Mattel, Inc. v. MGA Entm’t, Inc., 616 F.3d 904 (2010)

In 2000, during his employment with Mattel, Carter Bryant pitched his idea for the Bratz line of dolls to MGA, which was one of Mattel’s competitors. The year before, Bryant had signed an employment agreement with Mattel pursuant to which he agreed to disclose and assign to Mattel all “inventions” conceived or reduced to practice at any time during his employment with Mattel. After it learned of Bryant’s involvement in the Bratz line of dolls, Mattel sued MGA, Bryant and others. Prior to the trial, which resulted in (among other things) a $10 million jury award to Mattel for copyright damages and the imposition of a constructive trust in favor of Mattel over all Bratz trademarks, the judge determined that under the employment agreement, Bryant had assigned his “ideas” (not just his “inventions”) to Mattel.

The Ninth Circuit vacated the constructive trust imposed by the district court after determining “the agreement could be interpreted to cover ideas, but the text doesn’t compel that reading.”  The court further held the constructive trust had to be vacated even if the agreement covered ideas as well as inventions because “[i]t is not equitable to transfer this billion dollar brand – the value of which is overwhelmingly the result of MGA’s legitimate efforts – because it may have started with two misappropriated names. The district court’s imposition of a constructive trust forcing MGA to hand over its sweat equity was an abuse of discretion and must be vacated.” Finally, the Ninth Circuit held the phrase “at any time during employment” to be ambiguous and held the district court erred in concluding the agreement clearly assigned to Mattel works made outside the scope of Bryant’s employment.