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BARBIE V. BRATZ
(MATTEL INC. V. MGA ENTERTAINMENT
INC.)
Prepared for Innovators Network by:
Nikolai & Mersereau, P.A.
900 Second Avenue South, Suite 820
Minneapolis, MN 55402(612) 339-7461
www.nm-iplaw.com
Nikolai & Mersereau, P.A. 2008
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ABOUT THE PRESENTERSNikolai & Mersereau, P.A. is a full service IP firm located inMinneapolis, Minnesota. The firm represents individuals andbusinesses of all sizes in divergent technical areas.
Jim Nikolai has practiced intellectual property law since 1982focusing on IP litigation, licensing, product and trademark
clearance, and helping clients develop and implementcomprehensive IP strategies. Jims leadership and experience inthe area of patent litigation was recognized by the judges of theU.S. District Court for the District of Minnesota when theyappointed him to serve on the Courts Patent AdvisoryCommittee which recommended new procedural rules used bythe Court in patent cases.
Phone: (612)392-7302 Email:[email protected]
After serving in the U.S. Navy aboard two fast attack nuclearsubmarines, Jim Paige earned an electrical engineering degree
from Iowa State University and his law degree from DrakeUniversity, graduating with honors from both institutions.Since 2001, Jim has worked extensively on the protection ofmedical device, signal processing, communication and digitalmicroelectronic technologies. Jim was recognized as a RisingStar in the field of IP law by Minnesota Law & Politicsmagazine in 2005.
Phone: (612)392-7310 Email: [email protected]
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UNDISPUTED FACTS
Ruth Handler created Barbie in 1959 andco-founded Mattel, Inc.
Thanks to Barbie, Mattel is now the
largest toy company in the worldCarter Bryant worked for Mattel
Bryant left Mattels employment
Bryant joined MGA Entertainment
Bryant developed the Bratz concept
MGA introduced the Bratz line in 2001
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WHY THE FIGHT?
Mattel had $5.9 billion in sales last year--Mattel, Inc. 10K Report
Barbie comprises 21% of Mattels sales--
Bloomberg.com, May 13, 2008Barbie sales are dropping--Los Angeles
Times, May 27, 2008
Bratz is the most serious competitivethreat that Barbie has faced in its almost
50-year life--Sean McGowanBryant paid $30 million in royalties--Minneapolis Star Tribune, June 6, 2008
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LEGAL CONTENTIONS
Mattel v. Bryant
y Bryant assisted MGA in violation of his contractual
and other duties to Mattel
Bryant v. Mattely Mattels Confidential and Proprietary Inventions
Agreements are invalid
y Bryants conveyance of the rights in Bratz to MGA
was proper and did not misappropriate Mattels
rights
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LEGAL CONTENTIONS
(CONTINUED)
Mattel v. MGA
y Copyright infringement
y RICO violations
y Trade secret misappropriation
y Intentional interference with a contract
y Aiding and abetting breach of fiduciary duties
breach of duty of loyalty
y Unfair competition
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LEGAL CONTENTIONS
(CONTINUED)
MGA v. Mattel
y Trade dress infringement
y Trade dress dilution
y
False designation of originy Unfair competition
y Unjust enrichment
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WHAT INTELLECTUALPROPERTY LEGAL
CONTENTIONSHAVE NOT
BEEN MADE?
Patent infringement
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MATTEL
When relying on employee ideas to further
business
y Implement idea or invention disclosure notebooks
Require the notebooks be secured or turned in regularly
Require all ideas to be within the notebook
Require the notebook to be turned in upon termination of
employee (perhaps confiscate before termination)
y Implement an employee agreement
Agreement clearly lays out all IP developed during
employment related to employment is Mattels property
Further, all IP related to employment after the employee
leaves could also potentially be Mattels
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MATTEL Prevent idea theft by competitors
y Develop a non-compete agreement for all employees Make sure agreement is reasonable in time (less than 3 years),
scope (employees job at Mattel), and geography (local v. nationalcompany)
y Develop a non-disclosure agreement for all employees
y Develop trade secret protection protocol Limit employees who have access to trade secrets
Ensure trade secrets are kept in a protected place
Protect copyrightsy Mark materials with copyright notice
y Insist on work for hire agreements with consultants
y
Implement and enforce registration guidelines Protect trademarks, trade names, trade dress and service
marksy Clearances for proposed marks
y Applications for registration
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MATTEL
Patentingy Develop an internal patenting process
Reward system for employees obtaining patents for thecompany
Managerial review of patent submissions to weed out
patent submissions of no value to company Develop patent board to determine what patents get filed
Create Standards (e.g.)
y 75% of high value submissions get filed
y 50% of medium value submissions get filed
y 25% of low value submissions get filed (this helps prevent thewild card idea from getting away)
Consider types of patents available (apparatus, method,process, design, plant, etc.)
Match foreign filing strategy to important markets orpotentially important future markets
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BRYANT & MGAWhen hiring a competitors employee
y Check non-compete agreementsy Check non-disclosure obligations
Statutory Contractual
y Check employees invention assignment obligationsy Check prior employers rights to employees work
producty Check to make sure the employee has left all documents
of the prior employer behindy Restrict the employee to duties negating inevitable
disclosure of prior employers trade secretsy
Document ground rules for employee to follow: No recruiting No use of prior employers IP Keep clear and thorough documentation of work to show
where and how it was performed
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BRYANT & MGA
When introducing a product
y Is there interfering IP
Patents
CopyrightsTrademarks
y How can IP of others be avoided
y Licenses
Is there IP that needs to be licensedFrom whom
y Is IP protection strategy in place
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BRYANT & MGA
IP protection strategy
y What IP is potentially available Patent
Trademark/service mark/trade dress
Copyright Trade secrets
y Where should protection be sought
y What are the deadlines
y Who will manage the effort
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REMEDIES
Patenty Injunction
y Lost profits/reasonableroyalty
y Triple damages
y Costs and attorney fees Copyright
y Injunction
y Owners damages andprofits of the infringer
y Statutory damages
y
Costs and attorney feesy Criminal sanctions
imprisonment and fines
Trademarky Injunction
y Owners damages andprofits of the infringer
y Triple damages
y Costs and attorney fees Trade secret
y Injunction
y Damages/unjustenrichment/reasonableroyalty
y Double damages
y Costs and attorney fees
y Criminal sanctions10years in prison, $5 millionin fines
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INTELLECTUAL
PROPERTY
It is all about risk and return
y Reducing risk that others will be able to keep youfrom not receiving full return on investment
y Increasing risk to others who might try to reap profitsfrom your development efforts
Mattel and MGA each have tied their future totheir intellectual property rights
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WHOWON?
Liability Verdict (July 17, 2008)
y MGA found liable on 15 of 15 counts
Damages Verdict (August 26, 2008)
MGAMGA LarianLarian MGA HongMGA Hong
KongKongIntentional Interference with ContractualIntentional Interference with ContractualRelationsRelations
$ 20,000,000$ 20,000,000 $ 10,000,000$ 10,000,000
Aiding and Abetting Breach of FiduciaryAiding and Abetting Breach of FiduciaryDutyDuty
$ 20,000,000$ 20,000,000 $ 10,000,000$ 10,000,000
Aiding and Abetting Breach of Duty ofAiding and Abetting Breach of Duty of
LoyaltyLoyalty
$ 20,000,000$ 20,000,000 $ 10,000,000$ 10,000,000
ConversionConversion $ 31,500$ 31,500
CopyrightInfringementCopyrightInfringement $ 6,000,000$ 6,000,000 $ 3,000,000$ 3,000,000 $ 1,000,000$ 1,000,000
TOTALTOTAL $ 66,031,500$ 66,031,500 $ 33,000,000$ 33,000,000 $ 1,000,000$ 1,000,000