Mattel 2014 Annual Report Download - page 104

and other duties to Mattel. In September 2004, Bryant asserted counterclaims against Mattel, including
counterclaims in which Bryant sought, as a putative class action representative, to invalidate Mattel’s
Confidential Information and Proprietary Inventions Agreements with its employees. Bryant also removed
Mattel’s suit to the United States District Court for the Central District of California. In December 2004, MGA
intervened as a party-defendant in Mattel’s action against Bryant, asserting that its rights to Bratz properties are
at stake in the litigation.
Separately, in November 2004, Bryant filed an action against Mattel in the United States District Court for
the Central District of California. The action sought a judicial declaration that Bryant’s purported conveyance of
rights in Bratz was proper and that he did not misappropriate Mattel property in creating Bratz.
In April 2005, MGA filed suit against Mattel in the United States District Court for the Central District of
California. MGA’s action alleges claims of trade dress infringement, trade dress dilution, false designation of
origin, unfair competition, and unjust enrichment. The suit alleges, among other things, that certain products,
themes, packaging, and/or television commercials in various Mattel product lines have infringed upon products,
themes, packaging, and/or television commercials for various MGA product lines, including Bratz. The
complaint also asserts that various alleged Mattel acts with respect to unidentified retailers, distributors, and
licensees have damaged MGA and that various alleged acts by industry organizations, purportedly induced by
Mattel, have damaged MGA. MGA’s suit alleges that MGA has been damaged in an amount “believed to reach
or exceed tens of millions of dollars” and further seeks punitive damages, disgorgement of Mattel’s profits and
injunctive relief.
In June 2006, the three cases were consolidated in the United States District Court for the Central District of
California. On July 17, 2006, the Court issued an order dismissing all claims that Bryant had asserted against
Mattel, including Bryant’s purported counterclaims to invalidate Mattel’s Confidential Information and
Proprietary Inventions Agreements with its employees, and Bryant’s claims for declaratory relief.
On January 12, 2007, Mattel filed an Amended Complaint setting forth counterclaims that included
additional claims against Bryant as well as claims for copyright infringement, Racketeer Influenced and Corrupt
Organizations (“RICO”) violations, misappropriation of trade secrets, intentional interference with contract,
aiding and abetting breach of fiduciary duty and breach of duty of loyalty, and unfair competition, among others,
against MGA, its Chief Executive Officer Isaac Larian, certain MGA affiliates and an MGA employee. The
RICO claim alleged that MGA stole Bratz and then, by recruiting and hiring key Mattel employees and directing
them to bring with them Mattel confidential and proprietary information, unfairly competed against Mattel using
Mattel’s trade secrets, confidential information, and key employees to build their business. On January 12, 2007,
the Court granted Mattel leave to file these claims as counterclaims in the consolidated cases, which Mattel did
that same day.
Mattel sought to try all of its claims in a single trial, but in February 2007, the Court decided that the
consolidated cases would be tried in two phases, with the first trial to determine claims and defenses related to
Mattel’s ownership of Bratz works and whether MGA infringed those works. On May 19, 2008, Bryant reached a
settlement agreement with Mattel and is no longer a defendant in the litigation. In the public stipulation entered
by Mattel and Bryant in connection with the resolution, Bryant agreed that he was and would continue to be
bound by all prior and future Court Orders relating to Bratz ownership and infringement, including the Court’s
summary judgment rulings.
The first phase of the first trial resulted in a unanimous jury verdict on July 17, 2008 in favor of Mattel. The
jury found that almost all of the Bratz design drawings and other works in question were created by Bryant while
he was employed at Mattel; that MGA and Isaac Larian intentionally interfered with the contractual duties owed
by Bryant to Mattel, aided and abetted Bryant’s breaches of his duty of loyalty to Mattel, aided and abetted
Bryant’s breaches of the fiduciary duties he owed to Mattel, and converted Mattel property for their own use. The
same jury determined that defendants MGA, Larian, and MGA Entertainment (HK) Limited infringed Mattel’s
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