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Is Mattel raising the white flag in Bratz copyright case?

2/15/2013 COMMENTS (0)

As of Friday afternoon, there were 10,843 docket entries in Mattel's epic copyright litigation against MGA, which Mattel accused of stealing designs for Bratz dolls. Granted, Mattel's lawyers at Quinn Emanuel Urquhart & Sullivan first filed this case way back in 2004, and it's since seen sweeping counterclaims by MGA, two trials, two contradictory jury verdicts and two decisions by the 9th Circuit Court of Appeals that erased nine-figure judgments. But still, almost 11,000 docket entries!

Those have not come cheap. As of now, the only money damages in the case are $137.8 million in legal fees, which the 9th Circuit said Mattel owes MGA (even though the appeals court also ruled last month that a jury verdict on MGA's trade secrets counterclaims cannot stand). Those fees, in turn, have spawned their own fast-growing offshoot of the main trunk of Bratz litigation. As I told you a couple weeks ago, former MGA lawyers at Orrick, Herrington & Sutcliffewon a $23 million prejudgment lien against the fee award in their arbitration with their onetime client; MGA, in turn, has sued Orrick in state court in California, seeking a declaration that the lien is invalid. The Bratz maker has found an unlikely ally in its fight with Orrick: MGA's insurers, who have for years been battling the company over their duty to pay its legal fees in the Mattel litigation, filed briefs this week asking U.S. District Judge David Carter of Los Angeles to decline to consider Orrick's notice of its lien.

The insurers say that they've already paid out more than $130 million to MGA and its lawyers, so they're first in line for the fees MGA receives from Mattel. Meanwhile, the insurers are continuing to squabble in the 9th Circuit with MGA and each other over which of them bears responsibility for what portion of MGA's ongoing litigation expenses.

But a filing this week by Mattel suggests that it's just about ready to walk away from the copyright litigation with MGA. In a motion and brief entered in the voluminous docket on Wednesday, Mattel asked Judge Carter to enjoin competitors for the $138 million legal-fee award from initiating proceedings to execute on the judgment. The problem, Mattel said, isn't its willingness to put up the $138 million but rather its fear that MGA, Orrick and the insurers will assert duplicate claims for fees. Mattel had posted a $315 million appeal bond while its case was at the 9th Circuit, and it wants to be sure that it isn't hit with "unwarranted costs for the excess amounts" of the bond money, beyond the $138 million it owes.

Mattel's brief indicates that it wants simply to post a new $138 million bond and be done with the case. "Once Mattel bonds the proceeds of the copyright fees judgment," the brief said, "Mattel's obligation to the claimants will be satisfied."

The motion makes no mention of an additional appeal of the 9th Circuit's ruling on MGA's right to legal fees, and the deadline for Mattel to seek reconsideration or en banc review of the decision has passed. So it looks like Mattel is ready to close this docket out before it hits 11,000.

Of course, ending the copyright case may not end the litigation between Mattel and MGA, since MGA can still file trade secrets claims against Mattel. Those allegations had reaped MGA a judgment of $172 million, which the 9th Circuit vacated because it found they were improperly asserted as counterclaims in the copyright case. A trade secrets complaint by MGA would, however, start with a docket No. 1 in a new proceeding.

I called Mattel counsel at Quinn and MGA lawyers at Skadden, Arps, Slate, Meagher & Flom and Keller Rackauckas. None got back to me.

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