Yesterday’s Ninth Circuit opinion brings renewed focus on central business lessons from an intellectual property management perspective. These lessons are evidently overlooked even by iconic organizations, such as Mattel, to their detriment. As a business owner or manager, you should discuss how these important IP and contractual elements could impact your organization with competent intellectual property counsel.
First Lesson: Clearly Defined Contractual Terms
One of the first points made in the appeals court opinion refers to the ambiguity of Mattel’s employment contract language regarding “inventions” that employees must assign to the company. Traditionally, an employee’s innovations are assumed to be “works for hire” and “assigned to the employer,” yet the strict meaning of these terms may be subject to different interpretations in various industries.
This idea underlies the portion of the Appeals Court Opinion in this case wherein it is opined that the resolution of the meaning of the term “inventions” in the contract should have been decided by the jury, not summarily by the judge. Obviously, this is not a “new” lesson by any means; it is one that regularly makes an encore appearance in contract disputes. Both employers and employees will benefit in the future from clearly defining and clarifying the terms of their agreements, particularly where these agreements impact intellectual property rights that are seldom appreciated until those rights manifest their value. As the Appeal Judges’ state in the Opinion, the error in construing the employment agreement “… is sufficient to vacate the copyright injunction.”
Second Lesson: Copyright Does Not Cover Ideas
Judge Kozinski clearly states in the Opinion: “Mattel can’t claim a monopoly over fashion dolls with a bratty look or attitude, or dolls sporting trendy clothing—these are all unprotectable ideas.” Businesses will be better served by acknowledging the limitations of fundamental protections such as Copyright to the tangible expression of ideas, not the ideas themselves. In our experience, few organizations have clearly defined policies and procedures in place to identify, manage, and protect works over which they can claim Copyright protection, let alone actually obtain a registration for them. Outside the publishing and media industries, copyrights seem far removed from everyday business activities and needs, and are typically not the subject of in-depth management attention. Only by implementing specific protocols for copyright management can appropriate measures be taken to develop promising ideas into protectable works, which can then securely support new business processes, products, or services.
Third Lesson: Only Attributable Damages Are Recoverable
Trademark law allows for the recovery of those defendant’s profits associated with the infringed trademark as compensatory damages for a proven infringement. It does not, according to the Ninth Circuit Opinion, grant the plaintiff all the profits earned by the defendant, especially that portion of profits that results from its own investment, efforts and other elements of intellectual property or intangible assets. From a business perspective, litigants are reminded that, while trademarks, patents, copyrights, and other IP may be part of the revenue-generating process, not all profit is automatically attributable to any one specific piece of IP.
In the this case, the Judge clearly states that “Even assuming that …[the defendant]… misappropriated the names “Bratz” and “Jade,” the value of the trademarks the company eventually acquired for the entire Bratz line was significantly greater because of MGA’s own development efforts, marketing and investment.” In our own experience, the proper apportionment of infringement profits is one of the most important analysis points to consider when the facts of the case require it.
Read more about this case here.