BRATZ Doll Designer’s $100 Million Dollar Mistakes

Trying to launch a new business venture while employed by another company is risky business.

Just ask Carter Bryant, the creator of the billion-dollar-a year Bratz dolls.  He learned a $100 million dollar lesson.

DOLL WARS:  BARBIE v BRATZ

Carter Bryant was a doll designer and a periodic employee of Barbie’s maker Mattel.

During a period when Carter was living with his parents and not employed by Mattel, Carter claims that he went past a local high school and was inspired by the school girls to design a new line of dolls.  Carter claims that he drew the original series of sketches and designs for the dolls in a spiral notebook.  Carter’s BRATZ dolls had pouty lips, wide eyes and a sexy attitude.  (Although I applaud the ethnic diversity, the trashy BRATZ look makes many mothers, including me, cringe.  And yes my daughter owns several BRATZ she got as gifts. Uhgggggg!)

The hip BRATZ dolls were a big departure from the white, iconic 1950’s Barbie.  As my six-year-old daughter says, “Barbie is a princess.  My BRATZ dolls are rock stars.”

Later, Carter returned to Mattel as a doll designer and signed Mattel’s Invention Agreement.

While working at Mattel, Carter made some major mistakes that contaminated the intellectual property rights to the BRATZ doll designs.  During the hours he was paid to work for Mattel, he also worked on his BRATZ dolls—work that was within the scope of his employments duties at Mattel.  Carter enlisted Mattel co-workers to make a BRATZ doll prototype.

Further while employed at Mattel, Carter pitched his idea for the BRATZ doll line to MGA Entertainment, Inc. (“MGA”), Mattel’s competitor.  MGA bought the BRATZ concept and hired Carter as a consultant.  Carter then began working for both companies.  He used Mattel’s facilities and equipment including Mattel’s telephone and fax machine to do business for the BRATZ line.

Eventually Carter left Mattel and joined MGA.  The BRATZ doll line was a huge success with sales around a billion dollars a year.  Sales for the old fashioned Barbie dolls started to decline as young girls flocked to buy the hip BRATZ dolls.

A few years after Carter left Mattel, a Chinese toy maker showed Mattel an agreement between Carter and MGA that was dated during the time that Carter was employed at Mattel.  Barbie’s maker realized that Carter had been moonlighting making the BRATZ dolls while employed to work at Barbie’s headquarters.

Mattel sued Carter.  MGA intervened in the litigation to protect its IP interests in its billion dollar babes.  Mattel’s original claims against the pair were a virtual IP stew that included trade secret misappropriation, breach of the Mattel Invention Agreement, breach of fiduciary duty, breach of the duty of loyalty, copyright infringement, unfair competition and the related inducement claims against MGA.

Mattel sought over $1 BILLION in damages.  Yes, Billion with a B.

Carter settled on the eve of trial.

At trial, Carter’s credibility was damaged when he admitted changing dates on his drawings of the BRATZ dolls and that he had destroyed computer files.

Mattel hired forensic document experts to show that Carter’s drawings had really been made while he was employed at Mattel.

In August of 2008, a federal jury awarded Barbie’s maker Mattel $100 million in damages.  The jury found that Carter had created the BRATZ concept when he was employed at Mattel.  The jury concluded that pursuant to the terms of the Invention Agreement between Mattel and Carter, Mattel owned all intellectual property rights including the copyrights for the BRATZ dolls.

The court ordered MGA to turn over the entire BRATZ doll line to Mattel including all right and title to the intellectual property including all related copyrights, trademarks and trade secrets.  The court ordered MGA to recall all BRATZ dolls and associated products from toy maker’s shelves and cease manufacturing and selling the dolls.

The Ninth Circuit Court of Appeals stayed the recall and transfer of IP pending the final decision in the appeal.

MGA has already spent nearly $100 million in attorney fees for its defense.  This litigation could put MGA out of business.

FOUNDER’S TIPS:

When starting a new business venture, what can an entrepreneur do to avoid IP ownership claims by a former employer?

While still employed, an entrepreneur might want to learn from Carter’s mistakes and do the following when working on her new business:

• Determine whether the intellectual property being created for the new business is within the scope of the current employment responsibilities or based on work that was done for your employer.  If it is, watch out.  Your current employer may claim that it owns what is being created for the new company.

• Re-read the invention assignment agreement with your current employer, if any.  See what type of work is covered by the contract’s terms.

• Only work on the new business venture during off-hours.

• Do not use your current employer’s facilities, computers, cell-phone, equipment, software, supplies, e-mail, or other systems to create anything for the new business venture.

• Don’t ask co-workers to help you.

• Only use a personal computer, cell-phone, and e-mail to create work for the new company.

• Carefully date and record conception of your ideas.

If Carter had taken these precautions, this case may have turned out very differently.

My next post will help you see the bigger picture, give you a basic analytical framework and discuss these tips in more detail.