Who Owns What and Why?

At the center of a legal battle between two popular doll makers is a former employee accused of stealing intellectual property. Whatever the outcome of the litigation involving Barbie and Bratz dolls, there's an important lesson for employers: Protect your rights.

Details of the lawsuits: Mattel Inc., the manufacturer of Barbie dolls, recently filed suit in U.S. District Court in California against MGA Entertainment Inc., the maker of Bratz dolls. Mattel claims that it owns the rights to Bratz dolls because one of its former employees, Carter Bryant, conceived and sketched prototypes while he was still employed as a Barbie designer. Mattel is also suing the former employee personally.

Another Case Illustrates the Need For IP Agreements to be Signed Before Work Begins?

Although many courts have ruled that employers own the rights to certain ideas and inventions that employees conceived while on the job using company resources, the issue is not always clear.     For example, the city of Cocoa, FL, was found not to own the patent rights for improvements made to its water treatment plant that were invented by a team of city employees.     Facts of the case: A group of seven employees designed a new method of removing hydrogen sulfide gas from the city's drinking water. The team members held a meeting and discussed patenting the invention and paying for the application with their own money. The City Council decided to pay for the patent application, which was issued in the names of the team members.     The employees were then asked to assign their rights to the city. Three of them refused. The city sued the employees for ownership of the invention, which has been estimated to be worth $300 million in licensing royalties.     The court stated it was significant that team members were not told "to invent new technology and never anticipated that anything would be invented." Rather, "the goal of the team was to design a simpler, cheaper system." It was a "surprise" when their work led to an invention.     The city and employees now jointly hold the patent, which is generally believed to greatly reduce the value of the invention. The case was fought in state courts and involved issues governed by Florida employment law. However, it illustrates the importance of having a signed agreement in place before employees are hired. (City of Cocoa v. Leffler et al, 5D-01-1141, FL 5th DCA, 2002)

Multiple millions of dollars are at stake. Since its conception in 1959, Barbie has become the best-selling doll in the world, currently generating more than $3 billion a year in revenue. MGA Entertainment launched the Bratz doll line in 2001 and sales are now running approximately $2 billion a year, cutting into Barbie's profits. Bratz dolls are now sold in more than 65 countries and in some places, such as England, Australia and South Africa, they outsell Barbie dolls.

It's no surprise, then, that Mattel sued Bryant in 2004, or that late last year, Mattel amended its suit to include MGA Entertainment and the company's CEO, Isaac Larian. Mattel's lawsuit accuses Bryant, Larian and MGA Entertainment of copyright infringement, misappropriation of trade secrets and violation of the Racketeer Influenced and Corrupt Organizations Act.

These lawsuits followed one filed in 2005 by MGA Entertainment against Mattel, claiming the Bratz doll was illegally copied in one of Mattel's doll lines.

Mattel's claim is that it employed Bryant as a designer when he did initial drawings for the dolls that later became the Bratz line. Bryant left Mattel in October 2000, and according to Mattel's lawsuit, approached the MGA Entertainment CEO with the concept for the doll. Mattel claims it has proof that Bryant was a Mattel employee when he came up with the idea. As a Mattel employee, Bryant signed an employment contract giving rights to his creative work to Mattel.

Bryant now receives royalties from MGA Entertainment based on the sales of Bratz dolls.

Learning from the case: The feud is a classic case of intellectual property rights ownership. Typical questions arise in these cases: Who owns the rights to an idea? The employee who conceived it? Or the company or organization employing the individual?

Ownership of an idea or invention may not come up in some workplaces because employers may not think their staff members have the potential to create something that results in high financial returns. But when an employee's brainchild is worth thousands of dollars or more, it's common for the employee to want a cut of the action. Unless the ownership of ideas and inventions is clearly established before the employee applies her or his creativity, the employee is likely to expect to share in the profits generated.

The question of who owns the rights to workplace innovations can be complex. In general, if an employee is hired to invent something, the employer owns the rights to his or her ideas and inventions when they are conceived on-the-job or when using the employer's facilities, equipment, and data. State law may also govern the ownership of copyrightable materials and specific ideas, inventions and discoveries that can be patented.

Complications can arise when employees come up with a valuable invention even though they were not specifically hired to invent. This occurred in a Florida case, described in the right hand box, in which the employer was forced to share a patent with employees.

What to do. An organization that wants to avoid ownership conflicts can benefit from adopting a clear policy on the issue. Make it clear: While employees are on the job and using the employer's facilities, equipment, and data, the rights to any ideas and inventions conceived are owned by the employer. When understood and agreed to by employees, such a policy can strengthen the employer's position if future legal action is taken to protect ownership rights.

Consult with an attorney to draft a policy and an Intellectual Property and Inventions Agreement for employees to sign as a condition of employment.

[NOTE: Information and guidance in this article is intended to provide accurate and helpful information on the subjects covered. It is not intended to provide a legal service for readers' individual needs. For legal guidance in your specific situations, consult with an attorney who is knowledgeable about intellectual property, employment law and labor issues.]