Mattel v. MGA: Barbie and Bratz Duke it Out in the Court of Law

Mattel, Inc. and MGA Entertainment, Inc. have been in a legal battle over ownership rights to Bratz dolls since 2001.

Mattel, Inc., the world's largest toymaker, has been marketing Barbie dolls for nearly half a century. While still employed at Mattel, Carter Bryant came up with some designs that ultimately turned into Bratz dolls. Bryant showed his ideas to some MGA employees and ended up signing a consulting agreement with MGA before he left Mattel's employ. When Mattel learned about MGA's Bratz doll line, and about Bryant's involvement in designing them, Mattel filed suit against MGA. Mattel argued, Bryant had a duty to disclose and assign his sketches and designs to Mattel, under the terms of Bryant's employment agreement with Mattel. The jury found in favor of Mattel and awarded it $10 million in damages for copyright violations. The District Court imposed constructive trust over all trademarks including the terms "Bratz" and "Jade", and further enjoined MGA from producing and marketing most Bratz dolls. MGA appealed the lower court judgment.

On July 22, 2010, in MGA Entertainment, Inc. v. Mattel, Inc., No. 09-55673, the Ninth Circuit Court of Appeals reversed a 2008 lower court order which awarded Mattel, Inc. ownership rights to Bratz dolls. The appellate opinion, written by Chief Judge Alex Kozinski, reasoned that Bryant had not designed Bratz dolls at Mattel, but had come up with some sketches and ideas. Bryant's employment agreement with Mattel "could be interpreted to cover ideas, but the text doesn't compel that reading. The district court thus erred in holding that the agreement, by its terms, clearly covered ideas." The court further reasoned that even if MGA miappropriated the names "Bratz" and "Jade", the trademark owed much of its value to "MGA's own development efforts, marketing and investment." The court also vacated the copyright injunction based on a holding that the employment agreement assigned works created outside Bryant's scope of employment. In doing so, the Ninth Circuit stated "the entire case will probably need to be retried."

Having prevailed on their appeal to the Ninth Circuit Court of Appeal, the "MGA parties" have now filed counterclaims against Mattel including trade secret misappropriation, Civil RICO, and wrongful injunction. Legal commentators are fascinated by this move, and wonder how the counterclaims will stack up against Mattel's causes of action.

MGA Entertainment (Micro-Games America Entertainment) is a privately-held "consumer entertainment products company". The company's founder and CEO, Isaac Larian, controls more than 80% of the company. MGA employs 1,500 employees and had revenues of $2 Billion in 2006. The company is headquartered at 16300 Roscoe Boulevard, in Lake Balboa area of Los Angeles, California. In the past, MGA contemplated an initial public offering of its shares, but did not go through with it due to the pending litigation with Mattel, Inc.

The materials for this blog were gathered from various sources including WSJ, Bloomberg articles, JOLT Digest, Law.com article, Wikipedia, MGA's web site, and Mattel's web site. For further information, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the State Bar of California and the Bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.

Is China's Legal System Unfriendly Towards Foreigners?

The world was shocked last week at the news of a Beijing court sentencing a U.S. geologist to an eight-year jail sentence on charges of spying and collecting state secrets. Xue Feng, a Chinese-born U.S. citizen, had been working in China for IHS Energy, an American consultancy. Feng who was arrested in November 2007, had been tortured with lit cigarettes during his 30-months detention leading to his recent trial behind closed doors. Jon Huntsman, the U.S. Ambassador to China attended the sentencing hearing by the Intermediate People's Court, and afterwards issued a statement calling for Feng's release and return to the United States. Beijing has defended the sentencing saying the case was handled strictly based on law and Feng's legal rights were guaranteed. In March 2010, the Chinese-born Australian national Stern Hu was sentenced to a ten-year jail sentence on charges of bribery and trade secret violations. Both Feng and Hu were sentenced under "trade secret" laws, which secrets the Chinese courts will not clearly define.

In classical Chinese, the word for law is "fa" which means "fair" or "just." The classical Chinese legal system was based on the Confucian philosophy of promoting social control through enstilling virtues and moral standards. Later, under the imperial governments, the Chinese legal system changed and the laws focussed on citizens serving the state. In 1911, the nation underwent a revolution and formed the Republic of China, which adopted legal codes largely influenced by the West. After the communist victory in 1949, the People's Republic of China (PRC) was establised and the Chinese legal system turned towards socialism; the laws and constituion were larged based on those of the Soviet Union.

PRC's current Constitution (Zhonghua Renmin Gongheguo Xianfa) was enacted in 1982, which generally provides for a government by the working class under the leadership of the Communist Party. The preamble to this Constitution provides:

"Both the victory in China’s New-Democratic Revolution and the successes in its socialist cause have been achieved by the Chinese people of all nationalities, under the leadership of the Communist Party of China and the guidance of Marxism-Leninism and Mao Zedong Thought, by upholding truth, correcting errors and surmounting numerous difficulties and hardships. The basic task of the nation in the years to come is to concentrate its effort on socialist modernization ..."

PRC's executive branch is comprised of the State Council, the President and the Vice President. PRC's legislative branch is comprised of the National People's Congress. PRC's judicial branch consists of the Basic People's Court, the Intermediate People's Court, the Higher People's Court, and the Supreme People's Court. A litigant is generally allowed on appeal of the judgment, and the appellate court conducts a trial de novo on factual and legal matters. In response to growing demand, in 1992 the PRC issued provisional regulations allowing foreign law firms to establish offices in China; several foreign law firms including the U.S.-based Baker & McKenzie have since opened affiliated offices in China.

The materials for this blog were gathered from various sources including articles by The Associated Press, United Press International, lawinfochina.com, A Brief Introduction to the Legal System of China, CIA World Fact Book on China, and Wikiepedia. For more inforation, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the State Bar of California and the Bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.

Attachment Lien: How an Unsecured Creditor can be Protected Against a Debtor's Bankrutpcy

It is axiomatic that a cash transaction exposes the seller to little risk of loss. And it is easy to require cash payment for small purchases. However, when it comes to large transactions such as real estate purchases or wholesale purchase of goods, there are few purchasers who can afford to pay cash. So, sellers often consider extending credit in order to enable more purchase tranactions to take place. The added volume of transactions comes with its downsides. Sellers need to properly balance out the additional sales volume against the risk of purchaser defaults. Sophisticated sellers factor in the borrower's creditworthiness against the transaction profits, and seek guaranties and security for payment. In a secured transaction, seller seller may take back the collateral if debtor defaults on the payments, or goes bankrupt.

But what about sellers who extend credit without taking back a security? What protection do they have when the debtor defaults or is at risk of filing for banktuptcy? In such situations, the creditor may have rush to the court and seek an "attachment lien." Attachment is a prejudgment remedy that allows the creditor, who has followed the statutory requirements and who has established a prima facie claim, to have a lien recorded against real property and/or the debtor's assets seized and held until final adjudication at trial. See, Lorber Industries v. Turbulence, Inc., 175 Cal. App. 3d 532, 535 (1985).

If an unsecured creditor succeeds in obtaining an attachment lien, the creditor is placed in very similar situation to a creditor who obtained security at the inception of the transaction. Federal Bankruptcy law recognizes attachment liens issued by state courts under state law. A “prejudgment attachment constitutes a valid and perfected lien which is superior to the rights of the Trustee, notwithstanding that judgment has not been entered.” In re Giordano, 169 B.R. 12, 13 (Bankr. D.R.I. 1994). An unperfected prejudgment attachment lien could be pursued after bankruptcy, and upon judgment, the prejudgment attachment lien would ripen into a vested lien, relating back to the date of attachment. In the Matter of DeLancey, 94 B.R. 311, 314 (Bankr. S.D.N.Y. 1988). See, In re Southern California Plastics, Inc. (Diamant v. Kasparian), 165 F. 3d 1243 (9th Cir. 1999).

Obtaining an attachment lien requires proper facts, proper timing, and proper legal skills. If a debtor is going out of business or about to file for bankruptcy, there is often little time to file lawsuit and go through the lengthy motion process to obtain an attachment lien. In emergency situations, a creditor must act promptly and bring an ex parte application for a Right to Attach Order, and promptly perfect the lien by recording the resulting Writ of Attachment. It behooves the creditors to retain experienced business litigaiton attorneys to assist them with these processes.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the State Bar of California and the Bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.

Is British Petroleum (BP) Operating Responsibly in the United States?

On April 20, 2010, an offshore drilling rig operated by Transocean Ltd. on behalf of BP exploded in the Gulf of Mexico, killing 11 people and causing a large oil spill. The efforts last week to contain the spill using "top kill" method failed; authorities are now looking at a possible containment by August 2010. With nearly a month and half passing, the Deepwater Horizon oil spill continues to expand and and threaten the coasts of Louisiana, Texas, Mississippi, Alabama and Florida. In a news conference this week, Rear Adm. Mary E. Landry of the Coast Guard commented that oil is leaking at the rate of 5,000 barrels per day, which is five times the originally estmiated rate of 1,000 barrels per day. NASA satellites have been able to observe the spread of the oil from the space. The Deepwater Horizon disaster has now surpassed the Exxon-Valdez oil spill, to become the single largest oil spill in the U.S. history.

Rep. Ed Markey (D-Mass.) has charged that BP from the beginning understood the extent of the oil spill, but it attempted to cover up by "lowballing" the numbers. Markey said "without question" the oil spill in the Gulf of Mexico should be considered "criminal." In response, BP has committed up to $500 Million over the next ten years to study the impact of the oil spill in the Gulf of Mexico on the environment and the surrounding wildlife.

The Deepwater Horizon oil spill has not been BP's only legal issue in the recent past. In 2000, BP paid $6.5 Million in civil penalties for illegal disposal of hazardous waste and violating federal drinking water laws, paid $10 Milliion to resolve Clean Air Act case, and its subdiary was hit with a $500,000 criminal fine for failing to report the illegal disposal of hazardous waste in Alaska. In 2005, OSHA fined BP $21 Million for violating OSHA laws. These records caused BP to be placed on Mother Jones magazine's Ten Worst Corporations of 2000, and Multinational Monitor's Ten Worst Corporations of 2005.

BP evolved out of a British oil exploration in Iran. In May 1901, the Shah of Iran granted a concession to William Knox D'Arcy to search for oil. After oil was discovered, on April 14, 1909 the Anglo-Persian Oil Company, Limited was incorporated with an initial capital of Two Million Pounds Sterling. In 1935, the company changed its name to Anglo-Iranian Oil Company, Limited. In 1954 the company changed its name to The British Petroleum Company Limited. In 1980, the company was re-registered as a public company under the name The British Petroleum Company p.l.c. In 1998, the company merged with U.S. oil company Amoco and became BP Amoco p.l.c. In 2001 the company changed its named to BP p.l.c.

BP p.l.c. is currently United Kingdom's largest coporation; the company is listed on the London Stock Exchange (LSE: BP.) and on the New York Stock Exchange (NYSE: BP). It is globally the fourth largest company, and the third largest energy company (with operations in more than 80 countries). BP is one of the six "supermajors", which are "vertically integrated private sector oil exploration, natural gas, and petroleum product marketing companies." BP is the 100th largest contributor to political campaigns in the United States, and has contributed $5 Million in this regard since 1990. BP's retail operations in the United States include AMPM convenient stores and ARCO gas stations.

The materials for this blog were gathered from various sources including The Telegraph, The Washington Post, Politico, Wikipedia, and The New York Times. For more inforation, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.

SEC Charges Goldman Sachs & Co. with Civil Fraud, and British and German Authorities May Follow Suit

On Friday, April 16, 2010, the Securities and Exchange Commission (SEC) announced bringing civil fraud charges against Goldman Sachs & Co. SEC's complaint alleges that Goldman Sacks sold securities based on risky mortgage investments without disclosing to buyers that hedge fund Paulson & Co. who had influence in the selection of profolio, was betting the securities would fail. Goldman Sachs has denied all charges. SEC's compliant has not charged Paulson & Co. or its billionaire manager John Paulson.

On the news of SEC's charges, shares of Goldman Sachs & Co. fell 12.8 percent, a loss of $12 Billion in market value. The news also impacted the broader markets, putting an end to a six-day U.S. stock market rally, and causing the European markets to slump.

Founded in 1869, Goldman Sachs is currently the largest investment banking firm in the United States. Commentators believe that although Goldman Sachs may be able to defend itself against SEC charges, the damage to the company's image may allow Morgan Stanley, the second position U.S. investment banking firm, and foreign rivals such as Deutsche Bank and UBS to take on a portion of Goldman Sachs' market.

British Prime Minister Gordon Brown, and German government spokesman Ulrich Wilhelm said their governments will seek information from the SEC about Goldman Sachs Group's operations; the investigations may lead into legal action in those jurisdictions.

The materials for this blog were gathered from various sources including The Associated Press, Business Week, and Reuters. For additional information, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. He can be reached by phone at (310) 286-2000.

Justice Stevens Considers Retiring from the United States Supreme Court

In his recent press interviews, Justice John Paul Stevens has hinted at his intentions to retire from the United States Supreme Court. “I do have to fish or cut bait, just for my own personal peace of mind and also in fairness to the process,” he told the New York Times, “The president and the Senate need plenty of time to fill a vacancy.” At age 89, the Honorable John Stevens is currently the second-oldest justice to have served at the Supreme Court, after Justice Oliver Wendell Holmes. With 34 years of service at the Supreme Court bench, Justice Stevens is currently the fourth-longest-serving justice in the Court's 220-year history.

Justice John Paul Stevens

Justice Stevens was born April 20, 1920 in Chicago, Illinois. In 1941, he earned his bachelor of arts in English from the University of Chicago. Soon thereafter, he enlisted in the U.S. Navy, where he served as an intelligence officer from 1942 to 1945, and was awarded a Bronze Star for his service. He later attended Northwestern Univeristy School of Law from where he obtained his juris doctorate degree in 1947 magna cum laude. After finishing law school, Stevens clerked for Justice Wiley Rutledge during the 1947-48 Supreme Court term. Stevens was admitted to the State Bar of Illinois in 1949. He gained expertise in antitrust laws, first as an associate of Poppenhusen, Johnston, Thompson & Raymond, and later as a partner in the firm of Rothschild, Stevens, Barry & Myers. He was invited to teach an atitrust course at the University of Chicago Law School, and in 1969 he acted as a special prosecutor on the Greenberg Commission where he investigated corruption charges against Supreme Court justices. In 1970, President Nixon nominated Stevens to the Seventh Circuit Court of Appeals, and in 1975 President Ford nominated him to the U.S. Supreme Court.

Although Justice Stevens has not yet officially announced his retirement, people believe the announcement should come by April 28, 2010, when the current Supreme Court term ends. This will provide President Obama an opportunity to appoint a second Supreme Court Justice. Anonymous sources from the White House have speculated potential candidate for this vacancy would include judge Diane Wood (Seventh Circuit Court of Appeals), judge Merrick Garland (D.C. Circuit Court of Appeals), and Elena Kagan (Supreme Court's first female Attorney General).

Materials for this blog were gathered from various sources including Wikipedia, Associated Press, The Washington Post, the New York Times, and Business Week. For more information, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.

Healthcare and the Law, 2010

United States' healthcare has been a hot legal and political topic for years. In 2008, then presidential candidate Barack Obama made healthcare reform a key part of his campaign promise of "change we can believe in." The legislation took many months of Congressional debates, not to mention it requiring the Forty-Fourth U.S. President to spend the past 18 days traveling and campaigning for votes. However, President Obama may soon realize his campaign promise.

On Sunday, March 21, 2010, the U.S. House of Representative finally passed the health bill on a close 219-210 vote, over Republicans' unanimous opposition. As the House was in voting session, demonstrators outside the Capitol building were chanting "just vote no." The Congressional Budget Office has commented that this piece of legislation will extend health coverage to 32 million Americans who are uninsured, and will prevent insurance companies from denying coverage to people due to pre-existing medical conditions. President Obama and Vice President Joe Biden watched the House vote from the Roosevelt Room at the White House. When the Bill passed, President Obama telephoned House Speaker Nancy Pelosi to congratulate her. "We did not fear our future," the President commented publicly, "we shaped it."

(Official White House Photo by Pete Souza)

Last month, Anthem Blue Cross (ABC), California's largest for-profit insurance company, announced its intent to raise premiums by as much as thirty-nine percent, effective March 1, 2010. Consumer Watchdog, a consumer advocate group, reacted to this news by filing a class action lawsuit against ABC, on March 1, in the Superior Court of California for the County of Ventura. The lawsuit alleged ABC is forcing the insured into policies with lower coverage at higher costs. Consumer Watchdog has filed a public records request seeking ABC to release its actuarial data underlying the rates. In a February 2010 Congressional hearing, House Democrats accused ABC's parent company of padding its rates beyond the cost increases. The final chapter in this battle is yet to be written. For further news on this matter, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. He can be reached by phone at (310) 286-2000.