Mattel Attacks $310 Million Bratz Copyright Award on Appeal

Mattel Inc. has asked a federal appeals court to reverse the $310 million judgment against it in a long-running legal battle over the Bratz dolls, maintaining that its failed infringement allegations didn’t justify “the largest copyright fee award in history.”

In its opening brief before the U.S. Court of Appeals for the 9th Circuit, filed on Feb. 27, Mattel challenged U.S. District Judge David Carter’s entire judgment. Carter on Aug. 4, 2011, ordered Mattel to pay $85 million in compensatory damages, $85 million in exemplary damages, $107.9 million in attorney fees and $32 million in costs to MGA Entertainment Inc., maker of the Bratz doll.

Mattel counsel Kathleen Sullivan, a partner in the New York office of Quinn Emanuel Urquhart & Sullivan, wrote that the attorney fees were unjustified because many were not related to MGA’s defense of Mattel’s copyright claims and, according to MGA’s own accounts, were “improper, bloated, excessive, unreasonable or even false” and “unnecessary.”

As for the rest of the judgment, Mattel challenged a federal jury’s damages calculation on claims that Mattel stole trade secrets from MGA by planting spies at industry trade shows. The jury on April 21, 2011, awarded $88.5 million on those claims while rejecting Mattel’s allegations that MGA had infringed its copyright by hiring away a designer who took the Bratz doll concept with him. As part of his judgment, Carter lowered the verdict to $85 million to correct a mathematical error and awarded an additional $85 million in exemplary damages.

“We feel we filed a very strong brief and look forward to the conclusion of this case,” Mattel attorney Susan Estrich, a partner at Los Angeles-based Quinn Emanuel, wrote in a prepared statement.

In an e-mail, MGA Chief Executive Officer Isaac Larian wrote that he was pleased Mattel and its board of directors had “abandoned” their copyright claims and “ownership of the Bratz brand belongs to MGA.” As for the legal fees, he wrote, “I am confident we will prevail on appeal.”

In its brief, Mattel did not challenge the jury’s finding of non-infringement on its copyright. But the fact that another jury in 2008 awarded $100 million to Mattel on those same claims, the first time the dispute went to trial, evidenced the reasonableness of pursuing them a second time, Sullivan wrote. (That verdict was overturned on appeal.)

As a result, MGA did not deserve such “jaw-dropping” attorney fees, all but $2.5 million of which were associated with MGA’s copyright defense. Furthermore, she wrote, the award was based on 7,000 pages of attorney invoices filed under seal and gave MGA “a windfall for amounts it would never pay its own lawyers.”

Sullivan noted that Carter based his award on MGA’s estimate of $129.6 million in fees billed by 11 firms — including Skadden, Arps, Slate, Meagher & Flom; Keller Rackauckas; Orrick, Herrington & Sutcliffe; and O’Melveny & Myers — in defending against Mattel’s copyright claims.

“But the assumption that every dollar of Skadden’s and Keller’s bills were for defensive work unrelated to any of MGA’s claims is unfounded; Jennifer Keller was MGA’s lead lawyer at trial for MGA’s trade secrets claims, and the Skadden firm also was extensively involved in prosecuting MGA’s affirmative claims,” Sullivan wrote.

Moreover, Carter did not account for “duplicative or wasteful sums” in those bills, she wrote. “The court ignored the fact that MGA had called its own former lawyers’ fees ‘improper, bloated, excessive, unreasonable or even false’ and ‘unnecessary.’ The district court also erred in failing to reduce MGA’s claimed fees even though MGA has not and will not ever pay a large portion of those fees to its lawyers.”

MGA offered those criticisms during litigation against the law firms in question. At the time of MGA’s $129.6 million request, O’Melveny had sued its former client for $10.2 million in unpaid legal bills. O’Melveny later settled the action, but then Orrick withdrew from representing MGA, citing $20 million in unpaid bills. MGA has said it has paid only $70 million in fees to its lawyers, Sullivan wrote.

MGA initially sought $161 million, including the $129.6 million in fees and $32 million in costs. In a recent ruling against its insurers, MGA upped its estimate of its fees and costs to $175 million.

That left the two $85 million awards and $2.5 million in legal fees associated with trade secrets claims. Mattel attacked the jury’s conclusion that 26 of MGA’s 114 dolls involved trade secrets at all, much less any that had been misappropriated. Sullivan noted that many of MGA’s ideas were available to the public during trade shows. Mattel also challenged the jury’s conclusion that each of those 26 products entitled MGA to $3.4 million in damages.

Mattel argued that MGA’s trade secrets counterclaims, filed on Aug. 16, 2010, exceed the three-year statute of limitations and were not “compulsory,” as Carter ruled, because they had nothing to do with Mattel’s allegations that several of its former employees had stolen its own trade secrets when they went to work for MGA.

The $85 million in exemplary damages were inappropriate, as well, Sullivan wrote, since Carter found that Mattel had engaged in “amateurish tactics” that were “silly, not evil.”

Contact Amanda Bronstad at [email protected].

This article originally appeared in The National Law Journal.