Bratz dolls quietly disappeared from toy stores almost a decade ago. One day, the hot-selling dolls were in stores across the country and the next, they were gone. The fast-growing 40-doll variety, known for their almond-shaped eyes, glossy lips, and distinctly of-the-moment wardrobes, were in the spotlight elsewhere: they were at the center of what would become a years-long and multi-billion dollar legal war between their maker, MGA Entertainment, and its much-larger rival, Mattel, the American multi-national toy manufacturer.
Bratz dolls first hit shelves across the U.S. in 2001, and within 5 years, MGA had sold a whopping 125 million products. The demand was striking, and at times, the then-small(ish) Southern California toymaker that is MGA could not keep up. At the height of their success in 2005, Bratz products generated more than $1 billion in annual sales, which, as the Wall Street Journal noted years later, “cut deeply into Mattel’s Barbie doll sales.” MGA’s global sales ultimately reached $2 billion dollars for Bratz toys, alone.
While the Bratz brand was surging in demand, sales for Mattel’s staple Barbie – which account for approximately 20 percent of Mattel’s total revenue, the most of any brand under its expansive umbrella – were falling … and they were falling fast. Between 2005 and 2006, Barbie-related revenues dropped by more than 12 percent. “Without Barbie, Mattel’s sales would have increased by 6.7 percent [from 2005 to 2006],” brokerage firm Harris Nesbit revealed. Instead, they were up by just 1.5 percent to $5.2 billion.
The Bratz dolls were coming for Barbie’s crown, and that was the “one thing [that Mattel] could not afford,” Sean P. McGowan, who tracks the toy industry for Harris Nesbitt, told the New York Times in 2006.
Mattel’s problem was straightforward enough: in a market dominated by provocative, young – and often scantily clad – popstars, like Britney Spears, Christina Aguilera, and Beyoncé, then the lead singer of girl group Destiny’s Child, 40-year old Barbie was outdated.
Unlike the traditional white-washed pinup-girl-inspired Barbie, the Bratz girls were different. For one thing, they were diverse. The original lineup consisted of Chloe, a Caucasian doll; Sasha, an African American girl; Yasmin, a Latina, and Jade, who is Asian. But it was not just that. These dolls managed to embody just the right balance between “fashion and attitude” to attract the attention of girls in the early and mid-2000’s, Jim Silver, a longtime toy industry analyst, told the Times.
More than merely attracting consumers, the Bratz dolls were doing something no other dolls had really been able to: they were successfully rivaling Barbie. By 2006, an estimated 40 percent share of the fashion-doll market belonged to Bratz, and with each sale, the buzzy dolls were actively chipping away at Barbie’s remaining 60 percent.
But beyond the rivals’ battle for market share, another fight was underway.
The Making of the Bratz
It was the late 1990’s when the inspiration hit. Carter Bryant – who had spent his career up to that point designing clothing and accessories for Barbie – saw a group of teens in “little tank tops and T-shirts and sweatshirts and things like that … baggy pants.” Their attire prompted him to conceive of an entirely new doll – one that wasn’t anything like the prim-and-proper Barbie.
Bryant, a 31-year old Springfield, Missouri native, would ultimately sketch out his concepts, including a doll named “Jade,” slap the brand name Bratz on them, and pitch them to MGA. It wasn’t long before he gave his two weeks’ notice to Mattel and jumped ship. In the meantime, MGA launched what would become the multi-billion-dollar Bratz franchise.
Now fast forward to April 2004. Bratz sales were building, Barbie was swiftly falling out of favor, and Mattel was preparing to take the Barbie v. Bratz fight out of the toy aisle and into the courtroom in a string of lawsuits that would swiftly become a multi-billion-dollar legal war. Mattel’s first target? Carter Bryant.
In its complaint, which cited copyright infringement, trade secret misappropriation, and breach of contract, Mattel argued that Bryant had signed an employment contract in which he agreed to assign all of his “inventions” during his employment with Mattel to the toy giant. Because Bryant was employed by Mattel when he conceived of the concept for Bratz, the intellectual property in the dolls were the rightful property of Mattel, the company’s legal team argued before a California state court in the spring of 2004.
Mattel demanded that Bryant be forced to pay upwards of $30 million in exchange for his treachery and the larger scheme of misappropriation and infringement, which extended to everything from his sketches to the names he came up with for the individual dolls.
Bryant responded to the lawsuit with claims of his own. He alleged that the “Employee Confidential and Inventions Agreement” that he had been required to sign before commencing work for Mattel was overly broad and thereby, unenforceable. He also asserted, to his defense, that he first came up with the idea for the Bratz dolls during an 8 month break he took from his employment with Mattel in 1998 before he returned to the company in 1999. As a result, Carter alleged that he was the exclusive holder of the intellectual property rights in the dolls, not Mattel.
The parties managed to settle their differences in 2008, with Bryant reportedly forking over $2 million, just a fraction of the $30 million that he had been paid at that point in royalties from MGA for his work in creating Bratz.
Barbie vs. Bratz
Mattel’s second – and ultimately much more aggressive and deep-pocketed – target was MGA. In a separate suit filed in federal court in California, Mattel sued MGA for a whopping $1 billion and the exclusive rights in the entire Bratz brand. The toy giant alleged that it, alone, was the owner of the Bratz line – from the names of the original dolls to the copyrights that extended to the design of the dolls, themselves. But even more than that, Mattel claimed that MGA had stolen an array of its trade secrets (i.e., its valuable and confidential business information), while it actively bribed and secretly hired active Mattel employees, such as Bryant, for a number of side projects.
MGA swiftly responded with a complaint of its own, asserting that – in reality – it was Mattel that was on the hook for infringing its designs (namely, its Bratz packaging), among other claims.
A California federal judge combined Mattel and MGA’s separate lawsuits into one single matter and the parties’ case went before a jury in the summer of 2008.
In court, Mattel’s legal team told the jury that at the time of the Bratz creation, Bryant was one of its employees, making all rights in the new dolls the property of Mattel. In short, Mattel argued that MGA had built a $1 billion-dollar empire based exclusively on a concept that it had willfully and intentionally stolen from Mattel.
In his closing arguments that summer, John Quinn – an attorney known for his “tough” demeanor – told the jury that as a result of its large-scale scheme of deception and theft, MGA owed Mattel at least $1 billion in damages. In a particularly striking claim, Quinn also argued that MGA’s chief executive officer Isaac Larian, who was named as a defendant in the suit, had actively help to lure Bryant away from Mattel and to breach his contract, and should be forced to pay nearly $800 million from his own pocket for his involvement. It was not enough to make MGA, as a corporate entity, pay for its egregious dealings; Mattel wanted to hit Larian and his wallet, as well.
MGA’s attorneys attempted to persuade the jury otherwise. They reasoned that even if the idea for the Bratz line came from a former Mattel employee, it was MGA – and MGA, alone – that had built the Bratz brand thanks its enormous investment in the branding, packaging, marketing, and distribution. But for MGA, they waxed poetically to the jury members, Bratz would not be the success that it is.
After deliberating amongst themselves, the jury returned to the bench with a unanimous verdict. They found that Bryant had, in fact, developed the idea for Bratz dolls while employed at Mattel. That was blow number one to MGA. They found that MGA’s Bratz dolls breached Mattel’s copyright – blow number two. And still yet, MGA induced Carter to breach the assignment provisions in his employment contract with Mattel – the third strike.
As a result, the jury decided that Mattel was owed a $100 million pay day – with $90 million stemming from MGA’s interference with Mattel’s employment contract with Bryant and $10 million for copyright infringement. That figure was, however, just a small fraction of the $1 billion that Mattel wanted.
MGA did not leave the court empty handed that day in July, though. The jury opted not to award any of the punitive damages that Mattel was seeking. Such an award – which exceeds simple monetary damages and is levied for the pure purpose of punishing the defendant for particularly malicious or fraudulent acts – could have dramatically increased the amount of money that MGA would have to pay Mattel. However, the jury found that neither MGA nor Mr. Larian had acted willfully when they employed Bryant, and so, a punitives award was out of the picture.
Speaking just after the jury verdict was released, a “stone-faced” Robert A. Eckert, the CEO of Mattel, said, “We have pursued this case first and foremost as a matter of principle. We have an obligation to defend ourselves against competitors who choose to engage in fraudulent activities against us.”
That December, just as Barbie was turning 50, U.S. District Judge Stephen G. Larson, tasked with making a final decision based on the summer’s jury verdict, upped the ante and dealt a far more searing blow to MGA. In addition to the $100 million in damages that the jury had decided upon that summer, the judge stripped MGA of all rights in the Bratz. Specifically, he ordered MGA to cease its manufacturing, distribution, and sale of any dolls that were substantially similar to the copyright-protected Bratz dolls. He also ordered that all rights in the Bratz trademarks and any related domain names be transferred from MGA to Mattel, thereby permanently preventing MGA from using those marks.
This included injunctive relief that solpecifically required MGA to pull all dolls from shelves and while such a permanent move would never come into fruition (thanks to more favorable rulings to come), it did see MGA quietly remove Bratz from stores temporarily in the midst of the parties’ war.
Mattel had won.
The victory would not last long, though, as MGA would waste little time in filing an appeal to the higher 9th Circuit Court of Appeals and this time, it would win.
In July 2010, a year after the first jury verdict was delivered, a 3-judge panel for the 9th Circuit reversed the lower court’s sweeping decision, overturning both the injunction and the constructive trust rulings. In the eyes of the Court of Appeals, MGA had significantly improved the Bratz product as a result of its investment into the brand and as a result, it would be “unfair” to revoke its ownership of the billion-dollar brand — even if its development of the brand did start with an idea that had been taken from Mattel.
In addition to overturning the lower court’s decision, the Court of Appeals stated that because of errors it had identified in the lower court’s jury instructions, a significant portion of the jury verdict and damages award should be vacated, and that the “case will probably need to be re-tried.”
Emboldened by this win, MGA upped the ante. It lodged a new claim against Mattel, accusing its rival of taking part in a pattern of deception and fraud. Specifically, MGA asserted that Mattel had repeatedly enlisted a pool of individuals – armed with phony business cards – to spy on MGA’s unreleased product concepts and marketing plans at tradeshows, as part of a larger scheme to steal MGA’s most coveted business plans.
Pay to Play and Death by Litigation
Ahead of the retrial, MGA was busy compiling claims for an entirely new lawsuit, and in February 2011, filed a $1 billion-plus complaint against Mattel, accusing the company of attempting to monopolize the U.S. doll market. Citing violations of the Sherman Act, MGA alleged that in an attempt to bankrupt MGA and kill off the brand for good, Mattel made it a part of its strategy to improperly “litigate MGA to death.”
Beyond “abusing” the judicial process in an effort to rid the market of its closest rival, MGA claimed that Mattel had taken to intimidating suppliers and vendors so they would not do business with MGA, paying off retailers to favor Barbie over Bratz, and routinely rearranging the doll displays at stores like Walmart in order to sabotage the Bratz brand.
“Accordingly, Mattel’s conduct has served to reinforce its fashion doll monopoly, and to impair the ability of MGA and others to compete in the relevant fashion dollar market,” MGA’s lawsuit alleged. Not only was MGA paying the price for such (allegedly) anticompetitive behavior, consumers likely were to. Per MGA, Mattel’s efforts to keep Barbie as the world’s top doll for more than a half of a century knew no bounds.
MGA’s bold claims of monopoly-making and unfair trading did not stand for very long. The court sided with Mattel, which had argued that the facts at the heart of MGA’s new suit were identical to those in their already-existing dispute. If the court were to hear this new case, it would essentially be allowing the very same issues to be litigated twice in violation of the legal doctrine barring that exact thing.
Following a tentative ruling in October 2011, U.S. District Judge David O. Carter dismissed MGA’s antitrust suit in February 2012.
Trial No. 2
Meanwhile, the retrial of the original case was underway. Following a heated 3 month-long trial, MGA secured a win. Delivering its verdict in April 2011, the jury found that while MGA and Isaac Larian had induced Bryant to breach his employment contract (and awarded Mattel $10,000 in damages as a result), it rewarded MGA much more handsomely.
This time around, the jury found that Mattel had not only failed to prove that MGA had stolen its trade secrets, but the panel determined that – actually – Mattel was the one that had acted “willfully and maliciously” in stealing trade secrets from MGA by sending spies to toy fairs using false identification, among other unfair business practices.
As a result, the court ordered Mattel – which had also failed to prove its claims of copyright infringement, according to the jury – to pay its bitter rival more than $309 million in damages for trade secret misappropriation, in addition to attorney’s fees and other costs, a total that the appeals court later cut in half, holding that “the trial judge was wrong to have allowed the jury to consider MGA’s counterclaims because they were unrelated to Mattel’s initial lawsuit,” as reported by the Associated Press.
Sensing that the parties’ long-running dispute, in which they had each reportedly ranked up hundreds of thousands of dollars in legal bills, was far from over, Judge Kozinski of the 9th Circuit advised both MGA and Mattel to “take a lesson from [your] target demographic, and play nice.” That was never going to happen, though. The case has raged on with the parties’ ponying up “a bonfire of money, maybe the equivalent of the GDP of a small nation,” one insider told the New York Post in 2018.
And it has also gotten personal. As the Wall street Journal reported in 2008, “Rattled by the success of Bratz, Mattel hired private investigators [in 2004] to spy on one of its own executives whom it suspected of leaking secrets.” But the alleged spying went much further than that. Larian alleged that “during the trial and probably even now, Mattel hired private investigators to follow me, my elderly parents (who have nothing to do with MGA and do not even speak English), and my then 11-year-old son, who was harassed while skateboarding on neighborhood streets.” More than that, as Judge Carter stated in a December 2010 order, citing a deposition from former MGA Marketing Director and Senior VP and General Manager Ron Brawer, “Mattel also directed a team of private investigators to shadow Brawer, Brawer’s wife, and Brawer’s young children, whose activities the investigators recorded via videotape and shared with Mattel’s legal department.”
All the while, Mattel has maintained – without abandon – that Bryant came up with the idea for Bratz while under its employ and that MGA is – and always was – in the wrong. Now, 14 years after the first lawsuit was filed, the parties are still shuttling in court and out of court fighting over trade secret misappropriation (MGA filed a new $1 billion suit asserting this in 2014) and other intellectual property issues in a fight that has become bigger and uglier than the question it set out to answer, “Who owns Bratz?”
UPDATED (October 31, 2019): In a newly-issued decision, a California state appeals court refused to revive the case, despite MGA’s plea that it reinstate a more recently-filed trade secret lawsuit that a district court dismissed in February 2018. Holding that MGA’s trade secret claims are, in fact, barred by California’s three-year statute of limitations for trade secret claims, the court of appeals decision ushers out of court MGA’s claims that Mattel employees had engaged in a nearly decade-long scheme of “willfully and deliberately misrepresenting themselves” in order to gain entry into MGA’s showrooms, and steal its valuable trade secret information.
*This article was initially published in October 2018.
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