Many people were shocked in the spring, when Mattel was ordered to pay an $89 million jury verdict to rival MGA Entertainment over a dispute involving the popular Bratz dolls. New York Business Litigation Attorney Blog reported on the verdict in May.
Imagine their shock now, after a judge ordered Mattel to cough up an addition $220 million, bringing the total to a whopping $309 million for violations of copyright and trade secret laws in New York. The judge reduced the initial verdict to $85 million, but then added $85 million in punitive damages and $137 million in legal fees, which have piled up since 2004.
The case highlights the high stakes that businesses are in when they go head-to-head in court over a business law matter. This case also highlights the importance of strongly and clearly worded employee contracts.
The Bratz dolls, introduced in 2001 as a hipper version of other dolls on the market for girls ages 9 to 11 had pouty lips and hip-hop clothing. They were popular when introduced nearly 11 years ago.
The central issue of the lawsuit was that a Bratz designer created the dolls while he was employed at Mattel. The case also dealt with allegations that Mattel tried to crush the doll line because it was giving the long-standing Barbie doll a tough time in the market for girls’ dolls. The company alleged Mattel hired spies to find out information about its designs.
Mattel, however, accused MGA of stealing the idea for Bratz and then covering up any evidence the concept wasn’t created by them. During the initial trial, a jury sided with Mattel and awarded $100 million, but an appeals court overturned the verdict and sent it back for retrial.
At the second trial, a jury rejected Mattel’s claims of copyright infringement and found the company had stolen 26 trade secrets worth an $88 million verdict. Legal fees have reached nearly $600 million, the report states.
As you can see, business law matters can be contentious and expensive. But it is necessary for a company to protect its intellectual property — that is copyrighted material, ideas, secrets and other creations. Without protecting those things that have made a company unique and profitable, they will often lose out to a competitor. Trade secrets and other ideas pertinent to the future success of a company must be held tightly and if they are stolen, competitors must be held accountable.
And, as this case shows, a well laid out employment contract is critical. Allowing employees who know the secrets, the ideas and the battle plans to go to rival companies without consequence can be the death of a company. It is important to make sure contracts with prospective employees are worded to protect the business. These documents must be legally sufficient and include contingencies.
The Law Offices of Ira S. Newman provides commercial law representation in New York City, Long Island, Great Neck and throughout the area. Call 516-487-7375 or contact us through the website.
More Blog Entries:
Mattel Case Illustrates Importance of Employment Contracts: May 6, 2011
Mattel to Pay Rival $309 Million in Bratz Spat, by Gillian Flaccus, The Associated Press