You are on page 1of 47

Case: 09-55673 05/26/2009 Page: 1 of 47 DktEntry: 6933863

CA No. 09-55673
DC No. 04-cv-9049 SGL (RNBx)

IN THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
____________
MGA ENTERTAINMENT, INC., MGA ENTERTAINMENT HK LTD., and ISAAC LARIAN,
Appellants,
vs.
MATTEL, INC., a Delaware Corporation,
Appellee.
____________
On Appeal from the United States District Court
for the Central District of California
(Hon. Stephen G. Larson, Presiding)
____________

EMERGENCY MOTION UNDER CIRCUIT RULE 27-3

APPELLANTS’ EMERGENCY MOTION FOR


STAY PENDING APPEAL
OF PERMANENT INJUNCTION
(Redacted for Public File)
____________
Thomas J. Nolan (Bar No. 66992) Mark E. Haddad (Bar No. 205945)
Jason D. Russell (Bar No. 169219) Robert A. Holland (Bar No. 174642)
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Alycia A. Degen (Bar No. 211350)
300 South Grand Avenue, Suite 3400 SIDLEY AUSTIN LLP
Los Angeles, CA 90071-3144 555 West Fifth Street, Suite 4000
Telephone: (213) 687-5000 Los Angeles, California 90013
Facsimile: (213) 687-5600 Telephone: 213-896-6000
Facsimile: 213-896-6600
Russell J. Frackman (Bar No. 49087)
Patricia H. Benson (Bar No. 60565)
MITCHELL SILBERBERG & KNUPP LLP
11377 West Olympic Boulevard
Los Angeles, California 90064-1683
Telephone: (310) 312-2000
Facsimile: (310) 312-3100
Attorneys for Appellants
MGA Entertainment, Inc., MGA Entertainment HK, Ltd., and Isaac Larian
Case: 09-55673 05/26/2009 Page: 2 of 47 DktEntry: 6933863

CIRCUIT RULE 27-3 CERTIFICATE

A. Telephone Numbers And Office Addresses Of All Attorneys For


The Parties To The Appeal
Mark E. Haddad (Bar No. 205945) Counsel for Appellants MGA
mhaddad@sidley.com Entertainment, Inc., MGA
Robert A. Holland (Bar No. 174642) Entertainment HK, Ltd., and Isaac
rholland@sidley.com Larian
Alycia A. Degen (Bar No. 211350)
adegen@sidley.com
SIDLEY AUSTIN LLP
555 West Fifth Street, Suite 4000
Los Angeles, California 90013
Tel: 213-896-6000
Fax: 213-896-6600
Thomas J. Nolan (Bar No. 66992) Counsel for Appellants MGA
tnolan@skadden.com Entertainment, Inc., MGA
Jason D. Russell (Bar No. 169219) Entertainment HK, Ltd., and Isaac
jrussell@skadden.com Larian
SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071-3144
Tel: (213) 687-5000
Fax: (213) 687-5600
Russell J. Frackman (Bar No. 49087) Counsel for Appellants MGA
rjf@msk.com Entertainment, Inc., MGA
Patricia H. Benson (Bar No. 60565) Entertainment HK, Ltd., and Isaac
phb@msk.com Larian
MITCHELL SILBERBERG & KNUPP LLP
11377 West Olympic Boulevard
Los Angeles, California 90064-1683
Tel: (310) 312-2000
Fax: (310) 312-3100
Ronald L. Olson Counsel for Appellee Mattel, Inc.
Daniel P. Collins
Daniel.collins@mto.com
MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, 35th Floor
Los Angeles, CA 90071-1560
Tel: (213) 683-9100
Fax: (213) 687-3702
John B. Quinn Counsel for Appellee Mattel, Inc.
Johnquinn@quinnemanuel.com
Michael T. Zeller
michaelzeller@quinnemanuel.com
i
Case: 09-55673 05/26/2009 Page: 3 of 47 DktEntry: 6933863

Jon D. Corey
joncorey@quinnemanuel.com
Brett Dylan Proctor
dylanproctor@quinnemanuel.com
QUINN EMANUEL URQUHART OLIVER
& HEDGES LLP
865 S. Figueroa Street, 10th
Los Angeles, CA 90017-2543
Tel: (213) 443-3000
Fax: (213) 443-3100
Sanford I. Weisburst Counsel for Appellee Mattel, Inc.
sandyweisburst@quinnemanuel.com
QUINN EMANUEL URQUHART OLIVER
& HEDGES LLP
51 Madison Avenue, 22nd Floor
New York, NY 10010
Tel: (212) 849-7170
Fax: (212) 849-7100

ii
Case: 09-55673 05/26/2009 Page: 4 of 47 DktEntry: 6933863

A. Facts Showing The Existence And Nature Of The Emergency


MGA1 is the maker of the hugely successful Bratz brand of fashion

dolls and accessories. Over the past eight years, Bratz became the only brand of

fashion dolls in half a century to challenge the market dominance of the behemoth

Mattel and its iconic Barbie brand.

When MGA introduced Bratz, Mattel had never sold any product

called Bratz, or any doll that looked remotely like Bratz. After its attempts to

create competing products failed, Mattel filed this lawsuit, accusing MGA of

copyright infringement and seeking $1.4 billion in damages. A jury found non-

willful infringement, but, in a stinging repudiation of Mattel’s injury claim,

awarded Mattel a relative pittance on its copyright infringement claim – $10

million, a fraction of a percent of the damage Mattel claimed to have suffered.

Mattel never sought a preliminary injunction or the rights to the Bratz

trademark prior to trial. Nevertheless, after the trial, it pressed these demands, and

despite the jury’s verdict, the district court gave Mattel all it asked for. In a series

of sweeping Injunctive Orders, the court allowed Mattel to achieve its professed

litigation objective – to “KILL BRATZ.” Sealed Exs. 43 at 0547; 44 at 0564.

“MGA” refers to appellants MGA Entertainment, Inc. (“MGAE”), its subsidiary


1

MGA Entertainment HK, Ltd. (“MGA HK”), and founder and CEO Isaac Larian.
iii
Case: 09-55673 05/26/2009 Page: 5 of 47 DktEntry: 6933863

First, the district court barred MGA from selling not just the particular

female dolls that the court found infringed the copyright, but from using the name

Bratz on any item in the full line of Bratz products.2 Ex. 4 at 3, Ex. 2 at 4-5. The

ban thus extends to many other character dolls that neither the jury nor the district

court found to be infringing, as well as to thousands of Bratz brand accessories,

from clothes to cars to furniture, all products that the district court acknowledged

MGA created independently. Ex. 4 at 2-3; Ex. 7 at 9 n.6; Ex. 37 at 60:24-61:13.

The court also ordered perhaps the largest toy recall in U.S. history. Come New

Year’s, MGA must impound and/or destroy all MGA Bratz products that remain

on retailers’ shelves. Ex. 2 at 6-7; Ex. 6 at 11, 22; Ex. 7 at 7, 11.

The court’s orders go beyond enjoining MGA from selling products

under the Bratz name. They also require MGA to give Mattel all of the Bratz

trademarks so that Mattel can sell its products under the Bratz brand that MGA

built. Thus, in a matter of months, Mattel will have the exclusive right to extract

2
The orders were initially entered December 3, 2008, finalized with only very
minor modifications on April 27, 2009, and initially implemented through an order
on May 21, 2009, that also denied a stay pending appeal. See Exs. 1-7.
iv
Case: 09-55673 05/26/2009 Page: 6 of 47 DktEntry: 6933863

the benefit of the Bratz trademarks MGA spent hundreds of millions of dollars

fostering – or to simply to let the brand die, restoring Barbie’s unrivaled hegemony

in the market for fashion dolls. Ex. 4 at 2-3.

Worse yet, in its order last week denying MGA’s request for a stay

pending appeal, the district court ordered MGA to start immediately transferring its

trade secrets to Mattel. The district court directed that “MGA shall immediately

make available” to a court-appointed monitor “for transfer to Mattel” any “portion

of the Bratz Assets necessary to enable Mattel to begin preparation of its own

Bratz line for the Spring, 2010 sales season.” Ex. 7 at 13 ¶ V.B.3; see id. at 11 ¶

V.B.1.h; id. at 9-10 n.6 (broadly defining “Bratz Assets” to include products,

intellectual property, marketing assets, customer information, and other trade

secrets, not limited to those covered by the Injunctive Orders). MGA is now at the

mercy of the monitor’s judgment as to which of MGA’s assets and most critical

trade secrets will be given to its arch-rival—long before this Court will have a

chance to review the underlying verdict and orders.

If these orders are not immediately stayed, the harm to MGA will be

devastating and irreversible. To start with, rivals like Mattel and MGA spend

millions of dollars devising their strategies for how to design, brand, and market

their products and how to appeal to ever-evolving consumer tastes. E.g., Sealed

Exs. 49, 51; see generally Sealed Ex. 53 at 0665-91. They spend more still to

v
Case: 09-55673 05/26/2009 Page: 7 of 47 DktEntry: 6933863

protect those plans from their competitors. Starting now, however, the district

court has given a monitor access to all of MGA’s Bratz-related assets, including its

secret branding and marketing plans (Ex. 7, at 9-10 n.6), and required MGA to

begin transferring its assets and secret information to its most ardent rival.

MGA seeks emergency consideration also because

As the district court

recognized at a hearing on May 18, 2009, “there are things that need to be done for

the 2010 [Bratz] line now. Not a month from now or even two months from now,

but literally now.” Ex. 39 at 111:24-112:1.

vi
Case: 09-55673 05/26/2009 Page: 8 of 47 DktEntry: 6933863

See, e.g., Ex. 39 at 92:15-21; 93:8-9 (district court

acknowledging “arguably irreparable damages” to MGA, including by

“compromising” MGA’s “contracts” and “relationships with the people that

[MGA] is selling to now.”);

; Ex. 7 at 12 ¶ V.B.1.o. (district court refusing to limit Mattel’s

ability to initiate “legal proceedings anywhere in the world” to assert its newly

awarded rights in the Bratz brand).

Retailers, suppliers, distributors, licensees, and MGA thus all need to

know now whether MGA has authority to present its Bratz line pending appeal.

vii
Case: 09-55673 05/26/2009 Page: 9 of 47 DktEntry: 6933863

Even if Mattel chooses to sell Bratz in Spring 2010

Mattel could not copy MGA’s

existing line even if it wanted to, because, under the district court’s orders, MGA

still owns thousands of complementary and independently developed Bratz

products (even though MGA can no longer call them “Bratz”).

A brand is not a broach. Mattel cannot just borrow it

for a season and return it to MGA unscathed.

From any practical or legal perspective, implementing the district

court’s orders before this appeal is decided makes no sense. An unopposed motion

viii
Case: 09-55673 05/26/2009 Page: 10 of 47 DktEntry: 6933863

to expedite is pending, and this appeal can be fully briefed by September. See Dkt.

Entry 6921899. The disruption of a massive brand transfer should occur, if ever,

only once. A court-appointed monitor is in place to ensure that MGA properly

accounts for Bratz profits and promotes the Bratz brand during this appeal. Ex. 7

at 9-13. Nothing this Court might order later, after considering this stay motion on

a standard schedule, could repair the damage MGA faces now from

implementation of the district court’s orders. So long as this Court lacks the power

to purge MGA’s trade secrets from Mattel’s mind, to resuscitate a dead brand, or to

reset consumer predilections and partner expectations, the damage will be done.

The motion warrants emergency consideration.

Finally, MGA has sought an emergency stay at the earliest

opportunity, because the district court effectively insulated its orders from

appellate review until now. The district court initially released its unexpectedly

broad but seemingly final orders on December 3, 2008, causing mass confusion

among MGA’s retailers, suppliers, distributors, and licensees. MGA immediately

sought relief in the district court, filed multiple declarations in support of a stay,

obtained a stipulated briefing schedule and hearing date, and noticed an appeal.

See CA No. 08-57015. The district court then unexpectedly took the hearing off

calendar, and the court went dark. MGA promptly sought an emergency stay from

this Court, whereupon the district court set a new hearing date. The district court

ix
Case: 09-55673 05/26/2009 Page: 11 of 47 DktEntry: 6933863

then indicated that its December 3rd Injunctive Orders were not final and would

not become final until after the court decided then-pending post-trial motions; the

court also stated that it was ordering a limited stay in any event through the end of

2009. Ex. 5 at 1. Although the district court stated that it expected to finalize its

Injunctive Orders quickly, it did not do so until April 27, 2009. Ex. 38 at 82:22-

83:2; Ex. 6.

B. The District Court’s Denial Of A Stay


On May 8, 2009, MGA filed an ex parte application in the district

court for a stay pending this appeal. That application and its supporting

declarations explained the irreparable harm to the Bratz brand, and to MGA’s

business reputation and financial viability, that the district court’s orders already

are causing and would cause if the stay is not extended pending appeal. See Sealed

Exs. 47-53. The court expedited briefing on the motion, and heard argument on

May 18, 2009. On May 21, 2009, the district court denied the stay. Ex. 7 at 7. At

the same time, the court appointed a monitor with powers, inter alia, to oversee

MGA’s operations related to Bratz and the accounting of the revenues and profits

from the sale of Bratz through 2009 – far more protection for Mattel that would be

usual in a case like this and even more reason for a stay. Ex. 7 at 9-13. The

district court provided no protection for MGA pending appeal against Mattel

harming or destroying the brand. The court instead stated that “[a]t the end of the

x
Case: 09-55673 05/26/2009 Page: 12 of 47 DktEntry: 6933863

2009 year . . . the intellectual property will be in [Mattel’s] hands. What you do

with it beyond then is going to be [Mattel’s] business.” Ex. 39 at 64:9-12.

C. Notice To And Service Of Counsel For Other Parties


On May 22, 2009, MGA’s counsel notified Mattel’s counsel via e-

mail that MGA would be filing this Emergency Motion on May 26, 2009. Mattel’s

counsel in Los Angeles will be personally served with this motion and the

supporting papers on May 26; other counsel will be served by overnight delivery.

D. Request For Expedited Briefing Of This Motion


MGA asks the Court to shorten the briefing schedule for this motion

to stay. The issues are well-known to the parties, as MGA and Mattel briefed

motions to stay last December in both the district court and before this Court, and

briefed them again this month in the district court. The district court recognized

the urgency of determining who will be producing and selling Bratz for 2010, and

shortened the briefing and hearing schedule for the stay motion before that court.

Because significant deadlines are fast approaching for whichever company is going

to produce Bratz for 2010, MGA respectfully asks the Court for expedited briefing.

xi
Case: 09-55673 05/26/2009 Page: 13 of 47 DktEntry: 6933863
Case: 09-55673 05/26/2009 Page: 14 of 47 DktEntry: 6933863

CORPORATE DISCLOSURE STATEMENT


(Fed. R. App. P. 26.1)

MGA Entertainment, Inc., and MGA Entertainment HK, Ltd., are

corporations. No publicly held corporation owns 10% or more of the stock of

either of these corporations.

xiii
Case: 09-55673 05/26/2009 Page: 15 of 47 DktEntry: 6933863

TABLE OF CONTENTS

Page
FACTUAL AND PROCEDURAL BACKGROUND ..............................................1

A. The Jury Trial..............................................................................2

B. The District Court’s Injunctive Orders .......................................6

C. MGA’s Initial Appeal And Application For A Stay...................8

ARGUMENT .............................................................................................................9

I. This Court Is Likely To Overturn The Injunctive Orders...................11

A. The Injunction Lacks Any Lawful Foundation ........................11

1. The Injunction Violates The Seventh Amendment


Because It Conflicts With The Jury’s Verdict And
Role.................................................................................11

2. The District Court Applied The Wrong Standard


For Infringement.............................................................13

3. The District Court Failed To Follow eBay .....................15

B. The District Court Impermissibly Imposed A


Constructive Trust.....................................................................16

C. The District Court Based Its Orders On A Jury Verdict


Tainted By Ethnic Bias .............................................................20

II. MGA Will Suffer Irreparable Harm Without A Stay .........................22

III. A Stay Will Not Cause Irreparable Harm To Mattel ..........................24

IV. The Public Interest Strongly Favors A Stay........................................26

CONCLUSION........................................................................................................26
Case: 09-55673 05/26/2009 Page: 16 of 47 DktEntry: 6933863

TABLE OF AUTHORITIES

Page(s)

FEDERAL CASES

Advanced Med. Optics, Inc. v. Alcon Labs., Inc.,


No. Civ. A. 03-1095, 2005 WL 3454283 ...........................................................24

Aliotti v. R. Dakin & Co.,


831 F.2d 898 (9th Cir.1987) ...............................................................................14

Apple Computer, Inc. v. Microsoft Corp.,


35 F.3d 1435 (9th Cir. 1994) ..............................................................................14

Brookfield Commc’ns, Inc. v. W. Coast Entm’t Corp.,


174 F.3d 1036 (9th Cir. 1999) ............................................................................17

Concrete Co. v. MMC Holdings, Inc.,


201 F. Supp. 2d 1192 (M.D. Ala. 2001) ............................................................24

Conversive, Inc. v. Conversagent, Inc.,


433 F. Supp. 2d 1079 (C.D. Cal. 2006) ..............................................................17

Danjaq LLC v. Sony Corp.,


263 F.3d 942 (9th Cir. 2001) ..............................................................................12

Dimick v. Schiedt,
293 U.S. 474 (1935)............................................................................................12

Dyer v. Calderon,
151 F.3d 970 (9th Cir. 1998) (en banc) ..............................................................20

eBay Inc. v. MercExch., LLC,


547 U.S. 388 (2006)......................................................................................15, 16

Golden Gate Rest. Ass’n v. City and County of San Francisco,


512 F.3d 1112 (9th Cir. 2008) ............................................................................11

Grosso v. Miramax Film Corp.,


383 F.3d 965 (9th Cir. 2004) ..............................................................................17
Case: 09-55673 05/26/2009 Page: 17 of 47 DktEntry: 6933863

TABLE OF AUTHORITIES

Page(s)

Haley v. Blue Ridge Transfer Co.,


802 F.2d 1532 (4th Cir. 1986) ............................................................................21

Herbert Rosenthal Jewelry Corp. v. Kalpakian,


446 F.2d 738 (9th Cir. 1971) ........................................................................13, 15

Hilton v. Braunskill,
481 U.S. 770 (1987)............................................................................................11

Johansen v. Combustion Eng’g, Inc.,


170 F.3d 1320 (11th Cir. 1999) ..........................................................................12

Kennon v. Gilmer,
131 U.S. 22 (1889)..............................................................................................12

Kiernan v. Van Schaik,


347 F.2d 775 (3d Cir. 1965) ...............................................................................21

L. & J.G. Stickley, Inc. v. Canal Dover Furniture Co., Inc.,


79 F.3d 258 (2d Cir. 1996) .................................................................................24

Los Angeles Police Protective League v. Gates,


995 F.2d 1469 (9th Cir. 1993) ............................................................................12

Mattel, Inc. v. Azrak-Hamway Intern., Inc.,


724 F.2d 357 (2d Cir. 1983) ...............................................................................14

Mattel, Inc. v. Goldberger Doll Mfg. Co.,


365 F.3d 133 (2d Cir. 2004) ...............................................................................14

McCoy v. Goldston,
652 F.2d 654 (6th Cir. 1981) ..............................................................................21

MDY Indus., LLC v. Blizzard Entm’t, Inc.,


No. CV-06-2555-PHX-DGC, 2009 WL 649719 (D. Ariz. Mar. 10, 2009) .......23

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster,


518 F. Supp. 2d 1197 (C.D. Cal. 2007) ..............................................................15

Miller v. LeSea Broad., Inc.,


927 F. Supp. 1148 (E.D. Wis. 1995) ..................................................................24

ii
Case: 09-55673 05/26/2009 Page: 18 of 47 DktEntry: 6933863

TABLE OF AUTHORITIES

Page(s)

Mister Donut of Am., Inc. v. Mr. Donut, Inc.,


418 F.2d 838 (9th Cir. 1969) ..............................................................................18

Multi-Channel TV Cable Co. v. Charlottesville Quality Cable Operating


Co.,
22 F.3d 546 (4th Cir. 1994) ................................................................................23

Nat’l Basketball Ass’n v. Motorola, Inc.,


105 F.3d 841 (2d Cir. 1997) ...............................................................................18

Newsome v. Up-To-Date Laundry, Inc.,


219 F.R.D. 356 (D. Md. 2004) ...........................................................................13

Ohio-Sealy Mattress Mfg. Co. v. Sealy, Inc.,


585 F.2d 821 (7th Cir. 1978) ..............................................................................12

Robinson v. Metro-North Commuter R.R. Co.,


267 F.3d 147 (2d Cir. 2001) ...............................................................................13

Satava v. Lowry,
323 F.3d 805 (9th Cir. 2003) ..............................................................................13

Self-Realization Fellowship Church v. Ananda Church of Self-Realization,


59 F.3d 902 (9th Cir. 1995) ................................................................................20

Simon Prop. Group, Inc. v. Taubman Ctrs., Inc.,


262 F. Supp. 2d 794 (E.D. Mich. 2003) ............................................................24

Standard Havens Products Inc. v. Gencor Indus., Inc.,


897 F.2d 511 (Fed. Cir. 1990) ...........................................................................23

Thompson v. Altheimer & Gray,


248 F.3d 621 (7th Cir. 2001) ..............................................................................21

United Drug Co. v. Theodore Rectanus Co.,


248 U.S. 90 (1918)..............................................................................................18

United States v. Gonzalez,


214 F.3d 1109 (9th Cir. 2000) ............................................................................22

iii
Case: 09-55673 05/26/2009 Page: 19 of 47 DktEntry: 6933863

TABLE OF AUTHORITIES

Page(s)

United States v. Henley,


238 F.3d 1111 (9th Cir. 2001) ......................................................................20, 21

Velez v. Roche,
335 F. Supp. 2d 1022 (N.D. Cal. 2004)..............................................................12

Wang Labs., Inc.. v. Toshiba Corp.,


No. 90-1477-A, 1991 WL 333701 (E.D. Va. Aug. 23, 1991)............................24

Whitfield v. Lear,
751 F.2d 90 (2d Cir. 1984) .................................................................................17

STATE CASES
Chandler v. Roach,
156 Cal. App. 2d 435 (1957) ..............................................................................18

City of Hope Nat’l Med. Ctr. v. Genentech, Inc.,


43 Cal. 4th 375 (2008) ........................................................................................20

Communist Party v. 522 Valencia, Inc.,


35 Cal. App. 4th 980 (1995) ...............................................................................16

Desny v. Wilder,
46 Cal. 2d 715 (1956) ...................................................................................17, 18

Donahue v. Ziv Television Programs,


Inc., 245 Cal. App. 2d 593 (1966) ......................................................................18

Haskel Eng’g & Supply Co. v. Hartford Accident & Indem. Co.,
78 Cal. App. 3d 371 (1978) ................................................................................16

K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc.,


171 Cal. App. 4th 939 (2009) .............................................................................19

CONSTITUTIONAL PROVISIONS
U.S. Constitution, Seventh Amendment..................................................7, 11, 12, 21

iv
Case: 09-55673 05/26/2009 Page: 20 of 47 DktEntry: 6933863

TABLE OF AUTHORITIES

Page(s)

RULES
Federal Rule of Evidence 606(b) .............................................................................21

OTHER AUTHORITIES
2 DAN B. DOBBS, DOBBS LAW OF REMEDIES § 6.6(3) (2d ed. 1993) .......................19

RESTATEMENT (FIRST) OF RESTITUTION § 210 cmt. .................................................19

1 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 2:15 (4th ed.


2008); 3 MCCARTHY § 18:2 (4th ed. 2008) ........................................................18

v
Case: 09-55673 05/26/2009 Page: 21 of 47 DktEntry: 6933863

FACTUAL AND PROCEDURAL BACKGROUND

In October 2000, a young fashion designer named Carter Bryant

transferred ownership to MGA of several two-dimensional drawings of four

proposed Bratz dolls (Sealed Ex. 46) and became a consultant to MGA. Ex. 16 at

3048:10-15. After months of intensive design and development, MGA introduced

its version of Bratz dolls in 2001. Ex. 8 ¶ 8; see also, e.g., Ex. 25. MGA has since

invested hundreds of millions of dollars creating over 14,000 new Bratz products

and developing a strong brand, and it has been a huge success. Ex. 23 at 6380:22-

6381:3. With the Bratz brand, MGA became the only credible threat to Mattel’s

market dominance in fashion dolls, and prompted Mattel’s strategy to “KILL

BRATZ.” Sealed Ex. 44 at 0564.

Mattel filed suit years after Bratz was introduced to the market

alleging that Bryant “create[d] the concept, design and name of Bratz” and

drawings and models of Bratz dolls, and began assisting MGA in producing Bratz

dolls, before his Mattel contract expired. Sealed Ex. 41 at 35 ¶ 26. Mattel claimed

ownership over and asserted claims against MGA for copyright infringement of

Bryant’s drawings, as well as for conversion, unfair competition, interference with

contractual relations, and aiding and abetting breaches of fiduciary duty and duty

of loyalty. Sealed Ex. 41 ¶¶ 82-87, 116-66.

1
Case: 09-55673 05/26/2009 Page: 22 of 47 DktEntry: 6933863

A. The Jury Trial

In Phase 1(a) of a two-phase jury trial, the jury found that Bryant had,

alone or together with others, created Bratz drawings and a preliminary “sculpt” –

a three-dimensional “draft” of a blank, unpainted doll figure – while employed by

Mattel, and that MGA was liable to Mattel on the state law claims. Ex. 17 at 1-5.

In Phase 1(b), the jury addressed the damages on these state law claims and the

copyright infringement claim.

At the outset of Phase 1(b),

After privately interviewing each juror

Ex. 20 at 5647:5-11) but refusing to let any party or counsel see the

transcripts (Ex. 22 at 5693:11-19), the court found that, on the last day of Phase

1(a) deliberations, when the jury was deadlocked over certain issues, Juror No. 8

“indicated that her husband, an attorney, [had] told her about [a] client or clients

who are Iranian and who are stubborn, rude, . . . and have stolen other person’s

ideas.” Ex. 21 at 1 ¶ 1 (emphasis added); see also Ex. 20 at 5663:5-11; Ex. 24 at

3-4. These revelations were disturbing, not only because Mr. Larian, the founder

and CEO of MGA, immigrated to the U.S. from Iran when he was 17 years old, but

because the jurors were told about his background in voir dire and were questioned

whether they could be fair in a case involving someone from “the Middle East.”

2
Case: 09-55673 05/26/2009 Page: 23 of 47 DktEntry: 6933863

Ex. 11 at 317:21-25. The court expressed shock that this juror would “go through

the voir dire process that we went through and then harbor and make such a

statement, harbor such a feeling and then make such a statement.” Ex. 20 at

5655:24-5656:4. The court characterized Juror No. 8’s remarks as “grossly

inappropriate” and her presence as a “cancer” in the proceedings, and dismissed

her. Ex. 22 at 5694:5; Ex. 20 at 5662:6; Ex. 21 at 1-2.

Even though Juror No. 8 deliberated and voted in Phase 1(a), the

district court denied MGA’s motion for a mistrial. The court held that the

constitutional right to unbiased jurors applies only in criminal, not civil, cases. Ex.

24 at 8-10. It found that Juror No. 8’s statements reflected only her husband’s

views, and did not establish that “she herself held certain preconceptions regarding

Persians and/or Iranians.” Id. at 7. The court did not reconcile this finding with

Juror No. 6’s concern that Juror No. 8 was not objective or with her dismissal from

Phase 1(b), but did find that that Juror No. 8 was not “biased . . . in the legal sense”

because “[c]ourts do not require that jurors . . . be without preconceived notions,”

and because “perfect justice is not of this world.” Id. at 11.

MGA sought a writ of mandamus ordering a new trial. This Court

denied the petition, on the ground that mandamus is inappropriate when relief is

available on appeal. CA No. 08-73438.

3
Case: 09-55673 05/26/2009 Page: 24 of 47 DktEntry: 6933863

The trial continued with Phase 1(b), where the court instructed the

jury to evaluate copyright infringement through the lens of a “substantial

similarity” test and not the (correct) “virtually identical” test. Ex. 32 at 29-30.

Mattel’s evidence on the scope of copyright infringement emphasized similarities

between the Bryant drawings and the four “first generation” Bratz dolls,3 which

were on the market only through early 2003. For later generation dolls, Mattel

pointed to MGA’s use of the same, blank production sculpt. Ex. 33 at 8153:21-

8154:1, 8154:14-18, 8156:17-21. MGA acknowledged some similarities between

the first generation dolls, particularly the fashions, and Bryant’s drawings. Ex. 25

at 6959:6-9; Ex. 34 at 8196:22-8197:1. However, MGA identified significant

differences between Bryant’s drawings and the preliminary sculpt that Bryant

commented on and the final sculpt that took many more months to create and that

was used in making the dolls, and demonstrated that the dolls were given a new

look each season, to keep pace with the changing tastes of their young consumers.

See generally Exs. 25, 26. MGA also demonstrated that the profits from later

generation dolls were driven by changing themes, characters, fashions, face paint

and hair, which MGA contended reflected only MGA’s independent and extensive

3
See, e.g., Ex. 18 at 5422:8-5424:12 (opening statement comparisons of first
generation Sasha, Jade, Chloe, and Yasmin dolls to Bryant drawings), Ex. 33 at
8141:20-8142:1 (closing argument comparisons of drawings and 2001 dolls –
“Let’s look at some of the dolls and drawings side by side.”); Id. at 8142:19-21
(more of same).

4
Case: 09-55673 05/26/2009 Page: 25 of 47 DktEntry: 6933863

creativity and resources. See, e.g., Ex. 27; Ex. 34 at 8187:1-9, 8188:1-6, 8220:14-

8222:18, 8224:5-17.

Despite the differences between the first and later generations – which

Mattel itself acknowledged (Ex. 33 at 8154:2-9; 8155:14-15) – Mattel asked the

jury to award it all profits from all Bratz sales since 2001, which Mattel estimated

at over $1.4 billion. Id. at 8157:19-8158:22. Mattel argued no alternative

calculation. MGA, however, presented evidence that MGA’s profits from all Bratz

products were $405 million (Ex. 29 at 7693:21-25), then provided the jury with

options for attributing profits to infringement related to Carter Bryant’s

contribution, particularly infringement related to only the first generation dolls.4

MGA also proposed a special verdict form that would have allowed

the jury to identify the infringing categories of dolls. Ex. 28 at 2-6. But Mattel

opposed this, arguing that the jury’s “damages award will reflect” the scope of

infringement, and the district court acquiesced and used a general verdict form.

Ex. 31 at 7978:5-10, 7981:22-7982:1; Ex. 36. The court instructed the jury to

4
See, e.g., Ex. 29 at 7784:1-9 (calculating profits from first generation dolls at $4
million); Ex. 29 at 7709:14-17, 7711:14-18 (identifying revenues from first
generation dolls as 2.5% of total Bratz revenues); Ex. 34 at 8233:5, 8234:21
(calculating profits from later generation dolls at $18.9 million); Ex. 34 at 8225:13-
8226:11, 8229:9-16, 8232:14-8235:2 (providing various calculations concerning
indirect profits from different categories of merchandise).

5
Case: 09-55673 05/26/2009 Page: 26 of 47 DktEntry: 6933863

award the damages it found were attributable to infringement, but did not request

the jury to specify what it found infringing. Ex. 32 at 46-47.

On the next-to-last day of deliberations, the jury sent the court a note

stating that it had a “dilemma” about “appropriation [sic] of the first generation, $4

million profit,” and asking: “Can we find that the first generation dolls violate the

copyright of Mattel but that subsequent generations of dolls do not violate the

copyright?” With the parties’ consent, the court said it could. Ex. 35.

Evidently, the jury did exactly that. The jury awarded Mattel only

$10 million total on its copyright claim ($6 million for MGA, $3 million for

Larian, and $1 million for MGA-HK). Ex. 35 at 5. The jury also awarded Mattel

zero damages on Mr. Larian’s ownership percentage of MGA, which Mattel had

requested – albeit speculatively – largely by estimating Mr. Larian’s future Bratz-

related profits. Id. The jury also awarded identical damages on each of the three

state law claims of $20 million against MGA and $10 million against Mr. Larian.

Id. at 2. Finally, the jury found the infringement was not “willful.” Id. at 4-5.

B. The District Court’s Injunctive Orders

On September 29, 2008, Mattel filed motions for equitable remedies

based on the jury’s verdicts. The district court later noted that “the measurable

value to Bratz, the brand Bratz, to the dolls Bratz, to everything that came of it, is

so much a function of what Isaac Larian and his team at MGA have put into it,”

6
Case: 09-55673 05/26/2009 Page: 27 of 47 DktEntry: 6933863

that giving Mattel “everything that is of value” relating to Bratz was “quite a leap.”

Ex. 37 at 60:24-61:13.

Nevertheless, in orders issued on December 3, 2008, the district court

imposed a constructive trust on all of MGA’s worldwide trademarks, service marks

and domain names that include “Bratz” and “Jade,” enjoined MGA from using

these trademarks “anywhere in the world,” and ordered MGA to transfer and

assign all “Bratz” and “Jade” trademarks and domain names to Mattel, so Mattel

can sell its own Bratz line. Ex. 4 at 2-3. It also made all copyrights in Bryant’s

drawings and doll sculpt subject to the constructive trust. Ex. 3 at 5. It further

declared that Mattel owns all “Bratz-related works, ideas, and concepts that Carter

Bryant conceived or created while employed by Mattel, as found by the jury in this

case, including the idea for the [Names].” Id. at 2. Finally, it enjoined MGA from

selling Bratz female fashion dolls or related Bratz materials, and required MGA to

contact all retailers, distributors, wholesalers, importers, exporters, licensees, and

customers, and post a notice on its website, to recall and impound all such MGA

Bratz products. Ex. 2 at 2-4, 7-9.

The district court admitted that the “jury returned an award of

damages that was far less than that sought by Mattel” and that, under the Seventh

Amendment, it was bound by the jury’s “implicit or explicit factual

determinations.” Ex. 1 at 9. Nevertheless, it concluded that it could “make no

7
Case: 09-55673 05/26/2009 Page: 28 of 47 DktEntry: 6933863

principled inferences” from the jury’s outright rejection of Mattel’s $1.4 billion

demand “and must therefore engage in its own factfinding.” Id. at 10 (emphasis

added). After conducting its own review of evidence, the court concluded that

every full-sized female Bratz doll was “substantially similar” to the drawings and

preliminary sculpt that the jury found were created by Bryant while he worked at

Mattel. Id. at 11. In explaining its orders, the court referred to the “hundreds of

millions of dollars” that MGA had earned from Bratz. Id. at 13.

C. MGA’s Initial Appeal And Application For A Stay

On December 11, 2008, MGA noticed an appeal and sought a stay

from the district court pending appeal of the Injunctive Orders, explaining through

extensive supporting declarations the catastrophic harm that they would impose,

and providing a stipulated briefing schedule and hearing date. When the district

court, sua sponte, took the hearing date off calendar without replacing it, MGA

filed an emergency stay motion in this Court. Case No. 08-57015, Docket # 6.

The district court then restored the stay hearing to its calendar.

On January 7, 2009 the district court ordered a limited stay to permit

retailers to purchase Bratz through December 31, 2009, and stated that its

Injunctive Orders would not become final until after the court decided the parties’

post-trial motions (this Court thereafter dismissed the appeal). Ex. 5 at 1. On

February 11, the court heard argument on the post-trial motions and promised a

8
Case: 09-55673 05/26/2009 Page: 29 of 47 DktEntry: 6933863

decision soon. Ex. 38 at 82:22-83:2. But “soon” did not come for over two more

months, or nearly five months after the original orders.

On April 27, 2009, the court resolved the post-trial motions and

officially finalized, with only very minor modifications, the Injunctive Orders. Ex.

6. MGA filed a timely Notice of Appeal from the Injunctive Orders on May 4,

2009, and moved for a stay pending appeal, again supported by substantial

evidence, on May 8, 2009. On May 21, 2009, the district court denied the stay and

appointed a monitor to facilitate the transfer of Bratz from MGA to Mattel and

begin taking Bratz net profits into escrow. Ex. 7 at 7, 9-13. The court ordered

MGA to “immediately make available . . . for transfer to Mattel” those MGA

“Bratz Assets” – which are defined to include all Bratz-related materials, whether

or not covered by the Injunctive Orders – that Mattel needs to begin production of

its own Bratz line. Id. at 9-10 n.6, 13 ¶ B.3.

ARGUMENT
It may be, as the district court said, that “perfect justice is not of this

world.” But the imposition of the Injunctive Orders is a gross miscarriage of

justice. For conduct that the jury found caused relatively minor harm to Mattel, the

district court not only barred MGA from selling any Bratz female fashion dolls and

required a massive recall, but barred MGA from ever selling any product named

Bratz again and bestowed upon Mattel all of MGA’s Bratz trademarks and their

9
Case: 09-55673 05/26/2009 Page: 30 of 47 DktEntry: 6933863

associated value and goodwill. The district court’s disproportionate orders rest on

multiple stark errors of law, any one of which would require reversal.

For example, the district court not only disregarded the Seventh

Amendment’s mandate that a court respect the jury’s factual findings when

fashioning equitable relief, it wrongly chose the overbroad “substantial similarity”

test to analyze infringement. The court further erred in giving Mattel MGA’s

Bratz trademarks on the legally impermissible theories that a party can own an

“idea for a name,” and that a standard form employment contract creates a

fiduciary relationship. The underlying verdicts were also tainted by the presence

of a juror outspoken in her bias against the ethnicity of MGA’s founder and CEO,

yet the district court mistakenly held that the Constitution protects only criminal,

and not civil, defendants from racially and ethnically biased jurors.

Unless this Court stays these orders pending appeal, however, MGA

will not get the benefit of a successful appeal. In the absence of a stay, a

successful appeal will be of little value to MGA, for the Injunctive Orders will

have destroyed the Bratz brand and irreparably harmed MGA. Under the familiar

standards,5 the Injunctive Orders should be stayed pending appeal.

5
In evaluating a stay pending appeal, this Court considers: “(1) whether the stay
applicant has made a strong showing that he is likely to succeed on the merits; (2)
whether the applicant will be irreparably injured absent a stay; (3) whether
issuance of the stay will substantially injure the other parties interested in the
(footnote continued …)

10
Case: 09-55673 05/26/2009 Page: 31 of 47 DktEntry: 6933863

I. THIS COURT IS LIKELY TO OVERTURN THE INJUNCTIVE ORDERS

A. The Injunction Lacks Any Lawful Foundation

1. The Injunction Violates The Seventh Amendment Because


It Conflicts With The Jury’s Verdict And Role
The district court’s injunction violates the Seventh Amendment.

Mattel attributed all of MGA’s profits from all dolls and products – $1.4 billion in

Mattel’s estimation – to willful copyright infringement based on the final “sculpt”

of the female dolls, and claimed the loss of that profit as its harm. By awarding

Mattel only $10 million for copyright infringement, the jury flatly rejected Mattel’s

theory. The jury’s verdict is irreconcilable with the district court’s independent

findings that all the Bratz full-sized female fashion dolls infringe because all use

the same final sculpt. That was Mattel’s theory, too, and the jury rejected it.

The Seventh Amendment right to a jury trial prohibits a district court

from imposing equitable relief based on a factual finding that conflicts with the

jury’s verdict. The “Seventh Amendment prohibits re-examination of a jury’s

determination of the facts, which includes its assessment of the extent of plaintiff’s

(… footnote continued)
proceeding; and (4) where the public interest lies.” Hilton v. Braunskill, 481 U.S.
770, 776 (1987); Golden Gate Rest. Ass’n v. City and County of San Francisco,
512 F.3d 1112, 1115 (9th Cir. 2008). Moreover, ‘“the required degree of
irreparable harm increases as the probability of success [on the merits] decreases.”’
Golden Gate Rest. Ass’n, 512 F.3d at 1116 (citation omitted). Thus, if ‘“the
balance of hardships tips sharply in . . . favor”’ of a stay, that relief is warranted if
the appeal presents ‘“serious legal questions.”’ Id. (citation omitted).

11
Case: 09-55673 05/26/2009 Page: 32 of 47 DktEntry: 6933863

injury.” Johansen v. Combustion Eng’g, Inc., 170 F.3d 1320, 1328 (11th Cir.

1999) (citing Kennon v. Gilmer, 131 U.S. 22, 29 (1889)); Velez v. Roche, 335 F.

Supp. 2d 1022, 1037 n.5 (N.D. Cal. 2004) (same); see Dimick v. Schiedt, 293 U.S.

474, 486 (1935) (litigants “entitled” under Seventh Amendment “to have a jury

properly determine the question of liability and the extent of the injury by an

assessment of damages”). This Court has reversed judicial conclusions even when

they do not conflict with the jury’s explicit holding, but merely ignore a jury

finding implicit in the “level of damages it awarded.” Los Angeles Police

Protective League v. Gates, 995 F.2d 1469, 1474 (9th Cir. 1993); see Ohio-Sealy

Mattress Mfg. Co. v. Sealy, Inc., 585 F.2d 821, 844 (7th Cir. 1978).

The district court’s view that the verdict permits “no principled

inferences” does not justify denying MGA its constitutional right to a jury trial.

The jury’s verdict would have expressly identified whether any later generation

dolls infringed if the district court had accepted MGA’s special verdict form. The

district court was obliged, under the Seventh Amendment, to structure the trial to

ensure that the jury would decide all factual issues equally relevant to both

damages and equitable relief, and its failure to do so alone warrants reversal. See

Danjaq LLC v. Sony Corp., 263 F.3d 942, 961-62 (9th Cir. 2001) (trial court can

“run afoul of the Seventh Amendment” by ordering bifurcation in a way that

permits reexamination of facts decided by jury). Even where a case is bifurcated

12
Case: 09-55673 05/26/2009 Page: 33 of 47 DktEntry: 6933863

and tried to two separate juries, “the court must carefully craft the verdict form for

the first jury so that the second jury knows what has been decided already.”

Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 169 n.13 (2d Cir.

2001); see Newsome v. Up-To-Date Laundry, Inc., 219 F.R.D. 356, 364 (D. Md.

2004). Compliance with that requirement is essential where, as here, the second

factfinder is the judge.

2. The District Court Applied The Wrong Standard For


Infringement
The district court’s injunction fails for another independent reason: it

applies the wrong legal standard to the analysis of infringement. This error infects

the jury’s initial infringement finding as well as the court’s subsequent (and

constitutionally impermissible) infringement finding, because both jury and judge

applied the “substantial similarity” standard. Exs. 19, 30, 32 at 29-30. As this

Court and the Second Circuit have held, the correct standard in cases involving

natural forms is whether the accused copy is “virtually identical” to the original,

not whether it is “substantially similar.”

Most recently, in Satava v. Lowry, 323 F.3d 805, 812-13 (9th Cir.

2003), this Court held that a jellyfish sculpture receives only “thin” protection

against “virtually identical” copying, because an artist “may not prevent others

from copying elements of expression that nature displays for all observers.” The

Ninth Circuit has recognized this principle at least since its decision in Herbert

13
Case: 09-55673 05/26/2009 Page: 34 of 47 DktEntry: 6933863

Rosenthal Jewelry Corp. v. Kalpakian, 446 F.2d 738, 742 (9th Cir. 1971), the

“jeweled-bee pin” case. Cf. Apple Computer, Inc. v. Microsoft Corp., 35 F.3d

1435 (9th Cir. 1994) (applying “virtual identity” standard).

The district court rejected the “virtual identity” standard because it

found the human form capable of a wider range of expression than jellyfish. Ex.

30 at 2. This analysis conflicts with the Ninth Circuit’s repeated invocation of the

thin copyright standard when confronted with natural forms, e.g., Aliotti v. R.

Dakin & Co., 831 F.2d 898, 901-02 (9th Cir.1987), and with the other cases the

district court relied upon. For example, in Mattel, Inc. v. Goldberger Doll Mfg.

Co., 365 F.3d 133, 135 (2d Cir. 2004), the Second Circuit confronted allegations

that a competitor had copied the “central expressive features of Barbie’s face.”

The court held that the scope of protection accorded the human form – specifically

as expressed in dolls – was “of course, quite limited” and extended only to

“Mattel’s realization” of those particular features. Id. at 135. The court explained

that because “[o]ne artist’s version of a doll face with upturned nose, bow lips, and

widely spaced eyes will be irresistible to an eight-year-old collector [and] [a]nother

artist’s version . . . will be a dud . . . getting the doll’s face and expression exactly

right is crucial to success.” Id. at 136 (emphasis added). See also Mattel, Inc. v.

Azrak-Hamway Intern., Inc., 724 F.2d 357, 360 (2d Cir. 1983) (protecting “only

the particularized expression” of a muscleman body in a fighting pose).

14
Case: 09-55673 05/26/2009 Page: 35 of 47 DktEntry: 6933863

Copyright thus protects only one particular realization of human

features, and not another artist’s effort to get his own realization of those features

“exactly right.” Applying the substantial similarity rather than the virtual identity

test in a context like this gives the copyright holder far too great a power to restrict

competition and consumer choice – precisely the concern first recognized more

than three decades ago by this Court in Rosenthal. If the district court had applied

the correct legal standard, it could not have concluded that every female Bratz doll

was virtually identical to Mr. Bryant’s drawings and the draft sculpt. Under the

correct standard, the jury likely would not have found any infringement. Without

these predicates, there is no basis for the court’s equitable relief.

3. The District Court Failed To Follow eBay


Finally, the injunction violates the Supreme Court’s holding in eBay

that an injunction does not “automatically follow[] a determination that a copyright

has been infringed” because infringement alone does not create irreparable harm.

eBay Inc. v. MercExch., LLC, 547 U.S. 388, 392-93 (2006). Invoking a pre-eBay

rule, the District Court held that past infringement plus a likelihood of future

infringement satisfies the irreparable harm requirement. Ex. 1 at 11-12. Whether

this rule negates the holding in eBay is an important question this Court should

decide. See, e.g., Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, 518 F. Supp. 2d

15
Case: 09-55673 05/26/2009 Page: 36 of 47 DktEntry: 6933863

1197, 1211 n.13 (C.D. Cal. 2007) (“After eBay, Plaintiffs cannot rely on the pure

fact of infringement in order to establish irreparable harm.”).

B. The District Court Impermissibly Imposed A Constructive Trust


The district court’s errors do not stop with the injunction against

MGA selling any Bratz full-sized female fashion dolls. If anything, the court’s

error in giving all of MGA’s Bratz trademarks to Mattel – and thus precluding

MGA from selling even non-infringing products under the Bratz name – is even

more stark. The trademarks represent all of the goodwill and value that the market

associates with the trademark BRATZ after MGA’s investment of hundreds of

millions of dollars, and the sale of over 14,000 MGA Bratz products, over nearly

nine years. Yet the district court, in one breathtaking order, invoked the legal

vehicle of a “constructive trust” to hand these trademarks to Mattel. At the hearing

on post-trial motions, the district court admitted that the constructive trust was

“something which is bothering the Court.” Ex. 38 at 37:16-38:13. For good

reason. No court has afforded such a remedy in comparable circumstances,6 and to

do so here violates federal and state law.

First, Mattel is not entitled to a constructive trust unless it can point to

a “res” that rightfully belongs to Mattel. Communist Party v. 522 Valencia, Inc.,
6
The only case cited by the district court for its extraordinary remedy, Haskel
Eng’g & Supply Co. v. Hartford Accident & Indem. Co., 78 Cal. App. 3d 371
(1978), was an inapposite “tracing” of property case.

16
Case: 09-55673 05/26/2009 Page: 37 of 47 DktEntry: 6933863

35 Cal. App. 4th 980, 990 (1995). Neither Bryant nor Mattel ever owned the

trademarks or rights to the Bratz name. Such rights to a name can be established

only through use in commerce, and it is undisputed that MGA is the company that

created the BRATZ trademarks. See Brookfield Commc’ns, Inc. v. W. Coast

Entm’t Corp., 174 F.3d 1036, 1046 (9th Cir. 1999); Conversive, Inc. v.

Conversagent, Inc., 433 F. Supp. 2d 1079, 1089-90 (C.D. Cal. 2006).

The district court, however, found that because Mr. Bryant had the

“idea for the name” Bratz while at Mattel, Mattel owned the name Bratz, which

MGA merely enhanced by acquiring trademark rights to it.7 Treating an idea for a

name as the “res” – Mattel’s property – to support a constructive trust over the

trademarks was erroneous as a matter of law. Under California law, ideas are not

protectable property. See Desny v. Wilder, 46 Cal. 2d 715, 732, 733-34 (1956); see

also Whitfield v. Lear, 751 F.2d 90, 92 (2d Cir. 1984) (“Under California law … an

idea is not recognized as a property right” and cannot support claims “actionable

only to vindicate legally protected property interests”). As this Court has held, the

creator of an idea may be entitled, through contract, to compensation for conveying

the idea; but “the bargain is not for the idea itself, but for the services conveying

that idea.” Grosso v. Miramax Film Corp., 383 F.3d 965, 967 (9th Cir. 2004)

7
See Ex. 1 at 7; see also id. at 3, 5-6 & n.2; Ex. 3 ¶ 1; Ex. 6 at 5; Ex. 9 at 3.

17
Case: 09-55673 05/26/2009 Page: 38 of 47 DktEntry: 6933863

(emphasis added)).8 Treating ideas for a name as protectable property would also,

in any case, be preempted by the Copyright Act. See Nat’l Basketball Ass’n v.

Motorola, Inc., 105 F.3d 841, 849-50 (2d Cir. 1997) (state law cannot expand

protection over matters not protected in copyright).

Second, even if Mattel had some interest in the name “Bratz,” the

BRATZ trademarks are not an “enhancement” of that name in the way that, e.g.,

appreciation is an enhancement of the value of land. Rather, a trademark is an

independent symbol of goodwill, the significance and value of which are created

by and are inseparable from the investment and the business – in this case, MGA –

associated with the marks. See United Drug Co. v. Theodore Rectanus Co., 248

U.S. 90, 97-98 (1918); Mister Donut of Am., Inc. v. Mr. Donut, Inc., 418 F.2d 838,

842 (9th Cir. 1969); 1 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION §

2:15 (4th ed. 2008); 3 MCCARTHY § 18:2.

As the jury’s verdict reflects, virtually all of the value represented by

the trademarks is the product of MGA’s independent efforts and investments over

several years, including its development of Bratz products that have nothing to do

with Bryant’s drawing or ideas.

8
See also Desny, 46 Cal. 2d at 733-34; Donahue v. Ziv Television Programs, Inc.,
245 Cal. App. 2d 593, 609 (1966); Chandler v. Roach, 156 Cal. App. 2d 435, 441
(1957) (contract enforceable only between parties; does not create ownership).

18
Case: 09-55673 05/26/2009 Page: 39 of 47 DktEntry: 6933863

Equity does not entitle Mattel to the

benefits of MGA’s independent investments and innovations.9

Finally, there is no basis for the state law claims on which the

constructive trust is based. Mattel’s constructive trust claim depends heavily on

Bryant’s purported breach of fiduciary duty to Mattel. Yet the district court erred

in ruling, before trial and as a matter of law, that Bryant – a low-level, employee

fashion designer – owed Mattel a fiduciary duty.10

The court imposed a fiduciary duty merely because the Mattel form

contract recited that new employees were accepting a position and obligations of

“trust.” See Ex. 9 at 5-6, Ex. 12 at 3-4. This recitation is insufficient, as a matter

of law, to impose a fiduciary relationship. As the California Supreme Court has

held, “every contract to some extent requires a party to repose trust and confidence

9
See, e.g., 2 DAN B. DOBBS, DOBBS LAW OF REMEDIES § 6.6(3) (2d ed. 1993)
(equity does not allow plaintiff to capture “the fruits of the defendant’s own labors
or legitimate efforts”); RESTATEMENT (FIRST) OF RESTITUTION § 210 cmt. b (1937)
(constructive trust extends to “only a share in such proportion” as the trust property
bears to the entire fund of commingled property).
10
The other state law claims (to the extent not preempted by the Copyright Act)
could not support a constructive trust as opposed to an ordinary damages remedy,
and are in any case preempted by state law. See K.C. Multimedia, Inc. v. Bank of
Am. Tech. & Operations, Inc., 171 Cal. App. 4th 939, 954-62 (2009) (state statute
preempts common law claims, including breach of confidence claims, “based on
the same nucleus of facts” as would support a trade secrets claim).

19
Case: 09-55673 05/26/2009 Page: 40 of 47 DktEntry: 6933863

in the other,” but that alone “does not give rise to a fiduciary duty.” City of Hope

Nat’l Med. Ctr. v. Genentech, Inc., 43 Cal. 4th 375, 391 (2008) (emphasis added)

(alteration and internal quotation omitted); see id. at 389. Indeed, in City of Hope,

the California Supreme Court refused to impose a fiduciary duty as a matter of law

even where one party had expressly bargained to develop another party’s particular

“secret idea” in return for “royalties.” Id. at 387-92. Bryant merely signed a form

employment agreement. Whether Bryant owed a fiduciary duty to Mattel was, at

the very least, an issue to be “considered by the trier of fact” (id. at 391), which

independently requires vacating the constructive trust.

C. The District Court Based Its Orders On A Jury Verdict Tainted


By Ethnic Bias
The court’s equitable remedies depend on the jury’s underlying

liability verdict, and yet that verdict is tainted. It is the product of deliberations

that included a biased juror.11

The constitutional right to a jury trial is “violated by ‘the bias or

prejudice of even a single juror.’” See United States v. Henley, 238 F.3d 1111,

1120 (9th Cir. 2001) (quoting Dyer v. Calderon, 151 F.3d 970, 973 (9th Cir. 1998)

(en banc)); see also Dyer, 151 F.3d at 985. Here, the racist comment of Juror No.

11
This Court may address this issue in this appeal, because matters which
“provide[] the legal authority to issue an injunction” are “inextricably bound up
with the injunctive order.” Self-Realization Fellowship Church v. Ananda Church
of Self-Realization, 59 F.3d 902, 905 (9th Cir. 1995).

20
Case: 09-55673 05/26/2009 Page: 41 of 47 DktEntry: 6933863

8, the complaint of Juror No. 6 that Juror No. 8 was not objective or trying to be,

and the court’s dismissal of Juror No. 8 from Phase 1(b) as a “cancer,” demonstrate

that the Phase 1(a) deliberations were corrupted by the presence of a biased juror.

See Henley, 238 F.3d at 1121 (rejecting assertion that people who use racial slurs

are not racially biased).

The district court’s rationale – that civil litigants have no

constitutional protection against biased jurors – is wrong. That ruling conflicts

with the plain language of the Seventh Amendment, is unsupported by any

decision of this Circuit, and is contrary to decisions in other circuits. McCoy v.

Goldston, 652 F.2d 654, 657 (6th Cir. 1981); Thompson v. Altheimer & Gray, 248

F.3d 621, 622 (7th Cir. 2001); Kiernan v. Van Schaik, 347 F.2d 775, 778 (3d Cir.

1965); Haley v. Blue Ridge Transfer Co., 802 F.2d 1532, 1535 n.4 (4th Cir. 1986).

The district court compounded the denial of due process by refusing

to provide any access to the record of its juror interviews. Contrary to the district

court’s view, Federal Rule of Evidence 606(b) does not justify its decision. Rule

606(b) is inapplicable on its face, because Juror No. 6’s spontaneous complaint

about Juror No. 8’s bias was not made “[u]pon inquiry into the validity of a verdict

or indictment.” Even where Rule 606(b) is implicated, this Court has explained the

“powerful case” that Rule 606(b) “is wholly inapplicable to racial bias.” See

Henley, 238 F.3d at 1120. The only constitutionally permissible conclusion is that

21
Case: 09-55673 05/26/2009 Page: 42 of 47 DktEntry: 6933863

the deliberations with Juror No. 8 were invalid and the verdict must be vacated.

United States v. Gonzalez, 214 F.3d 1109, 1111-12 (9th Cir. 2000).

II. MGA WILL SUFFER IRREPARABLE HARM WITHOUT A STAY


If this Court does not immediately stay the Injunctive Orders pending

appeal, MGA will suffer irreparable harm. As set forth in detail on pp. iii – xi,

supra, and in the declarations submitted to the district court and attached here as

Exhibits 48 to 53, absent a stay, the Injunctive Orders will cause

See, e.g., Ex. 39 at 92:15-21; 93:8-9

(district court acknowledging “arguably irreparable damages” to MGA, including

by “compromising” MGA’s “contracts” and “relationships with the people that

[MGA] is selling to now.”).

The

district court has not limited Mattel’s ability to initiate “legal proceedings

anywhere in the world” to assert its newly awarded rights in the Bratz brand –

22
Case: 09-55673 05/26/2009 Page: 43 of 47 DktEntry: 6933863

further undermining MGA’s business relationships. Ex. 7 at 12 ¶ V.B.1. This is

precisely the sort of irreparable harm that justifies a stay.12

12
See, e.g., Multi-Channel TV Cable Co. v. Charlottesville Quality Cable
Operating Co., 22 F.3d 546, 552 (4th Cir. 1994) (irreparable harm shown by
“possibility of permanent loss of customers to a competitor or the loss of
goodwill”); Standard Havens Products Inc. v. Gencor Indus., Inc., 897 F.2d 511,
515 (Fed. Cir. 1990) (granting stay pending appeal where defendant faced
“irreparable harm in the form of employee layoffs, immediate insolvency, and,
possibly, extinction”); MDY Indus., LLC v. Blizzard Entm’t, Inc., No. CV-06-2555-
PHX-DGC, 2009 WL 649719, at **2-3 (D. Ariz. Mar. 10, 2009) (granting stay of
copyright injunction because, without one, defendants “likely will have lost all of
their market share to competitors during the duration of the appeal and will be
unable to regain their business”).
13

That qualified statement was made by a Mattel


employee who was admittedly “out-thought and out-executed” by MGA (Sealed
Ex. 44 at 0561),
after failing at Mattel’s stated mission to “KILL
BRATZ.” Sealed Ex. 44 at 0564.

23
Case: 09-55673 05/26/2009 Page: 44 of 47 DktEntry: 6933863

Courts routinely grant stays

where asset transfers cannot readily be undone.15

III. A STAY WILL NOT CAUSE IRREPARABLE HARM TO MATTEL


Mattel, in contrast, faces no irreparable harm. Unlike many who

complain of infringement and fend off stays, Mattel never sold the original goods.

It has no association with Bratz products in the minds of customers or any third

parties, and thus faces no irreparable damage to its reputation or market share, or

any job losses, from MGA’s continued sale of Bratz.16 Mattel expresses

14
E.g., L. & J.G. Stickley, Inc. v. Canal Dover Furniture Co., Inc., 79 F.3d 258,
262 n.2 (2d Cir. 1996) (“The likelihood of consumer confusion also tends to prove
irreparable harm.”).
15
Miller v. LeSea Broad., Inc., 927 F. Supp. 1148, 1152 (E.D. Wis. 1995) (granting
stay of injunction requiring sale of television station where it "could be difficult, if
not impossible, to undo the sale" after a successful appeal); see, e.g., Simon Prop.
Group, Inc. v. Taubman Ctrs., Inc., 262 F. Supp. 2d 794, 798-99 (E.D. Mich. 2003)
(granting stay of injunction pending appeal where it was uncertain whether certain
steps under injunction “would be reversible or compensable if Defendants prevail
on appeal”); Concrete Co. v. MMC Holdings, Inc., 201 F. Supp. 2d 1192, 1195
(M.D. Ala. 2001) (granting stay of injunction removing business partner where
“the difficulties involved in reinstating [him] promise to be substantial”).
16
See Wang Labs., Inc.. v. Toshiba Corp., No. 90-1477-A, 1991 WL 333701, at *1
(E.D. Va. Aug. 23, 1991); Advanced Med. Optics, Inc. v. Alcon Labs., Inc., No.
Civ. A. 03-1095, 2005 WL 3454283, at *11; GTE Prods., 772 F. Supp. at 920-21.

24
Case: 09-55673 05/26/2009 Page: 45 of 47 DktEntry: 6933863

Ex. 54 at 5. But the district court

has now given Mattel far more protection than other litigants have when a stay

pending appeal is granted: the court has appointed a monitor who will report

monthly on MGA’s operations and inform the district court if MGA is not

adequately supporting Bratz or accounting for Bratz profits during the appeal. Ex.

7 at 9-13. Mattel waited eight years without seeking an injunction giving it control

of Bratz; given the monitor’s oversight, another few months pending appeal will

cause Mattel no irreparable harm.

MGA therefore is not seeking a stay of all of the May 21, 2009, Order

Appointing MGA Monitor. Rather, MGA is seeking a stay of only the provisions

that (i) require MGA to provide the Monitor its assets and trade secrets to assist

Mattel in selling a Bratz line (Ex. 7 ¶¶ V.B.1.h; V.B.3); (ii) require the Monitor to

collect MGA’s monthly Bratz profits in amounts and by accounting to be

determined (Id. ¶¶ V.B.1.g.; V.B.2,) and (iii) otherwise authorize the Monitor and

Mattel to implement the Injunctive Orders (Id. ¶¶ V.B.1.e; V.B.1.o). The

remaining, exceptionally broad provisions, which, e.g., allow the Monitor full

access to all of MGA’s Bratz operations and accounting for all Bratz-related

25
Case: 09-55673 05/26/2009 Page: 46 of 47 DktEntry: 6933863

revenues and profits, are more than sufficient to protect Mattel’s interests pending

appeal.17

IV. THE PUBLIC INTEREST STRONGLY FAVORS A STAY


Giving Bratz to Mattel now creates a substantial risk that the Bratz

brand will be destroyed. It would allow Mattel to “KILL BRATZ” before the

appeal is decided. Sealed Exs. 43 at 0546-47; 44 at 0564. That would disserve the

public interest, because Bratz is one of the few brands to succeed against Mattel.

The repercussions of transferring Bratz to Mattel also extend beyond

MGA and Mattel. They implicate relationships with retailers, suppliers,

distributors, licensees, and customers worldwide. Sealed Exs. 52; 53 at 0688.

Should such a massive disruption ever occur, it should happen only after this Court

has reviewed the decision below.

CONCLUSION
The Court should stay, in their entirety, the Injunctive Orders (entered

December 3, 2008) (Exs. 1-4), the Order Lifting Stay On Permanent Injunction

(entered April 27, 2009) (Ex. 6), and the Order Denying Ex Parte Application For

26
Case: 09-55673 05/26/2009 Page: 47 of 47 DktEntry: 6933863

Rate