Mattel 2012 Annual Report Download - page 103

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 totaled approximately $310 million in favor of MGA.
Mattel appealed the judgment, challenging on appeal the entirety of the District Court’s monetary award in
favor of MGA, including both the award of $170 million in damages for alleged trade secret misappropriation
and approximately $140 million in attorney’s fees and costs. On January 24, 2013, the Ninth Circuit Court of
Appeals issued a ruling on Mattel’s appeal. In that ruling, the Court found that MGA’s claim for trade secrets
misappropriation was not compulsory to any Mattel claim and could not be filed as a counterclaim-in-reply.
Accordingly, the Court of Appeals vacated the portion of the judgment awarding damages and attorney’s fees
and costs to MGA for prevailing on its trade secrets misappropriation claim, totaling approximately $172.5
million. It ruled that, on remand, the District Court must dismiss MGA’s trade secret claim without prejudice. In
its ruling, the Court of Appeals also affirmed the District Court’s award of attorney’s fees and costs under the
Copyright Act. Accordingly, Mattel has recorded a litigation accrual of $137.8 million during the fourth quarter
of 2012 to cover these fees and costs (the “Litigation Charge”).
Note 12—Segment Information
Description of Segments
Mattel sells a broad variety of toy products which are grouped into three major brand categories:
Mattel Girls & Boys Brands—including Barbie fashion dolls and accessories (“Barbie”), Polly Pocket,
Little Mommy, Disney Classics, and Monster High (collectively “Other Girls Brands”), Hot Wheels,
Matchbox, and Tyco R/C vehicles and play sets (collectively “Wheels”), and CARS, Radica, Toy
Story, Max Steel, WWE Wrestling, and Batman, and games and puzzles (collectively
“Entertainment”).
Fisher-Price Brands—including Fisher-Price, Little People, BabyGear, and Imaginext (collectively
“Core Fisher-Price”), Dora the Explorer, Go Diego Go!, Thomas & Friends, Mickey Mouse Clubhouse,
Disney’s Jake and the Never Land Pirates, and See ‘N Say (collectively “Fisher-Price Friends”), and
Power Wheels.
American Girl Brands—including My American Girl, the historical collection, and Bitty Baby.
American Girl Brands products are sold directly to consumers via its catalog, website, and proprietary
retail stores. Its children’s publications are also sold to certain retailers.
Prior to 2012, Mattel’s operating segments were divided on a geographic basis between domestic and
international. The domestic segment was further divided into Mattel Girls & Boys Brands US, Fisher-Price
Brands US, and American Girl Brands. Effective January 1, 2012, Mattel modified its organizational structure
into North America, International, and American Girl divisions. This reorganization was implemented in order to
simplify the organization and to move decision-making for the North America business closer to its retail
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