Barbie/Bratz - doll spatz - clear winners? fat catz!

OK, it may be soooo last week, but we realise that if we don't cover the Barbie/Bratz spatz sometime soon, those glammed-up dolls are liable to pout and sulk. (Although since that's how they look anyway, who'd know the difference).
It isn't the end of the case, but enough has happened that it makes an interesting tale, so we'll add our two-pennyworth now. I should add a caveat that although my sympathies are with Mattel, the Barbie people, I don't have any inside knowledge of this case.

Here's the story. The original Bratz dollz, above were designed by a Mr Carter Bryant. Mr Bryant was seemingly not the most loyal of employees. According to the Appeal Court, Bryant worked in Mattel's “Barbie Collectibles” department, where he designed fashion and hair styles for high-end Barbie dolls intended "more for accumulation than for play."

Evidently, this strange engagement sapped either sense or sensibility, because he devised, named and designed a new line of dolls ... and took his work to MGA, a competitor -despite an "All your base are belong to us" clause in his contract of employment with Mattel as follows:

"I agree to communicate to the Company as promptly and fully as practicable all inventions (as defined below) conceived or reduced to practice by me (alone or jointly by others) at any time during my employment by the Company. I hereby assign to the Company . . . all my right, title and interest in such inventions, and all my right, title and interest in any patents, copyrights, patent applications or copyright applications based thereon." 

The contract also indicated that

"the term 'inventions' includes, but is not limited to, all discoveries, improvements, processes, developments, designs, know-how, data computer programs and formulae, whether patentable or unpatentable."

That looks pretty comprehensive, doesn't it? Bryant had sewn up a deal with MGA, and started working with them on Bratz, before even leaving Mattel. Bad boy. You might be forgiven for thinking that a breach of his employment contract had occurred, and that Mattel were the wronged party.

That was back in 2000. In 2004, Mattel sued Bratz and Bryant. In 2008, they got a nice jury verdict in their favour, ordering $100M damages and, more seriously, an injunction against supplying dolls, and even the handover of the Bratz trademarks to Mattel - a grand slam.

I'd like to be able to end this tale there, with a clear close and, for Mattel, a happy ending. Alas, however, they succeeded so overwhelmingly that two years later they were overturned on appeal. The appeal court made several rulings that were bad for Barbie.

Firstly, as to the contract, they held that the language “at any time during my employment by the Company” was ambiguous - for example, it might not have covered things done after work or even in lunch-break. For in-house lawyers, this is a familiar, but really very unhelpful, analysis, for it suggests that an inventor or designer can hold back what he should have done during office hours, to cheat the company out of what he is paid to invent by moonlighting it - an idea ought not to be allowed much airtime (Readers of this blog will recall an Australian court wrestling with somewhat similar language back in the day).

Secondly, they held that "inventions" as defined above didn't unambiguously include trade marks (which, now you look at it, might be right), or "ideas" generally. It might have done, but the jury hadn't been directed to consider whether or not that was the case. Again, really not too helpful for an employer.

That led them onto the idea/expression dichotomy - no copyright in the idea of a bigheaded pouty doll, just in the expression of that idea, which had not clearly been assigned.

Mattel's case was slimmed down again (appropriately for Barbie, that sveltest of dolls) using the "thin copyright" theory - in other words, that "if there’s only a narrow range of expression, then copyright protection is “thin” and a work must be “virtually identical” to infringe. That looks very much like the view of the Swedish Court in the Maglite case we reported some time ago, and, through half-closed eyes, also resembles the EU "design freedom" filter on scope of designs.

Accordingly, the jury should have compared each generation of Bratz dolls separately with Mattel's alleged copyright work (Bryant's original designs) rather than lumping them all together. The case was referred back for re-trial, which has just taken place.

Both players changed lawyers more times than Barbie changes outfits (MGA, amazingly, got through nine firms, collecting at least one satellite lawsuit for unpaid fees along the way). MGA brought in Orricks at the appeal, and then apparently unsuccessully tried to replace them on the retrial, for unsuccessfully alleging a conspiracy under RICO, the anti-racketeering act, involving Mattel and Quinn Emanuel, their lawyers (after all, if you can't conspire with your lawyers, who can you conspire with?). Mattel successfully moved to disqualify MGA's former lead counsel Patricia Glaser, on the basis that her firm was conflicted three weeks before trial, and again, they may have been victims of their own success - for as a result, MGA brought in Jennifer Keller, a criminal defense attorney from a four-man firm, and she won the case for MGA, persuading the jury to sock Mattel for $88M in damages for alleged theft of MGA's trade secrets.

In their fascinating April article 'Bratz Attorney Portrayed Mattel as "Corporate Mega-Monster' the National Law Journal interviewed Ms Keller, and her answers (based, it seems, not only on her case presentation but also on conversations afterwards with jurors) reveal just how little to do with IP the verdict turned out to be. Here are a couple of quotes:

• "The same skills I bring to bear on a criminal case transfer 100% in the case of a civil trial. ... A criminal law background is invaluable."
  
• "We really presented both [MGA founder] Isaac Larian versus [Mattel CEO] Bob Eckert, and MGA versus Mattel, as being a contrast between the gifted entrepreneur with a dream and idea who comes to this country with nothing and built a $1 billion company, versus a typical corporate suit who could be selling Kraft cheese [he previously was CEO of Kraft Foods Inc.], dolls or hamburgers without it making a difference."
• "We showed, for example, that Mattel, once Bob Eckert arrived there in 2000, profitability was largely tied to [the fact that] he cut jobs and sent those overseas. He referred to that as a headcount reduction or consolidation. Bob Eckert closed Mattel's last remaining plant in the United States, 850 people lost their jobs, and Eckert could not remember what state it was in because it was just a headcount reduction."
• "Mattel's a giant, corporate mega-monster, and MGA's a little flexible startup, and there's a huge contrast between the two."
• "I don't know whether the recession has an effect. I suppose it might. I think it's less about the recession and more about the fact that people realize that mega-corporations can be quite heartless."

I can't fault (indeed, I applaud) Ms Keller for picking up a billion dollar case three weeks before trial and doing her job the way she knows best - but, systemically, should a judge allow an IP infringement case to be decided by putting an innovative corporation in the dock as if it were a criminal on trial for being "heartless"?

Writing in "The American Lawyer" last year, Susan Beck commented that

"The case has preoccupied three federal district court judges, involved the efforts of more than 100 lawyers (just counting those listed on the court docket), [and] generated a mind-boggling 9,000 docket entries and close to 10 million documents in discovery". 

It is suggested elsewhere on the interweb that MGA has spent over £150M and Mattel over $400M, to get a series of judgments that have all the predictability and logic of a random-number generator, have taken seven years so far, and are still an appeal or two short the full distance. On dolls. Hardly rocket science. Next time your clients mention the cost of European design litigation, point them at this case.

Pilgrim's Pyrrhic victory?

"I bought it in China - I had no idea it was a copy". Can a company these days pass the buck to their Chinese supplier, or should they not at least ask the question? This seems to have been the issue in Pilgrim A/S v Dansk Smykkekunst A/S (Maritime and Commercial Court, August 17 2010, Case V-6-09), reported by Mads Marstrand-Jørgensen of Norsker & Co in the ever-helpful International Law Office newsletter.
Pilgrim sued on the basis of a men's necklace. They failed to cross the copyright threshold, and Denmark's usually-reliable Marketing Practices Act let them down because they did not establish Danish sales, apparently. However, subsistence and infringement of Unregistered Community Design right were found. A good result? Alas, no. The Court held that Pilgrim should have no damages or compensation because "the Court is not satisfied that Dansk Smykkekunst has known or should have known Pilgrim's necklace" and, indeed, they made Pilgrim pay Dansk's costs.
Somehow, it seems wrong to us that the proprietor, after infringement has been shown, has to pay the infringer's costs because the infringer did not determine that the goods were infringements. On the one hand, of course, it is generally better to chase the copyist and manufacturer rather than the retailer. But on the other, that is far from easy when they are located abroad - and they know it. So we think it is just a bit too easy these days to play the innocent or ignorant importer. Is there anyone out there who is unaware that fakes can be bought in the Far East? We doubt it.
But what do you think?

Good news for copyright infringers, or a Trapp to Tripp designers?

This posting is by Class 99-er Henning Hartwig.

German case law isn’t famous for awarding exorbitant damages in IP infringement matters. Now, it appears as if German Courts are even going into reverse: Just published, the German Federal Supreme Court has only recently decided, in Case I ZR 98/06 Tripp-Trapp-Stuhl, that copyright infringers are not obliged to render the whole profit made with the infringing copy even when imitating one-to-one the work-in-suit (in this case, the well-known Tripp-Trapp child's chair). The court found that, in such a case, the decision of the consumer to buy the copy (and not the original) was not based “entirely on the infringement” but rather on other factors such as “functionality” or “good price” of the copy. In short, the consumer is buying the copy not only because of it being identical with the original, but because it is cheaper.

This observation doesn’t seem to be new or surprising – why should I buy a copy if it isn’t even cheaper than the original? In fact, there is most probably no copy that isn’t offered at a better price than the original. But this is no excuse for courts to let copyright infringers get away with some of their profits. Should these people really be rewarded by being allowed to keep a part of their profits because they sell their copies for less (and clearly detracting buyers from acquiring the original), whereas infringers selling their copy at the price of the original (highly unlikely, though) would have to render the entire amount of their profits? And how can a court determine and weigh factors such as “functionality”, “low price”, “imitation” etc., factors that are decisive, according to the court, for calculating the percentage to be deducted from the profits?

The decision raises more questions than it answers – including the critical question to what extent this reasoning will be transferred to other IP rights. If German courts answer this in the affirmative, Germany would indeed find itself before a change of paradigm.

Community Designs - consultation on "innocence"

You infringe a design, by selling product you bought from someone else, without knowledge that the design was protected. Should you pay?
That was the issue in J Choo (Jersey) Ltd v Towerstone Limited and Others [2008] EWHC 346(Ch), concerning counterfeit handbags. There is an "innocence" defence in the UK for most forms of IP infringement (copyright, registered and unregistered UK designs and patents), exempting the infringer from damages (though not other remedies) where he did not know and had no reasonable grounds to suppose that the rights existed, but the Court found none for Community designs. The IPO are consulting as to whether to add such a defence for Community designs, and a response is due by the end of September.
Obviously, it makes matters easier if like measures have like remedies. In the case of a Registered Community Design, where there is no mental element, I tend to think that there should be the same "innocence" defence as for other UK rights.
However, for an unregistered Community Design, where copying must have taken place, I don't see why there should be any innocence defence: someone, somewhere, was far from innocent, and caused damage to the proprietor. If the seller was innocent, they can contractually recoup from their supplier and so back the chain to the infringer. The life of the right is so short, at three years, that by the time an infringer has been found and put on notice, much of the life of the design has evaporated. Thus, I can see arguments against in the case of UCD.