Mattel 2011 Annual Report Download - page 104

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leave to file a Fourth Amended Answer and Counterclaims which focused on RICO, trade secret and other
claims, and added additional parties, and subsequently granted in part and denied in part a defense motion to
dismiss those counterclaims. Later, on August 16, 2010, MGA asserted several new claims against Mattel in
response to Mattel’s Fourth Amended Answer and Counterclaims, including claims for alleged trade secret
misappropriation, an alleged violation of RICO, and wrongful injunction. Mattel moved to strike and/or dismiss
these claims, as well as certain MGA allegations regarding Mattel’s motives for filing suit. The Court granted
that motion as to the wrongful injunction claim, which it dismissed with prejudice, and as to the allegations about
Mattel’s motives, which it struck. The Court denied the motion as to MGA’s trade secret misappropriation claim
and its claim for violations of RICO.
The Court resolved summary judgment motions in late 2010. Among other rulings, the Court dismissed both
parties’ RICO claims; dismissed Mattel’s claim for breach of fiduciary duty and portions of other claims as
“preempted” by the trade secrets act; dismissed MGA’s trade dress infringement claims; dismissed MGA’s
unjust enrichment claim; dismissed MGA’s common law unfair competition claim; and dismissed portions of
Mattel’s copyright infringement claim as to “later generation” Bratz dolls.
Trial of all remaining claims began in early January 2011. During the trial, and before the case was
submitted to the jury, the Court granted MGA’s motions for judgment as to Mattel’s claims for aiding and
abetting breach of duty of loyalty and conversion. The Court also granted a defense motion for judgment on
portions of Mattel’s claim for misappropriation of trade secrets relating to thefts by former Mattel employees
located in Mexico.
The jury reached verdicts on the remaining claims in April 2011. In those verdicts, the jury ruled against
Mattel on its claims for ownership of Bratz-related works, for copyright infringement, and for misappropriation
of trade secrets. The jury ruled for MGA on its claim of trade secret misappropriation as to 26 of its claimed trade
secrets and awarded $88.5 million in damages. The jury ruled against MGA as to 88 of its claimed trade secrets.
The jury found that Mattel’s misappropriation was willful and malicious.
In early August 2011, the Court ruled on post-trial motions. The Court rejected MGA’s unfair competition
claims and also rejected Mattel’s equitable defenses to MGA’s misappropriation of trade secrets claim. The
Court reduced the jury’s damages award of $88.5 million to $85.0 million. The Court awarded MGA an
additional $85.0 million in punitive damages and approximately $140 million in attorney’s fees and costs. The
Court entered a judgment which totals approximately $310 million in favor of MGA.
Mattel has appealed the judgment, and expects to file its opening appeal brief by February 27, 2012. Mattel
does not believe that it is probable that any of the damages awarded to MGA will be sustained based on the
evidence presented at trial and, accordingly, a liability has not been accrued for this matter.
In February 2011, MGA commenced litigation in the United States District Court for the Central District of
California alleging that Mattel’s conduct in response to MGA’s sale of Bratz violated both a federal antitrust
statute and the California Business & Professions Code, and constituted abuse of process under California law.
On October 20, 2011, the Court granted Mattel’s motion to dismiss MGA’s claims on the grounds, among others,
that they are barred by the doctrine of res judicata and should have been brought in the prior proceeding. The
Court gave MGA leave to file an amended complaint in compliance with its Order.
On November 10, 2011, MGA filed a first amended complaint which included a single claim for alleged
violations of a federal antitrust statute. Mattel has filed a motion to dismiss MGA’s amended complaint, on the
grounds, among others, that it continues to be barred by the doctrine of res judicata. Mattel believes this
complaint is without merit and intends to vigorously defend against it.
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