Orange County – U.S. toy-maker Mattel has recently been dealt a serious blow in an ongoing copyright infringement lawsuit over the “Bratz” doll line.  Competing toy-maker MGA Entertainment was awarded nearly $88.5 million in damages after a retrial determined that it did not infringe on Mattel’s copyright.  The judge in the case also holds the power to triple the damages against Mattel over its alleged willful misconduct and intentional theft of trade secrets.

In the original copyright infringement complaint filed by Mattel against MGA, a southern California jury ruled in favor of Mattel, awarding it $100 million in damages.  Mattel maintained that “Bratz” designer Carter Bryant developed the idea for the popular dolls while working as an employee for Mattel, thereby making Mattel the owner of the sketches.  It also accused Bryant of secretly sharing the designs with MGA, which allegedly developed the first line of “Bratz” while hiding Bryant’s involvement.  Bryant insists that he thought of the idea for the dolls while living with his parents in Missouri.  He also maintains that he worked for Mattel intermittently before and after he came up with the idea.

After a lengthy appeals process, U.S. Circuit Court of Appeals in San Francisco overturned the $100 million verdict and ordered a retrial ruling that a southern California judge had mistakenly determined that an employment agreement between Mattel and Carter Bryant gave Mattel sole ownership of the “Bratz” copyright.  Just minutes after the verdict was read, Mattel’s stock (MAT) price fell 2.3 percent on the NASDAQ to close at $26.67 Thursday.

This case highlights the importance of employee agreements covering creative works.  Companies should also have all independent contractors sign work for hire/assignment agreements which clearly indicate that the commissioned work will be the property of the business, not the creator.