratz."
The Ninth Circuit vacated the constructive trust imposed over all Bratz-related trademarks finding that it was overbroad. The Ninth Circuit questioned whether Bryant assigned his "ideas" for the Bratz to Mattel under his employment agreement. The agreement assigned "inventions" to Mattel which were defined to include a number of items but not specifically "ideas." Although the agreement could be interpreted to include ideas, the Ninth Circuit concluded that the District Court erred in finding that it clearly covered ideas. But the Ninth Circuit left the issue to be addressed by the trial court on remand because it vacated the constructive trust on other grounds.
The Ninth Circuit ultimately vacated the constructive trust on the ground that it was overbroad because it transferred the entire Bratz trademark portfolio to Mattel despite the fact that the value of the brand had been significantly increased by MGA's own efforts:
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 misappropriated names. The district court's imposition of a constructive trust forcing MGA to hand over its sweat equity was an abuse of discretion and must be vacated.
The Ninth Circuit also vacated the District Court's injunction on the copyright claim, which enjoined MGA from producing the Bratz dolls or any other substantially similar dolls. The Ninth Circuit concluded that the District Court had erred in holding that Bryant's employment agreement with Mattel clearly assigned works made outside the scope of Bryant's employment. Rather, because the agreement was ambiguous (stating that he assigned inventions created "at any time during my employment by the Company"), the issue should have been submitted to the jury. That error was sufficient to require vacating the copyright injunction.
In light of its decision vacating the equitable orders and remanding for essentially a do-over, the Ninth Circuit also addressed MGA's appeal of the District Court's copyright rulings. Specifically, the Ninth Circuit discussed the trial court's decision with respect to the scope of copyright protection afforded the Bratz sketches and sculpt created by Bryant (assuming for purposes of the discussion that Mattel owned those works). In particular, the court focused on the distinction between an idea and a particular expression of an idea; the latter is protected by copyright while the former is not.
As to the doll sculpt, the Ninth Circuit concluded that the District Court had erred in affording broad protection to it and instead held that it was entitled to only "thin" protection against virtually identical copying.
As to the sketches, although the Ninth Circuit agreed with the District Court's conclusion that they were entitled to broad copyright protection against substantially similar works, it held that the trial court erred in failing to filter out all of the unprotectable elements of the sketches. Specifically, the Ninth Circuit held that "Mattel can't claim a monopoly over fashion dolls with a bratty look or attitude, or dolls sporting trendy clothing--these are all unprotectable ideas."
Chief Judge Kozinski concluded the opinion with another Barbie reference: "America thrives on competition; Barbie, the all-American girl, will too."
The case cite is Mattel, Inc. v. MGA Entm't, Inc., No. 09-55673 (9th Cir. July 22, 2010).
