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March 2013: Ninth Circuit Victory for Mattel in Long-Running MGA Dispute

March 2013

On behalf of Mattel, Inc., the firm recently won in the U.S. Court of Appeals for the Ninth Circuit a complete reversal of a $172.5 million judgment for trade secret misappropriation from rival toy company MGA Entertainment, Inc., maker of the “Bratz” line of dolls. Mattel had previously sued MGA for infringing its own intellectual property rights in Bratz and had won those claims in an earlier trial. On appeal to the Ninth Circuit, with another firm arguing the appeal for Mattel, that victory was reversed. On remand, a second jury disagreed with the first jury and found for MGA on Mattel’s claims. While rejecting the majority of MGA’s trade secret claims against Mattel for supposedly stealing MGA’s product information from “toy fair” showrooms, the second jury found for MGA on approximately 25 alleged trade secrets and awarded damages. Mattel appealed the resulting $172.5 million judgment to the Ninth Circuit.

Quinn Emanuel argued for Mattel on this second appeal, which returned to the same panel of the Ninth Circuit that decided the first appeal. This time, the panel ruled resoundingly for Mattel. The panel agreed with Mattel that the trade secret claims “should not have reached this jury” because they did not “arise[] out of the transaction or occurrence that is the subject matter of [Mattel’s] claim” and therefore were not a “compulsory” response to any claim Mattel had raised. Because MGA’s trade-secrets claim should not have reached the jury in the first place, the Ninth Circuit vacated the appealed portion of the jury’s trade secret verdict for MGA in its entirety, vacated the entirety of the $172.5 million judgment and remanded the claim to the district court with instructions that it be dismissed without prejudice on remand.