In a stunning reversal of fortune that could have a significant impact on intellectual property assignment provisions in employment contracts, a federal jury in California sided with upstart MGA in its long-running dispute with toy giant Mattel over rights to the Bratz line of dolls. Mattel claimed that it was entitled to the copyright for the Bratz collection – a provocative Barbie alternative that hit $1 billion in annual sales at the height of its popularity in the mid 2000s – under an employment agreement with the inventor, a former Mattel employee who later joined MGA. The inventor generated the idea for the dolls – including sketches and a rough model – while still employed by Mattel. Under the terms of his employment contract, he assigned to Mattel rights to “all inventions…conceived…at any time during my employment by the Company.”
Mattel previously secured a $10 million award and permanent injunction in federal district court giving it all rights to the Bratz collection. The Ninth Circuit vacated that judgment, however, and remanded for a new trial. Today, the outcome of that new trial was announced, and the jury not only rejected Mattel’s claims, but also awarded MGA $88.5 million in damages for Mattel’s theft of MGA’s trade secrets.
While the jury’s 28-page verdict has yet to be released, two key issues were disputed in the case. First, MGA argued that the term “inventions” did not include ideas, but only more concrete creations. The term was defined by the agreement as including “all discoveries, improvements, processes, developments, designs, know-how, data computer programs and formulae, whether patentable or unpatentable.” The federal judge originally granted summary judgment against MGA and found that the agreement unambiguously assigned rights to ideas to the inventor’s employer, Mattel. The Ninth Circuit later reversed and held that the question should have been committed to the jury.
The second key issue was whether the phrase “at any time during my employment” should limit Mattel’s rights to works created in the scope of the inventor’s employment. MGA alleged that the concept for the doll came to the inventor during his free time, and that it was therefore outside the assignment provision. The Ninth Circuit likewise reversed the district court judge’s summary judgment ruling on this issue, reasoning that the language was appropriately a question for the jury.
Today, after considering these issues, the jury responded unequivocally in favor of MGA.
The lesson? Employment agreements assigning rights to intellectual property must be absolutely clear in scope – including the use of terms of art such as “copyright,” “inventions,” “ideas” and “scope of employment.” Without such clarity, courts will leave the interpretation of such provisions to the jury – where the results, as the Bratz case demonstrates, are a roll of the dice.