Court Unravels Mattel|Victory in Bratz Case

(CN) - Mattel does not own the rights to the entire line of Bratz dolls, the 9th Circuit ruled Thursday, because even if the Barbie creator owns some rights to the big-headed dolls, it can't reap the benefits of work it didn't do.

Carter Bryant is a former employee of Mattell who worked in the company's Barbie collectibles department when he came up with the idea for Bratz dolls. He took the idea to MGA Entertainment while still employed by Mattel, and together Bryant and MGA turned Bratz into an overnight success. Bryant quit his job at Mattel as soon as MGA agreed to embrace the new doll.

MGA and Bryant tried to keep their dealings a secret, but Mattel caught wind and filed a $1 billion lawsuit agaisnt Bryant and MGA, claiming that because Bryant worked for Mattel when he invented Bratz, Mattel owned all rights to the dolls.

Although U.S. District Judge Stephen Larson agreed that Bratz infringed on Mattel's copyrighted Barbie, a jury awarded Mattel only $10 million.

Larson also ordered MGA and Bryant to turn over the entire Bratz trademark portfolio to Mattel. The order barred MGA from selling not only the original four dolls, but also any spinoff dolls, including about six additional lines such as Bratz Boyz and Bratz Babyz.

The 9th Circuit stayed that order pending appeal.

On Thursday, a three-judge panel ruled that Larson had abused his discretion with his sweeping ruling for Mattel. The panel concluded that Bryant's employment agreement could have, but did not necessarily, cover ideas as it did designs, processes, computer programs and formulae, which are all more concrete.

The Pasadena-based panel also found that although Mattel owned the rights to the Bratz name and "Jade," the name of one of its dolls which Bryant had invented and which had never been changed by MGA, "it is not equitable to transfer this billion-dollar brand -- the value of which is overwhelmingly the result of MGA's legitimate efforts -- because it may have started with two misappropriated names."

Chief Judge Alex Kozinski said the entire case will probably need to be reheard.

"America thrives on competition; Barbie, the all-American girl, will too," he wrote.

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