IN Slidecast: Battle of Dolls, Barbie vs Bratz


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A look at the ongoing battles between the makers of Barbie and Bratz dolls, and what startups can learn from them. Jim Nikolai and Jim Paige discuss this ongoing legal battle and what startups should know about intellectual property strategy around new products.

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IN Slidecast: Battle of Dolls, Barbie vs Bratz

  1. 1. 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 © Nikolai & Mersereau, P.A. 2008
  2. 2. ABOUT THE PRESENTERS <ul><li>Nikolai & Mersereau, P.A. is a full service IP firm located in Minneapolis, Minnesota. The firm represents individuals and businesses of all sizes in divergent technical areas. </li></ul><ul><li>Jim Nikolai has practiced intellectual property law since 1982 focusing on IP litigation, licensing, product and trademark clearance, and helping clients develop and implement comprehensive IP strategies. Jim’s leadership and experience in the area of patent litigation was recognized by the judges of the U.S. District Court for the District of Minnesota when they appointed him to serve on the Court’s Patent Advisory Committee which recommended new procedural rules used by the Court in patent cases. </li></ul><ul><li>Phone: (612)392-7302 Email: [email_address] </li></ul><ul><li>After serving in the U.S. Navy aboard two fast attack nuclear submarines, Jim Paige earned an electrical engineering degree from Iowa State University and his law degree from Drake University, graduating with honors from both institutions. Since 2001, Jim has worked extensively on the protection of medical device, signal processing, communication and digital microelectronic technologies. Jim was recognized as a “Rising Star” in the field of IP law by Minnesota Law & Politics magazine in 2005. </li></ul><ul><li>Phone: (612)392-7310 Email: J [email_address] </li></ul>
  3. 3. UNDISPUTED FACTS <ul><li>Ruth Handler created Barbie in 1959 and co-founded Mattel, Inc. </li></ul><ul><li>Thanks to Barbie, Mattel is now the largest toy company in the world </li></ul><ul><li>Carter Bryant worked for Mattel </li></ul><ul><li>Bryant left Mattel’s employment </li></ul><ul><li>Bryant joined MGA Entertainment </li></ul><ul><li>Bryant developed the Bratz concept </li></ul><ul><li>MGA introduced the Bratz line in 2001 </li></ul>
  4. 4. WHY THE FIGHT? <ul><li>Mattel had $5.9 billion in sales last year--Mattel, Inc. 10K Report </li></ul><ul><li>Barbie comprises 21% of Mattel’s, May 13, 2008 </li></ul><ul><li>Barbie sales are dropping-- Los Angeles Times , May 27, 2008 </li></ul><ul><li>“ Bratz is … the most serious competitive threat that Barbie has faced in its almost 50-year life”--Sean McGowan </li></ul><ul><li>Bryant paid $30 million in royalties-- Minneapolis Star Tribune , June 6, 2008 </li></ul>
  5. 5. LEGAL CONTENTIONS <ul><li>Mattel v. Bryant </li></ul><ul><ul><li>Bryant assisted MGA in violation of his contractual and other duties to Mattel </li></ul></ul><ul><li>Bryant v. Mattel </li></ul><ul><ul><li>Mattel’s Confidential and Proprietary Inventions Agreements are invalid </li></ul></ul><ul><ul><li>Bryant’s conveyance of the rights in Bratz to MGA was proper and did not misappropriate Mattel’s rights </li></ul></ul>
  6. 6. LEGAL CONTENTIONS (CONTINUED) <ul><li>Mattel v. MGA </li></ul><ul><ul><li>Copyright infringement </li></ul></ul><ul><ul><li>RICO violations </li></ul></ul><ul><ul><li>Trade secret misappropriation </li></ul></ul><ul><ul><li>Intentional interference with a contract </li></ul></ul><ul><ul><li>Aiding and abetting </li></ul></ul><ul><ul><ul><li>breach of fiduciary duties </li></ul></ul></ul><ul><ul><ul><li>breach of duty of loyalty </li></ul></ul></ul><ul><ul><li>Unfair competition </li></ul></ul>
  7. 7. LEGAL CONTENTIONS (CONTINUED) <ul><li>MGA v. Mattel </li></ul><ul><ul><li>Trade dress infringement </li></ul></ul><ul><ul><li>Trade dress dilution </li></ul></ul><ul><ul><li>False designation of origin </li></ul></ul><ul><ul><li>Unfair competition </li></ul></ul><ul><ul><li>Unjust enrichment </li></ul></ul>
  9. 9. MATTEL <ul><li>When relying on employee ideas to further business </li></ul><ul><ul><li>Implement “idea” or “invention disclosure” notebooks </li></ul></ul><ul><ul><ul><li>Require the notebooks be secured or turned in regularly </li></ul></ul></ul><ul><ul><ul><li>Require all “ideas” to be within the notebook </li></ul></ul></ul><ul><ul><ul><li>Require the notebook to be turned in upon termination of employee (perhaps confiscate before termination) </li></ul></ul></ul><ul><ul><li>Implement an employee agreement </li></ul></ul><ul><ul><ul><li>Agreement clearly lays out all IP developed during employment related to employment is Mattel’s property </li></ul></ul></ul><ul><ul><ul><li>Further, all IP related to employment after the employee leaves could also potentially be Mattel’s </li></ul></ul></ul>
  10. 10. MATTEL <ul><li>Prevent idea theft by competitors </li></ul><ul><ul><li>Develop a non-compete agreement for all employees </li></ul></ul><ul><ul><ul><li>Make sure agreement is reasonable in time (less than 3 years), scope (employee’s job at Mattel), and geography (local v. national company) </li></ul></ul></ul><ul><ul><li>Develop a non-disclosure agreement for all employees </li></ul></ul><ul><ul><li>Develop trade secret protection protocol </li></ul></ul><ul><ul><ul><li>Limit employees who have access to trade secrets </li></ul></ul></ul><ul><ul><ul><li>Ensure trade secrets are kept in a protected place </li></ul></ul></ul><ul><li>Protect copyrights </li></ul><ul><ul><li>Mark materials with copyright notice </li></ul></ul><ul><ul><li>Insist on “work for hire” agreements with consultants </li></ul></ul><ul><ul><li>Implement and enforce registration guidelines </li></ul></ul><ul><li>Protect trademarks, trade names, trade dress and service marks </li></ul><ul><ul><li>Clearances for proposed marks </li></ul></ul><ul><ul><li>Applications for registration </li></ul></ul>
  11. 11. MATTEL <ul><li>Patenting </li></ul><ul><ul><li>Develop an internal patenting process </li></ul></ul><ul><ul><ul><li>Reward system for employees obtaining patents for the company </li></ul></ul></ul><ul><ul><ul><li>Managerial review of patent submissions to weed out patent submissions of no value to company </li></ul></ul></ul><ul><ul><ul><li>Develop patent board to determine what patents get filed </li></ul></ul></ul><ul><ul><ul><ul><li>Create Standards (e.g.) </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>75% of high value submissions get filed </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>50% of medium value submissions get filed </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>25% of low value submissions get filed (this helps prevent the “wild card” idea from getting away) </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Consider types of patents available (apparatus, method, process, design, plant, etc.) </li></ul></ul></ul><ul><ul><ul><li>Match foreign filing strategy to important markets or potentially important future markets </li></ul></ul></ul>
  12. 12. BRYANT & MGA <ul><li>When hiring a competitor’s employee </li></ul><ul><ul><li>Check non-compete agreements </li></ul></ul><ul><ul><li>Check non-disclosure obligations </li></ul></ul><ul><ul><ul><li>Statutory </li></ul></ul></ul><ul><ul><ul><li>Contractual </li></ul></ul></ul><ul><ul><li>Check employee’s invention assignment obligations </li></ul></ul><ul><ul><li>Check prior employer’s rights to employee’s work product </li></ul></ul><ul><ul><li>Check to make sure the employee has left all documents of the prior employer behind </li></ul></ul><ul><ul><li>Restrict the employee to duties negating inevitable disclosure of prior employer’s trade secrets </li></ul></ul><ul><ul><li>Document ground rules for employee to follow: </li></ul></ul><ul><ul><ul><li>No recruiting </li></ul></ul></ul><ul><ul><ul><li>No use of prior employer’s IP </li></ul></ul></ul><ul><ul><ul><li>Keep clear and thorough documentation of work to show where and how it was performed </li></ul></ul></ul>
  13. 13. BRYANT & MGA <ul><li>When introducing a product </li></ul><ul><ul><li>Is there interfering IP </li></ul></ul><ul><ul><ul><li>Patents </li></ul></ul></ul><ul><ul><ul><li>Copyrights </li></ul></ul></ul><ul><ul><ul><li>Trademarks </li></ul></ul></ul><ul><ul><li>How can IP of others be avoided </li></ul></ul><ul><ul><li>Licenses </li></ul></ul><ul><ul><ul><li>Is there IP that needs to be licensed </li></ul></ul></ul><ul><ul><ul><li>From whom </li></ul></ul></ul><ul><ul><li>Is IP protection strategy in place </li></ul></ul>
  14. 14. BRYANT & MGA <ul><li>IP protection strategy </li></ul><ul><ul><li>What IP is potentially available </li></ul></ul><ul><ul><ul><li>Patent </li></ul></ul></ul><ul><ul><ul><li>Trademark/service mark/trade dress </li></ul></ul></ul><ul><ul><ul><li>Copyright </li></ul></ul></ul><ul><ul><ul><li>Trade secrets </li></ul></ul></ul><ul><ul><li>Where should protection be sought </li></ul></ul><ul><ul><li>What are the deadlines </li></ul></ul><ul><ul><li>Who will manage the effort </li></ul></ul>
  15. 15. REMEDIES <ul><li>Patent </li></ul><ul><ul><li>Injunction </li></ul></ul><ul><ul><li>Lost profits/reasonable royalty </li></ul></ul><ul><ul><li>Triple damages </li></ul></ul><ul><ul><li>Costs and attorney fees </li></ul></ul><ul><li>Copyright </li></ul><ul><ul><li>Injunction </li></ul></ul><ul><ul><li>Owner’s damages and profits of the infringer </li></ul></ul><ul><ul><li>Statutory damages </li></ul></ul><ul><ul><li>Costs and attorney fees </li></ul></ul><ul><ul><li>Criminal sanctions—imprisonment and fines </li></ul></ul><ul><li>Trademark </li></ul><ul><ul><li>Injunction </li></ul></ul><ul><ul><li>Owner’s damages and profits of the infringer </li></ul></ul><ul><ul><li>Triple damages </li></ul></ul><ul><ul><li>Costs and attorney fees </li></ul></ul><ul><li>Trade secret </li></ul><ul><ul><li>Injunction </li></ul></ul><ul><ul><li>Damages/unjust enrichment/reasonable royalty </li></ul></ul><ul><ul><li>Double damages </li></ul></ul><ul><ul><li>Costs and attorney fees </li></ul></ul><ul><ul><li>Criminal sanctions—10 years in prison, $5 million in fines </li></ul></ul>
  16. 16. INTELLECTUAL PROPERTY <ul><li>It is all about risk and return </li></ul><ul><ul><li>Reducing risk that others will be able to keep you from not receiving full return on investment </li></ul></ul><ul><ul><li>Increasing risk to others who might try to reap profits from your development efforts </li></ul></ul><ul><li>Mattel and MGA each have tied their future to their intellectual property rights </li></ul>
  17. 17. WHO WON? <ul><li>Liability Verdict (July 17, 2008) </li></ul><ul><ul><li>MGA found liable on 15 of 15 counts </li></ul></ul><ul><li>Damages Verdict (August 26, 2008) </li></ul>MGA Larian MGA Hong Kong Intentional Interference with Contractual Relations $ 20,000,000 $ 10,000,000 Aiding and Abetting Breach of Fiduciary Duty $ 20,000,000 $ 10,000,000 Aiding and Abetting Breach of Duty of Loyalty $ 20,000,000 $ 10,000,000 Conversion $ 31,500 Copyright Infringement $ 6,000,000 $ 3,000,000 $ 1,000,000 TOTAL $ 66,031,500 $ 33,000,000 $ 1,000,000