Toy giant Mattel Inc. can’t claim a monopoly over dolls with a bratty attitude, and the rival company that developed the Bratz line deserves its fair share of the dolls’ success, a federal appeals court ruled Thursday.
The decision reversed the copyright victory scored two years ago in the battle over who owns the billion-dollar Bratz — Mattel, which employed the inventor while he did early development of the pouty plastic figures, or MGA Entertainment Inc., which later hired him and went on to produce the brand.
Mattel, whose Barbie dolls ruled the world’s toy chests and play houses for half a century, had been awarded $100 million in damages ($10 million of it for copyright infringement) and ownership of the trademark rights to all Bratz dolls after a 2008 jury trial. The lower court had found that the inventor, Carter Bryant, had violated his contract with Mattel by taking the idea with him when he left the company.
MGA, based in Van Nuys, was ordered by a federal judge to transfer all products, proceeds and other assets to a trust created for Mattel. MGA appealed, leading to Thursday’s decision by a three-judge panel of the U.S. 9th Circuit Court of Appeals.
While an employee of El Segundo-based Mattel, Barbie designer Bryant developed the Bratz dolls, worked up sketches and made at least one mockup of four flirty girls with hot clothes and heavy makeup. Bryant had called his line Bratz and named one of the first four dolls Jade — names that eventually made it to market on MGA products.
Although MGA violated Mattel’s copyrights to some degree, MGA developed the dolls into a phenomenal success and is entitled to its “sweat equity,” the appeals panel said.
“Mattel can’t claim a monopoly over fashion dolls with a bratty look or attitude, or dolls sporting trendy clothing — these were all unprotectable ideas,” the panel headed by 9th Circuit Chief Judge Alex Kozinski ruled.
The judges also sent the case back to federal district court to determine a more fair disposition of the Bratz property, saying “it was not equitable to transfer this billion-dollar brand — the value of which was overwhelmingly the result of MGA’s legitimate efforts — because it might have started with two misappropriated names.”
Each dollmaker said it expected to ultimately prevail in the ownership battle.
“We are confident that when the correct legal standards are applied, that it will be determined that MGA and [Chief Executive] Isaac Larian did nothing wrong and are the true owners of the Bratz brand,” MGA attorney Thomas J. Nolan said of the appeals court ruling. He said the company would oppose any retrial.
Larian said in an interview that he was “sad that a big corporation with a lot of resources and connections everywhere can try to come and put smaller companies out of business.”
He said MGA was prepared for a retrial and added that it would launch a new line of Bratz products in August.
Mattel issued a statement saying it looked forward to “a full trial on all of Mattel’s claims against MGA” and expressed confidence that the judicial system would “right the wrongs that Mattel has suffered.”
Shares of Mattel rose 39 cents, or 1.9%, to $21.05 on Thursday.
Toy analyst Sean McGowan of Needham & Co. said the ruling in MGA’s favor may be too little, too late.
“Retailers are going to treat this property like it’s radioactive until it’s clear who owns it,” he said. “The retailers have moved on; to some extent, the kids have moved on.”
Mattel can afford another clash in the courtroom better than MGA can, but it may decide against fighting for “a brand that’s almost gone,” McGowan said.
“The other purpose was to send a message,” he said. “That message has been sent: Mattel will rigorously defend its intellectual property.”
In a lively opinion written by Kozinski, the panel cast the copyright battle as a clash of the conventional Barbie with the cocky newcomer Bratz.
“Barbie was the unrivaled queen of the fashion-doll market throughout the latter half of the 20th century. But 2001 saw the introduction of Bratz, ‘The Girls With a Passion for Fashion!’” the appeals panel ruling begins. “Unlike the relatively demure Barbie, the urban, multiethnic and trendy Bratz dolls have attitude.”
After detailing the lower court’s errors in ceding all rights to Mattel, Kozinski observed that a new trial might be necessary to determine rightful ownership.
“America thrives on competition,” the ruling concludes. “Barbie, the all-American girl, will too.”