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BRATZ DOLLS ON INTELLECTUAL PROPERTY SPREE- CRITICAL ANALYSIS OF MATTEL INCORPORATED V. MGA ENTERTAI

INTRODUCTION

Who is the owner? The landmark judgement of Mattel Inc. v. MGA Entertainment Inc. is an epitome of intellectual property dispute dealing with the matter of ownership of Bratz dolls. Barbie being the queen of the fashion doll industry, faced a setback when Bratz dolls entered the market. Bratz dolls, having a funky and sassy attitude, led them to achieve greater heights in a short period, which made them arch-enemy with Barbie. Mattel, the owner of Barbie, was conspicuously unhappy because it was one of his employees, named Carter Bryant, who sold the very idea and the sculpts of Bratz dolls to his nemesis. This ended up Mattel filing a lawsuit claiming the right over the Bratz dolls, against MGA Entertainment and Bryant and trapping itself in a whirlpool of trials.

This article analyses the case of Mattel Inc. v. MGA Entertainment Inc. by providing insights into the issues related to intellectual property, scrutinizing the observation, and the ratio of the case, followed by the views of the judgement given by the court. The author also attempted to give the ideal solution by mitigating the harm caused to the parties.

BACKGROUND

FACTS:

Mattel, the owner of Barbie, entered into an employment contract with Carter Bryant, which included a non-competing clause and stated that while working with Mattel, he would not engage himself or assist any rival firms. It further emphasised that all the rights, titles, and interests that Bryant had in the inventions conceived during employment belonged to Mattel. Later, in 2000 while employed under Mattel, Bryant came up with the innovative idea of Bratz dolls and approached MGA Entertainment with some sketches and a crude dummy to convince them to buy the idea. On October 4, 2000, Bryant entered into a consulting agreement with MGA to grant the rights of Bratz. He then later gave two weeks’ notice to Mattel. During that period, Bryant was involved in developing Bratz dolls and even created a sculpt. When Mattel came to know about Bryant’s breach of contract, he sued Bryant and MGA Entertainment, which leads to multiple lawsuits.

Mattel claimed a breach of contract, breach of duty of loyalty, and wrongful interference of a contract. But significantly, he claimed that being the rightful owner of Bratz dolls, there has been a copyright infringement as regards the sketches and sculpts and misappropriation of trade secrets. The district court was convinced and passed the judgement in favour of Mattel by granting equitable relief. The court imposed a constructive trust over all trademarks and asked to transfer the Bratz trademark to Mattel by providing an injunction to MGA from producing or using the Bratz dolls trademark. MGA, aggrieved by the said decision, approached the higher court. Now the question that arises is whether the decision taken by the district court was on ambiguous grounds as the agreement between Bryant and Mattel did not clearly state the rights confirming the ‘ideas’ to be included within the purview of the contract and what ideas can be protected under the copyright act. Further, there laid a dispute regarding whether the sculpts or the sketches made by Bryant were accepted in entirety by MGA, leading to a case of copyright infringement. Also, the court is obliged to see whether there was a breach of California’s Uniform Trade Secrets Act.

ISSUES:

Though the case deals with several questions regarding the jurisdiction, unjust enrichment, unfair competition, unfair business practices, etc., as far as the subject matter is concerned, we will only delve into the questions related to intellectual property.

Copyright Infringement

The fundamental issue that arose between Mattel and MGA Entertainment was that of copyright infringement. Mattel argued that it had copyright over Bryant’s sketches and sculptures as they were furnished during his employment period with Mattel. The subsequent production of Bratz dolls by MGA without prior acknowledgment infringed his copyrights. Though initially, the district court ruled in favour of Mattel and granted the constructive trust to it. Still, it lacked precision in determining what is protected and unprotected, under copyright law, when there are similarities between the copyrighted and the disputed works. To prove the existence of copyright infringement, three things have to be looked upon: 1) it has to be proved by Mattel that it was entitled to the copyrights for the sketches and the sculpts 2) it is to be observed whether MGA had access to the sketches and the sculpts and 3) it is to be proved that the dolls produced by MGA, infringed the copyrighted work by adding the original elements in the dolls. The court was disputed on the ground that the dolls were the result of copying the original elements or not. The general rule is that for proving the existence of copyright infringement, Mattel should substantiate that MGA had particularly expressed the idea in the Bratz dolls and not merely taken the idea itself. The fact that the ideas for a particular form a general view cannot be protected under the copyright law is largely unoriginal. The court distinguished between the ideas that are not permissible for protection from copyright infringement and the expression of ideas that are protected. Thus, the court devised a system of extrinsic/ intrinsic test to determine the question.

As far as the extrinsic test is concerned, the court has to objectively examine the similar elements present in the copyrighted and the disputed works or articulating commonalities between the ideas and the expression and whether they are protected or not. After separating the unprotected elements like underlying ideas at large, then the remaining original expression of ideas are to be protected under copyright law. The rule further elaborates that the expression of ideas can be undertaken either in many ways forming ‘broad’ copyright protection or few creating ‘thin’ protection. While in the former case, if ‘substantial similarity’ is found between both the works, then it will infringe the rights of the copyright owner as opposed to the latter case where infringement will occur only if it is ‘virtually similar’ to the copyrighted work. After applying the rule, it could be inferred that the notion of an idealised, fashionista doll having exaggerated features like large head and feet as incorporated in Bratz dolls was an uncommon idea. Though the district court held that Bratz dolls would be included within the ‘broad’ scope of protection as there are many ways one could express the idea of exaggerated features. But it overlooked the fact that one cannot exaggerate the features beyond a certain limit, thus making the scope of protection ‘thin’ in itself. Therefore, by applying the concept of ‘virtually similar’, the Bratz dolls do not infringe the copyrighted work.

Talking about the sketches of Bratz, though Ninth Circuit acknowledged the observation of the district court regarding the broad range of ideas and thus be protected under copyright law, it observed that the court failed to separate the unprotected elements from the protected ones. To be protected against copyright infringement, the law looks into matters where there is ‘substantial similarity’ between the copyrighted and disputed works rather than engaging in matters having ‘similar’ elements. Thus, there should be the presence of a similar expression of ideas as opposed to ideas only. The Ninth Circuit observed that though the first generation dolls could be categorized as ‘substantially similar’ to the drawings, this could not be inferred from the subsequent generations; therefore, the district court erred in its decision.

Another issue that arose was related to the period when Bryant worked on Bratz dolls. Mattel claimed that the dolls were invented during employment and thence the copyright to the dolls belonged to Mattel itself. The employment agreement stated, “at any time during my employment,” which could be interpreted in two ways. Either the works which are produced during the working hours of the company or the inventions created during the entire course of employment, including weekends and nights. Further, MGA argued that Bryant was given hairstyling and fashion designing and did not include new dolls. The extrinsic evidence was ambiguous, and the district court’s decision was faulty.

Misappropriation of trade secrets and infringement of trade dress

Mattel alleged that MGA, along with some of its employees, acquired, used, and published its trade secrets related to documents, designs, names, etc. For a trade secret to be protected under the law (California’s Uniform Trade Secrets Act), it should derive its independent economic value by not being known to the public. Secondly, reasonable efforts should be taken to keep the trade secret a secret in itself. MGA argued that the Bratz concept and the names of the dolls do not fall under the purview of trade secrets as it lacks novelty. Further, it alleged that the documents which form a part of the trade secret were not termed as ‘confidential,’ which proves that Mattel took no reasonable action. Since Mattel failed to provide evidence of its claim, the decision was taken in favor of MGA.

As far as trade dress infringement is concerned, three broad criteria need to be fulfilled. It should be distinctive, the public must be confused due to the infringement, and it should be non-functional. The MGA Entertainment failed to give evidence on trade dress infringement, which ultimately resulted in Mattel’s claims being granted by the court.

At last, since Mattel’s issue of trade secret misappropriation was taken up as a counterclaim, then MGA’s counterclaim-in-reply should be logically related to the counterclaim of Mattel. District court failed to take notice of the same, which was then reversed by the Ninth Circuit.

Faulty Decision Of The District Court Regarding Ownership

Apart from the above discussed faulty decisions taken by the district court, it also includes some other decisions which lacked serious interpretation. The leading issue was whether ‘ideas’ could be interpreted to come within the arena of inventions? The employment agreement stated that all inventions like designs, developments, discoveries, etc. would belong to Mattel. But it did not expressly include ‘ideas’ within its agreement. The ownership of Mattel over the idea of Bratz dolls could only be generated if both Mattel and Bryant consented for the same. The general rule persists that the undisclosed intent is of no use in a contract. Still, in the present case, the agreement is ambiguous. The ideas cannot be treated as part and parcel of the contract as claimed by Mattel because the checkout forms and earlier contracts distinguished between inventions and ideas. It can be inferred that both Bryant and Mattel were oblivious to the fact that ideas were included within the term ‘invention’.

The remedy of constructive trust provided to Mattel was flawed in entirety. A constructive trust is an equitable remedy whereby the wrongfully acquired property is transferred to its rightful owner. The mere issue of ownership of names ‘Bratz’ and ‘Jade’, which should be transferred to Mattel if proved, does not mean it would transfer the entire Bratz line to Mattel. It would be wrong in the garb of justice to transfer the trademark as the whole portfolio of Bratz to Mattel as it contains the hard work of MGA, its development efforts, marketing, and investment. The benefit of MGA’s efforts in enhancing the idea that Mattel should not enjoy the product. Even if the idea belonged to Mattel, MGA could not be asked to give up its portfolio as it was MGA’s labour, efforts, and resources that turned the Bratz line into a million-dollar brand.

Conclusion

The war between Mattel and MGA Entertainment is considered the “largest fee and cost award in a copyright infringement case in US history”. The whirlpool of trials ended up benefitting only the attorneys and not the parties. If the parties had considered a better alternative, they would not have ended up tied in a war with multiple debts. The dispute could have been resolved by communicating through alternative dispute resolution. This strategy would have sorted major disputes in a short period and with much less cost. But, the hesitative decisions by the party lost them a chance to earn benefits from both of them instead of one. This copyright infringement case was considered a landmark case in US history. It laid down various issues related to IP and made the provisions interpretive in the eyes of the law. The constructive interpretation of the law was subjective, which leads to resolving persistent questions regarding copyright disputes. , In the end, Bratz intellectual property spree costed it more than what anyone ever imagined. Was it worth it? The question remained silent.


Title Image Source: Fortune International


This article has been written by Somya Jain, law student at Vivekananda Institute of Professional studies .She takes keen interest in knowing and exploring new horizons of law by occupying herself in conducting competent legal analysis.