Bratz Litigation Has Provided Fertile Grounds for Attorney Fee Disputes

by Hinshaw & Culbertson LLP
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The Bratz litigation between Mattel and MGA Entertainment has provided fertile grounds for attorney fee disputes. In the latest installment, the Ninth Circuit upheld a $137 million attorney fee award in favor of MGA as a prevailing defendant in a claim under the Copyright ActSee Mattel Inc. v. MGA Entertainment Inc., 2013 DJAR 1040, 2013 U.S. App. LEXIS 1586 (9th Cir. Jan. 24, 2013). 

Mattel’s original complaint alleged that MGA had infringed upon Mattel’s copyrights by producing Bratz dolls. In late 2006, Mattel sought to amend its complaint to include a trade secret claim. The trial court permitted the amendment but only as a counterclaim. After an appeal, MGA filed a counterclaim-in-reply against Mattel alleging that Mattel misappropriated MGA’s trade secrets. 

The case went to trial. The jury rejected Mattel’s copyright and trade secret claims, but found for MGA on its counterclaim for misappropriation of trade secrets. The jury awarded MGA $85 million in damages. The district court awarded MGA an equal amount in exemplary damages and $2.5 million in attorneys’ fees and costs on the trade secret claim. See Mattel Inc. v. MGA Entertainment Inc., 801 F. Supp. 2d 950 (C.D. Cal. 2011).

Separately, the district court awarded MGA $137 million in attorneys’ fees and costs as the prevailing defendant on the copyright claim. See Mattel Inc. v. MGA Entertainment Inc., 2011 U.S. Dist. LEXIS 85998 (C.D. Cal. Aug. 4, 2011)The trial court reasoned that MGA:

secured the public interest in a robust market for trendy fashion dolls populated by multiple companies” and that it was entitled to fees in defending a claim that was “stunning in scope and unreasonable in the relief it requested.” 

The Ninth Circuit overturned the judgment in favor of MGA on the trade secret claims, along with the award for trade secret fees and costs. The court reversed this portion of the judgment on procedural grounds. Because the MGA’s trade secret claim did not rest on the same “aggregate core of facts” as Mattel’s trade secret claim, the appellate court concluded that MGA should not have been permitted to assert the counterclaim in the first place.

The panel, however, affirmed MGA’s $137 million award in fees and costs in successfully defending the copyright claim. Mattel had argued below and on appeal that, because its copyright claim was “objectively reasonable,” MGA was not entitled to fees. 

The Ninth Circuit characterized this argument as an attempt to “resurrect the long-rejected requirements of frivolousness and bad faith.” There no longer is any requirement for a copyright defendant to show frivolousness or bad faith to be entitled to fees. The most important factor to be considered is whether an award of fees would further the purposes of the Copyright Act. The Ninth Circuit held that, regardless of whether Mattel had an objectively reasonable basis for its copyright claims, the trial court did not abuse its discretion in awarding fees.

Mattel sought to exclude attorney time spent on non-copyright claims. The trial court rejected this argument, awarding fees incurred litigating any claims involving facts that overlapped with the reproduction of the Bratz concept. The Ninth Circuit did not disturb this ruling on appeal.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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