Mattel 2009 Annual Report Download - page 18

nation. See Item 1A “Risk Factors—Factors That May Affect Future Results” and Item 8 “Financial Statements
and Supplementary Data—Note 15 to the Consolidated Financial Statements—Segment Information.”
Licenses and Distribution Agreements
Mattel has license agreements with third parties that permit Mattel to utilize the trademark, characters, or
inventions of the licensor in products that Mattel sells. A number of these licenses relate to product lines that are
significant to Mattel’s business and operations.
Mattel has entered into agreements to license entertainment properties from, among others, Disney
Enterprises, Inc. (including Disney®characters such as Disney Princess™, CARS™ and Toy Story®from Pixar,
High School Musical®, Winnie the Pooh®, and all Disney®films and television properties for use in Mattel’s
games), Viacom International, Inc. relating to its Nickelodeon®properties (including Dora the Explorer®,Go
Diego Go!®, and SpongeBob SquarePants®), Warner Bros. Consumer Products (including Batman®, Superman®,
Justice League®, and Speed Racer®), Sesame Workshop®(relating to its Sesame Street®properties including
Elmo™), WWE®Wrestling, and HIT Entertainment™ relating to its Thomas and Friends®properties.
Royalty expense during 2009, 2008, and 2007 was $188.5 million, $241.2 million, and $243.3 million,
respectively. See “Product Design and Development” and Item 8 “Financial Statements and Supplementary
Data—Note 14 to the Consolidated Financial Statements—Commitments and Contingencies.”
Mattel also licenses a number of its trademarks, characters, and other property rights to others for use in
connection with the sale of non-toy products that do not compete with Mattel’s products. Mattel distributes some
third-party finished products that are independently designed and manufactured.
Trademarks, Copyrights and Patents
Most of Mattel’s products are sold under trademarks, trade names, and copyrights, and a number of those
products incorporate patented devices or designs. Trade names and trademarks are significant assets of Mattel in
that they provide product recognition and acceptance worldwide.
Mattel customarily seeks patent, trademark, or copyright protection covering its products, and it owns or has
applications pending for US and foreign patents covering many of its products. A number of these trademarks
and copyrights relate to product lines that are significant to Mattel’s business and operations. Mattel believes its
rights to these properties are adequately protected, but there can be no assurance that its rights can be
successfully asserted in the future or will not be invalidated, circumvented, or challenged.
Commitments
In the normal course of business, Mattel enters into contractual arrangements for future purchases of goods
and services to ensure availability and timely delivery, and to obtain and protect Mattel’s right to create and
market certain products. Certain of these commitments routinely contain provisions for guarantees or minimum
expenditures during the term of the contracts. Current and future commitments for guaranteed payments reflect
Mattel’s focus on expanding its product lines through alliances with businesses in other industries.
As of December 31, 2009, Mattel had approximately $267 million of outstanding commitments for
purchases of inventory, other assets, and services in fiscal year 2010. Licensing and similar agreements with
terms extending through 2014 and beyond contain provisions for future guaranteed minimum payments
aggregating approximately $241 million. See Item 7 “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Commitments” and Item 8 “Financial Statements and Supplementary
Data—Note 14 to the Consolidated Financial Statements—Commitments and Contingencies.”
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