IP Insight: May 5, 2009

What does a company have to gain by ensuring that the intellectual property created by one of its workers belongs to the company even after the worker leaves the company? Potentially in excess of $100 million and control of its competitor's assets.

Such are the lessons learned from the biggest IP case of the past year -- or perhaps any year -- the copyright infringement case between Mattel, the maker of Barbie dolls, and MGA Entertainment, the maker of Bratz dolls. Unlike the all-American blonde and preppy Barbie doll, the Bratz doll is variously described as a doll of indeterminate ethnic background, "saucy," and far more modern and contemporary than its tried and true counterpart. The Bratz doll concept originated with designer Carter Bryant.

In the lawsuit, Bryant and MGA contended that Bryant conceived the design of the Bratz dolls during a period when he was not working for Mattel and legitimately sold the concept to MGA after Mattel had passed on it. On the eve of trial, Mattel and Bryant reached a confidential out of court settlement.

In July 2007, a federal jury determined that Bryant had come up with the Bratz concept while working at Mattel, and in August 2007, the jury awarded Mattel damages in the amount of approximately $100 million-an award that was substantially increased by subsequent orders of the trial judge.

In December 2008, a federal trial judge issued an order declaring that Mattel owns all right, title, and interest in the Bratz dolls and characters. The judge also permanently enjoined MGA from manufacturing, marketing or selling any of the Bratz and Bratz--related products.

The Bratz case amply demonstrates the importance of ensuring protection of copyrighted works that are created by an employee. While, under the Copyright Act, copyrightable works that are prepared by an employee within the course and scope of his employment are usually considered works made for hire for that person's employer, it's always possible that a jury could find that works that the employee created at home during non-working hours were not made within the "course and scope" of his employment. For companies whose intellectual property assets form a valuable part of their business -- i.e., nearly every 21st century enterprise -- the better practice is always to have a written agreement with your employees in which they acknowledge that all copyrightable works they create while they are employed by the company are works made for hire for the company, regardless of when or where they are created. Companies should also take similar steps to protect other valuable intellectual property assets such as patents and trademarks. As is clear from the Bratz case, a relatively small effort to protect one's intellectual property assets now can pay enormous dividends in the future.