upfront: minding your business

THE LEGAL DEPARTMENT Loopholes An Adult Appeal & Legalese Who said toys were just for kids? HAVE YOU REVIEWED your employee agree- ments recently? This is a timely question given the By Richard Gottlieb recession in 2008 but 13 percent is a surprisingly epic battle between Mattel and MGA over Bratz ll of us in the toy industry are aware that large amount for an industry that doesn’t do much to dolls. One of the central disputes in that case con- there are adults, teens and seniors who pur- market its products specifically to adults. cerns an employment agreement, and its genesis is Achase toys for their own use. We know they Think what would happen if we actually tried. If we instructive on how to avoid similar conflicts. buy games, puzzles, dolls action figures and collect- are going to actively pursue adult end users and ex- The case began in 2004 when Mattel sued Cart- able cars for their own enjoyment. We are also aware pand the pie, it is going to be the retail community er Bryant, a former Mattel designer, accusing him that they love licenses like Transformers, Star Wars, leading the charge. They will need to make adjust- of violating his agreement with and duties owed to GI Joe and Star Trek. ments in their department layouts, their messaging Mattel, and of infringing Mattel’s copyright. There- Yet, we as an industry for the most part act as if we and their product mixes to tap into what can only be after, the case swelled with Bryant and his new were in the children’s business. Walk into virtually any seen as a huge potential. employer, MGA Entertainment, filing their own toy department or toy store and you will get the over- complaints against Mattel. Eventually Bryant settled whelming sense that you are in a place exclusively for A working example with Mattel, but MGA did not. children. The product mixes, the signs, the fixtures, Imagine a toy store or department that is not designed One of Mattel’s key arguments was that Bryant the ads and the licenses all make it very clear that we for kids but for everyone. In addition to a large kid’s conceived of the name “Bratz” and created draw- think toys are strictly for kids. section but there would sections for teens, adults and ings of the “Bratz” dolls while employed at Mattel, In fact, the very outlook of some in the toy industry maybe even seniors. In teen and adult departments and that the name and designs belonged to Mat- is that if adults buy toys for themselves there is some- you would find strong presentations of licenses like tel. Mattel’s claims rested on a broad interpretation thing wrong with them. Let me give you an example: A Family Guy, The Simpsons, Star Wars, Star Trek and of an “Inventions Agreement” Bryant signed when few years ago I was speaking with a clerk in a major South Park. You would find action figures, miniature he began working for Mattel, which states in rele- toy chain who told me that he and the other staff cars, games, puzzles and sophisticated construction vant part (with emphasis added): members used to hide the new action figures when sets. In short, you would find an adult’s paradise. [I...agree] to communicate to [Mattel]...all inven- they arrived so that the adult collectors would not buy Can’t you just see a family hitting the toy department tions...conceived...at any time during my employ- them all. They wanted to save them for the kids. As together with kids going to their sections while Mom ment by [Mattel], [and] I hereby assign to [Mattel]... the clerk told me this, he acted as if there was some- and Dad go to theirs? Well, I actually did see it. It ex- all my right, title and interest in such inventions, ists at the new Barnes & Noble flagship store on Lex- and...in any...copyrights...or copyright applications Age group Annual $ 2007 Annual $ 2008 ington Avenue and 86th Street in Manhattan. based thereon...[T]he term “inventions” includes, 12-17 5% 5% They have created a beautiful game and puzzle de- but is not limited to, all discoveries, improve- 18-34 5% 4% partment on the main floor that is clearly meant for ments, processes, developments, designs, know- 35+ 5% 4% adults. This is telegraphed through content, through how...whether patentable or unpatentable...[This Total 15% 13% positioning and through signage. agreement] shall not apply to an invention that Source: The NPD Group/Consumer Tracking Service It is purposely situated on a different floor than the the employee developed on his or her own time... children’s toy department. The product mix consists except for those inventions that...relate at the time thing wrong with adults who purchased toys. I won- of puzzles and games for the discerning adult shopper. of conception or reduction to practice of the inven- dered at the time how many sales that store lost be- The signage is appropriately sophisticated and sug- tion to the employer’s business... cause some of the staff wanted to prevent adults from gests that this is clearly a place for adults. MGA and Bryant, of course, argued for a more buying toys. The space allocated to the department is ample, run- narrow interpretation of the agreement. In a series ning by my calculations to 140 running feet, with most of rulings, the District Court agreed with Mat- The numbers shelving coming in at 8 feet in height. The game mix tel and concluded that the Inventions Agreement Well, adults love to play and they love to play with consists of European and American games that are conveyed to Mattel “any Bratz-related ‘inventions’ toys. Yet, how big is the current adult/teen market? categorized by anything from “Abstract Strategy” to (including any designs, improvements, ideas, con- Those numbers are hard to come by. Perhaps it’s be- “Adventure.” The puzzle section is a strong mix of Eu- cepts and copyrightable subject matter), that Bry- cause we never ask for them. Well, I did. ropean and American manufacturers that run the full ant created while employed with Mattel.” My first stop was to speak with someone in the range of price points. In fact, a number of retails were Though the decision is on appeal, and there are action figure industry. I wanted to know what per- over $50, and from what I understand from talking yet further proceedings ongoing at the district centage of action figures were purchased by adults to Barnes & Noble, they are selling. Clearly, the con- court level, the lesson is clear. Unless you enjoy for their own use. He asked to remain anonymous sumer is seeing products he or she would not see in spending a lot of time and money with your law- but did tell me that, according to their figures, 33 per- most child-oriented toy stores and is buying them. yers in court, take a small amount of time upfront cent of all action figures sold are purchased by adults Barnes & Noble is positioned to be a breakout player with your lawyers to carefully review and craft any for their own use. Does that surprise you? I have to in toys. It could be the first major chain to truly focus employment agreement. It may avoid a costly fight admit, it surprised me. in on the allusive adult toy end user. down the road. My next stop was to ask NPD what kind of infor- mation they had on the adult/teen market. They gra- Richard Gottlieb is president of Marc S. Cooperman (pictured) is Richard Gottlieb & Associates, a pro- ciously provided me with the following US sales data a partner with Chicago’s Banner vider of business development ser- showing toy sales to end user adults and teens. The in- vices to the toy industry. His “Out of & Witcoff Ltd. He specializes in IP formation is expressed in the percentage of total toy the Toy Box” blog can be read daily litigation. Co-author Timothy J. dollars spent. [See table above] on Playthings.com. He can be reached Rechtien is an associate at B&W. It looks like adult purchasers took a hit due to the at [email protected]. The fight between Mattel and MGA Entertainment over rights to the Bratz doll franchise has cost the companies involved a reported $100 million in combined legal fees in the five years since litigation began. —Marc S. Cooperman

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