Barbie v. Bratz: Toys on Trial

The multimillion-dollar "custody battle" comes down to one question: Was the creator of the street-smart dolls working for Mattel when he sold his idea to MGA?

Carter Bryant, the designer who came up with the initial idea for the wildly successful Bratz line of dolls, settled his legal battle with toy giant Mattel (MAT) a month ago. But you wouldn't know that from the grilling he's been getting in federal court in Riverside, Calif.

Bryant is the star witness in the high-profile dustup (BusinessWeek.com, 3/10/91) between Mattel and its archrival MGA Entertainment, controlled by entrepreneur Isaac Larian. The civil case in U.S. District Court, Central District of California, is a custody battle of sorts over the Bratz dolls. Their launch seven years ago sent Mattel's iconic Barbie brand into a market-share tailspin. Mattel claims it should own Bratz, because Bryant was working for Mattel when he first pitched the idea for the sassy, street-chic dolls to Larian.

Bryant has maintained he conceived of the dolls during an eight-month break he took from Mattel in 1998. He admitted on the witness stand that he never offered his doll design to Mattel and instead pitched it to MGA and another company. "I created these characters," he said. "I had no idea they'd ever compete with anything Mattel did."

Surprisingly Relentless

MGA has since paid Bryant "several million dollars" in royalties, he said. Last week, Larian testified it was more than $30 million. Bryant settled Mattel's suit against him for undisclosed terms just prior to the start of the trial on May 27. The toy giant is still pursuing its copyright infringement claim against Larian's company. The key to that will be convincing the jury that Bryant actually created the Bratz dolls while he was employed by Mattel in 1999 and 2000.

Dressed conservatively in a dark suit and a pale yellow shirt, his cherubic face mild behind arty wire-framed eyeglasses, Bryant seemed like an unlikely perp in a high-stakes intellectual property battle. Yet Mattel's legal teamed hammered away at him, trying to make him contradict himself on such seemingly minor details as whether there was a camera present during a practice deposition he'd given with his own lawyers in 2004. "I think everyone, including MGA, is surprised at how relentlessly Mattel is pursuing this case," says Gerrick Johnson, a toy analyst at BMO Capital Markets (BMO) who has been following the trial from afar.

Bryant, a 39-year-old Missouri native, took the stand for a second day on June 12. He said he'd heard rumors while at Mattel that fellow employees "moonlighted" on projects for other companies. But attorney William Price, a member of Mattel's legal team, continued to probe until Bryant admitted he couldn't name other Mattel employees who had worked for rivals. "I had just heard about it," he said. "It was a general rumor."

Didn't Understand the Agreement

Price showed Bryant portions of an "inventions agreement" he had signed when he returned to work at Mattel in January, 1999. The contract, fairly standard in the industry, prohibits employees from working simultaneously for competing companies and requires them to disclose product ideas they conceive of while employed by Mattel. Bryant testified he felt he had not had an "opportunity to consult with a lawyer about the terms of the agreement" at the time and that he "understood it the best I could, but I didn't understand everything about it."

Bryant has said he did the initial drawings for Bratz in 1998 when not employed by Mattel. But on the witness stand he admitted to backdating one set of drawings to August of 1998 even though they'd actually been done a year later, after he had returned to Mattel. Bryant said he had done so before he knew there was any legal challenge to Bratz ownership. Although Bryant's friends and family are expected to testify that they saw Bratz drawings as early as 1998, the designer said he didn't have copies dated from that time period. "I don't usually put a date on master drawings," he explained.

Used Mattel's Fax Machine

Attorney Price walked Bryant through various steps he took to pitch the Bratz dolls to other companies while he was at Mattel. Bryant admitted he'd done more extensive sketches of the dolls, used old Barbie doll parts to make a prototype, and used a Mattel fax machine to correspond with MGA. He'd also asked Mattel co-workers to help him design a Bratz logo, paint a prototype doll's face, and implant hair in the dummy doll's head.

Price asked Bryant several times if he didn't think he was betraying his fellow Mattel employees by asking them to work on his project without telling them it was not Mattel work. "I didn't think it was that big a deal," Bryant said. "I don't know [if] I understood MGA was a competitor of Mattel. I knew they were a toy company. I didn't know how big they were."

Erasing the Evidence?

Earlier in the week, Judge Stephen Larson ruled Mattel's legal team could introduce evidence that Bryant used a software program called Evidence Eraser just prior to handing his computer over to Mattel investigators for document retrieval. MGA's side has explained Bryant was just trying to remove pornographic "pop up" ads.

Mattel also likely scored points for its side when it showed a letter Bryant had written to an MGA attorney in 2000 when he was negotiating the sale of the Bratz designs to Larian. MGA apparently had asked Bryant for copies of any employment agreements he'd signed with Mattel. Bryant explained in the letter that he couldn't ask Mattel's human resource department for copies of the documents without "raising suspicion."