Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov
`ESTTA651914
`ESTTA Tracking number:
`01/23/2015
`
`Filing date:
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`91162237
`Plaintiff
`Mattel, Inc.
`JILL M PIETRINI
`SHEPPARD MULLIN RICHTER HAMPTON LLP
`1901 AVENUE OF THE STARS, SUITE 1600
`LOS ANGELES, CA 90067 6017
`UNITED STATES
`jpietrini@smrh.com, mdanner@smrh.com, rwalsh@smrh.com,
`lmartin@smrh.com
`Response to Board Order/Inquiry
`Jill M. Pietrini
`jpietrini@smrh.com, mdanner@smrh.com, rwalsh@smrh.com,
`lmartin@smrh.com
`/Jill M. Pietrini/
`01/23/2015
`Plaintiff's Response to Board Order-Inquiry - Mattel, Inc. - MGA Entertainment,
`Inc. (January 23, 2015).DOC.pdf(3140166 bytes )
`
`Proceeding
`Party
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`Correspondence
`Address
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`Submission
`Filer's Name
`Filer's e-mail
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`Signature
`Date
`Attachments
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`

`
`
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`
`Docket No. 0PX7-165386
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`Mattel, Inc.,
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`
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`vs.
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`Opposer,
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`MGA Entertainment, Inc.,
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`
`
`Applicant.
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`Examining Attorney
`
`Opposition No. 91-162237
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`
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`OPPOSER'S RESPONSE TO ORDER RE: STATUS OF CIVIL ACTION
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`The Board has ordered the parties to inform it of the status of the civil action that
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`occasioned the suspension of this proceeding. Opposer, Mattel, Inc. (“Mattel”), hereby
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`respectfully responds to the Board’s Order. By Order dated February 12, 2009, the Board
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`suspended the instant proceedings because the parties were involved in a pending civil action
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`that may be dispositive of or have a bearing on the Board case. The civil action that occasioned
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`the suspension was captioned Carter Bryant v. Mattel, Inc., Case No. CV 04-9049, and MGA
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`Entertainment, Inc. v. Mattel, Inc., Case No. CV-05-02727. As explained in Opposer’s
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`December 5, 2013 submission to the Board regarding the civil action’s status, the civil action
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`was still pending as of that time, although the United States Court of Appeals had ordered
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`dismissal of MGA’s trade secret claim without prejudice. Subsequently, the United States
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`District Court for the Central District of California dismissed MGA’s trade secrets claim without
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`prejudice. MGA then refiled its civil action on January 13, 2014 in Los Angeles County
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`Superior Court. MGA’s refiled civil action is captioned MGA Entertainment, Inc. v. Mattel, Inc.,
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`Case No. BC 532708. A copy of MGA’s Complaint in the civil action is attached hereto as
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`Exhibit A. A copy of Mattel’s Answer in the civil action is attached hereto as Exhibit B.
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`-1-
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`

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`Accordingly, although now being litigated in a different court, the civil action that occasioned
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`the Board’s suspension of this proceeding remains pending.
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`Dated: January 23, 2015
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`Respectfully submitted,
`
`
`
`/Jill M. Pietrini/
`Jill M. Pietrini
`Sheppard Mullin Richter & Hampton LLP
`1901 Avenue of the Stars, Suite 1600
`Los Angeles, California 90067-6017
`(310) 228-3700
`
`Attorneys for Plaintiff, Mattel, Inc.
`
`
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`CERTIFICATE OF ELECTRONIC TRANSMISSION
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`I hereby certify that this correspondence is being transmitted electronically through
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`ESTTA pursuant to 37 C.F.R. §2.195(a) on January 23, 2015.
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`/LaTrina A. Martin/
`LaTrina A. Martin
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`
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`CERTIFICATE OF SERVICE
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`I hereby certify that a copy of the foregoing correspondence is being deposited as first
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`class mail, postage prepaid, in an envelope addressed to:
`
`Eleanor Trope, Esq.
`MGA Entertainment, Inc.
`16380 Roscoe Boulevard
`Van Nuys, California, 91406
`
`on this 23rd day of January, 2015.
`
`SMRH:436127345.1
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`
`/s/LaTrina A. Martin
`LaTrina A. Martin
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`-2-
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`Exhibit A
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`

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`,
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`-
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`3
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`KELLER RACKAUCKAS LLP
`JENNIFER L. KELLER (SBN 84412)
`2 KAY RACKAUCKAS (SBN 143480)
`ALLISON SHALINSKY (SBN 186975)
`18300 Von Karman Avenue, Suite 930
`Irvine, California 92612
`4 Telephone:
`(949) 476-8700
`Facsimile:
`(949)476-0900
`5 E
`'1:
`k ller krlawll
`.co
`mm
`6 @
`p m
`6 Attorneys forPlaintiff
`
`MGA ENTERTAINMENT, INC.
`
`F
`Sugerior Court of California
`°“"‘V °' ‘-05 Angeles
`
`JAN 1 3 2014
`_
`Shem B. Carter. E e utiye Officer/Clerk
`Bv Deputy
`
`°"S""a G"1a' a
`
`39+ llowvt L was
`
`SUPERIOR COURT OF THE STATE OF CALIFORNIA
`
`COUNTY OF LOS ANGELES, CENTRAL DISTRICT
`'
`
`..
`BC532708
`
`Case No.
`
`'
`CIVIL COMPLAINT FOR
`TRADE SECRET MISAPPROPRIATION
`
`DEMAND FOR JURY TRIAL
`
`Date Action Filed:
`Trial Date:
`
`January 13, 2014
`. None Set
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`!
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`,
`,
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`7,
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`9
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`MGA ENTERTAINMENT, INC., a
`Q 12 California corporation,
`E 13
`E.-2
`G4
`3
`
`Plaintiff‘,
`
`vs.
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`MATTEL, INC., :1 Delawam corporation,
`16 and DOES 1-50, inclusive,
`
`Defendant.
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`-1-
`COMPLAINT
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`
`
`INTRODUCTION
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`1.
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`Beginning in at least 1992 and continuing through at least 2009, employees in
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`Mattel’s “Market Intelligence” department, with the knowledge, approval, training, and financial
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`support of their supervisors and the senior executives of the company, willfully and deliberately
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`misrepresented themselves to gain enuy into the private showrooms of Mattel’s competitors
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`(including MGA Entertainment,
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`Inc.
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`(“MGA”)) at numerous industry trade shows.
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`The
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`showrooms were ofillirnits to competitors, and Mattel otherwise could never have gained entry.
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`Afier having unlawfully gained access to MGA’s private showrooms, these Mattel employees
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`stole highly confidential competitive information -- including price lists, advertising plans, and
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`unreleased product atuibutes. Mattel then disseminated the stolen information throughout the
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`company, rewarded the employees who had misappropriated the information, and used the
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`information to gain an unfair and illegal advantage in the market.
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`2.
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`Mattel’s conduct was unlawful, outrageous, despicable, and inflicted tens of
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`millions of dollars in damages on MGA.
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`Indeed, afier a multi-month trial, a federal jury in the
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`Central District of California found precisely that and awarded MGA$85 million in compensatory
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`damages. That same jury also found, by clear and convincing evidence, that Mattel willfully and
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`maliciously misappropriated MGA’s trade secret information. Thereafter, United States District
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`Court Judge David 0. Carter, following the jury’s fnding, awarded another $85 million to MGA
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`in punitive damages, plus attorneys‘ fees and costs against Mattel — expressly finding that Mattel’s
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`senior management encouraged employees to use false pretenses to access competitors’ private
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`showrooms and that Mattel’s “market
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`intelligence” “nefarious” tactics were “intentional,
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`pervasive, long-standing, and egregious."
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`3.
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`Due to a technical procedural issue having nothing to do with the merits of the
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`claims against Mattel, the Ninth Circuit vacated without prejudice the $170 million judgment
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`against Mattel for this misconduct. Because of the lack of ongoing federal jurisdiction for this
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`matter, the retrial of MGA’s California Uniform Trade Secret Act claim must now take place in
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`\O0O\lO\UI43UJK\)
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`-2-
`COMPLAINT
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`4.
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`The jury and Court in the federal trial based the verdict and award on the following
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`misconduct by Mattel employees. Following the express instructions of an 11 page “how to steal
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`manual” created by Mattel executives, which instructed Mattel’s corporate spies on the most
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`effective means to steal their competitors’ trade secrets, Mattel employees went to Kinko’s and
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`printed up take business cards, and had Mattel accounting create mocked-up invoices, so they
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`could flash “evidence” of their fictional businesses and lie their way into the private showrooms of
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`competitors. They bought small video recorders (paid for by Mattel) and brought cameras to
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`photograph and videotape what they saw in those private showrooms, which limited access to
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`retailers. Mattel lied about its employees’ identities and presented them as retailers, because it
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`knew that they could not gain entry to these private showrooms unless it did so. Mattel then stole
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`the trade secrets and other confidential information of its competitors, including but not limited to
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`the appearance, operation and intended play pattern of toys not yet on the market, price lists, and
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`marketing and advertising plans and strategies. Mattel,
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`the world's largest
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`toy company,
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`embarked on this scheme to acquire and maintain an unlawful competitive advantage and
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`monopoly in the toy market. It succeeded wildly.
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`5.
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`Over time and pursuant to this scheme, Mattel defrauded MGA of unreleased
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`product information regarding at
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`least
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`the following products: Bratz Mobile, Bratz Styl’ It
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`Collection, Bratz Winterwonderland Collection, Bratz Fomral Funk Collection, Bratz Runway
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`Formal Funk Collection, Bratz FM Limo, Bratz Motorcycle, Bratz Pet Assortment, Lil’ Bratz
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`Vehicle Assortment, Lil’ Bratz Deluxe Mall Playset, Bratz Petz, Dazzlin’ Disco Café, Sun Kissed
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`Summer, Girls Nite Out, Wild l..ife Safari Collection, Bratz Diamondz, Bratz Virtual Buddiez
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`Petz, Bratz Campfire, Wild Wild West, Bratz Rock Angelz, Monkey See Monkey Do, Lil’ Bratz
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`Boyz, Alien Racers, Bratz Kidz, and Passion for Fashion. Some of these products were never
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`released to the market by MGA, largely because Mattel’s illicit and wrongful conduct allowed it to
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`preempt MGA’s efforts to successfully launch these products.
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`6.
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`The federal litigation sparmed nine years, racked up more than 10,000 separate
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`docket entries, and involved two multi-month jury trials and two fully-briefed-and—argued
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`appeals. Discovery in the case was massive, with over 11.5 million pages produced by the parties
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`N
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`.3-
`COMPLAINT
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`and over 400 depositions taken — with three district court judges, one magistrate, two discovery
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`masters, and one electronic discovery master overseeing discovery. By Mattel’s counsel's
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`admission, moreover, discovery on this claim has already been conducted and no further
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`documents are required to be produced. As such,
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`the case is effectively ready for retrial.
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`Accordingly, MGA alleges and avers as follows:
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`PARTIES
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`7.
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`Plaintiff MGA is a California corporation organized and existing under the laws of
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`the State of Califomia, with a principal place of business in Van Nuys, California.
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`8.
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`Defendant Mattel, Inc. (“Mattel”) is a Delaware corporation with a principal place
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`of business in El Segimdo, California.
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`9.
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`MGA is ignorant of the true names and capacities of the defendants sued herein
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`under the fictitious names DOES 1 through 50 inclusive. MGA will seek leave of court to amend
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`this complaint to allege such names and capacities when they are ascertained. MGA is informed
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`and believes, and based thereon alleges, that each of the fictitiously named DOE defendants is
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`responsible in some manner for the wrongful conduct alleged herein. MGA fiirther alleges that
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`each defendant acted in concert with, as agent or representative for, or at the request or on behalf
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`of another or Mattel. Each charging allegation contained herein is, therefore, also hereby alleged
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`against each fictitiously named DOE defendant.
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`FACTUAL BACKGROUND
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`10.
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`MGA is a privately held company in the San Fernando Valley that began in 1979 as
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`a small consumer electronics business. In 1987, the company made its first foray into the toy
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`business when it secured rights to market handheld LCD games featuring licensed Nintendo®
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`characters. Building on that small success, the company began marketing products for popular
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`licensed properties such as the “Power Rangers”® and “Hello Kitty”®. This little-known but
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`successful company was propelled into the limelight ‘after its daring release in 2001 of “BRATZ” -
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`- an innovative line of multi-ethnic fashion dolls that sported a fiesh new urban and contemporary
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`look and fashion. At the time of the release of “BRATZ”, “Barbie” sales were in a slump, Mattel
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`was in turmoil, and the market was ripe for something new, exciting and innovative. “BRATZ” fit
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`.4.
`COMPLAINT
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`the bill. It was the first fashion doll to seriously challenge “Barbie” for market share, and begin to
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`loosen Mattel’s 50-year iron-fisted grip on the fashion doll market.
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`11.
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`Mattel did not take kindly to the challenge. Either unable or unwilling to compete
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`against “BRATZ” fairly in the marketplace on a level playing‘ field, Mattel
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`took a more
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`expeditious approach, resorting to unfair and anti-competitive business practices including, but not
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`limited to, corporate espionage. As United States Disnict Court Judge David 0. Carter stated in
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`awarding punitive damages afier a jury found Mattel had stolen MGA trade secrets:
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`For years, [Mattel’s] senior management encouraged employees to use
`false pretenses to access competitors’ private displays at international toy
`fairs and improperly acquire competitive information, including price lists,
`advertising plans, and unreleased product attributes. Mattel disseminated
`the
`improperly acquired information through internal memoranda
`[citations omitted], praised the employees that committed the wrongdoing
`[citations omitted], used MGA’s trade secret
`information to preempt
`MGA’s unreleased products [citations omitted], and reaped $85 million in
`unjust
`enrichment.
`These
`“market
`intelligence"
`tactics were
`intentional, pervasive, long-standing and egregious; indeed, Mattel’s
`hierarchy admitted at trial that the information had value [citations
`omitted], and that its acquisition was wrongful [citations omitted],
`while making unfulfilled pronouncements about future corrective action
`against
`the attorneys, executives and employees that encouraged or
`concealed the misconduct [citations omitted]. Faced with competition and
`innovation that
`it “didn’t relish,” [citation omitted] Mattel resorted to
`nefarious tactics in an attempt to cling to its market position. (emphasis
`added)
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`12.
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`On January 24, 2013, the Ninth Circuit vacated without prejudice the jury’s 2011
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`verdict finding Mattel liable for trade secret misappropriation and Judge Carter’s damages awards
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`related to the claim, due to a procedural error in the manner in which the claims were joined to
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`other claims, and remanded this action to the district court to be dismissed without prejudice. On
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`February 19, 2013, the Ninth Circuit issued its formal mandate remanding the case to federal
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`district court. On December 17, 2013, Judge Carter dismissed the state law trade secret
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`misappropriation claims in the federal action without prejudice to their being re-filed in this Court.
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`13.
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`MGA now brings this action to address the extensive harm that Mattel’s illicit
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`behavior has caused and continues to cause MGA. Matte1’s own website states: “As the global
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`leader m the toy industry, we believe that how we achieve success is just as important as the
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`-5-
`COMPLAINT
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`success itself.” It also proclaims that “unwavering integrity defines our corporate culture on every
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`level, guiding how we work and how we do business.” Mattel’s own corporate governance
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`standards require it to “play fair” and be a good corporate citizen. Mattel’s underhanded and
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`illegal actions, however, speak louder than its words.
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`PROCEDURAL HISTORY '
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`14.
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`This has been one of the most heavily contested trade secret cases in American
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`legal history. What began as a copyright ownership dispute in 2004, morphed over the years into
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`massive litigation involving numerous claims between fierce competitors. Over the course of
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`nearly a decade, this case has undergone three appeals to the Ninth Circuit, two separate jury
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`trials, and multiple stays. The entire procedural history is massive and complex and could take
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`pages to explain. Here, instead is a synopsis:
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`(a)
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`On April 27, 2004, Mattel sued Carter Bryant in Los Angeles County Superior
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`Court for breach of contract, breach of fiduciary duty, breach of loyalty, unjust enrichment, and
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`conversion; the gist of the complaint was that Bryant created the Bratz dolls while he was still in
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`Mattel’s employ.
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`.
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`(b)
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`On September 8, 2004, Bryant filed a cross-complaint in state court. The matter
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`was remanded to the United States District Court on November 2, 2004, and Bryant filed a
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`declaratory relief claim for copyright non-infringement.
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`(c)
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`On April 13, 2005, MGA intervened in the Mattel-Bryant action, filing suit against
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`Mattel and alleging causes of action for false designation of origin, unfair competition, dilution,
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`and unjust enrichment.
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`(d)
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`On May 13, 2005, the Ninth Circuit Court of Appeals granted Mattel permission to
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`file an interlocutory appeal on the remand issue; the district court thereafter stayed all discovery.
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`On May 2, 2006, the Ninth Circuit issued its opinion affuming the remand denial, and the stay on
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`discovery was lified. All told, the stay lasted 12 months.
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`(e)
`On April 6, 2006, the federal actions were transferred to United States District
`Judge Stephen G. Larson.‘ Judge Larson consolidated the federal actions on June 19, 2006.
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`-5-
`COMPLAINT
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`(t)
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`On November 20, 2006, Mattel moved for leave to file a First Amended
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`Counterclaim alleging 13 claims for copyright infringement, RICO claims, conspiracy, trade secret
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`misappropriation, breach of contract, intentional interference with contract, breach of fiduciary
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`duty, breach of the duty of loyalty, aiding and abetting breach of fiduciary duty, and breach of the
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`duty of loyalty, conversion, unfair competition and declaratory relief.
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`(g)
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`On July 12, 2007, Mattel filed a Second Amended Counterclaim alleging the same
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`13 claims.
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`(h)
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`By that point in the proceedings, the case had been divided into two phases: Phase
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`1 dealt with claims relating to the ownership of Bratz; Phase 2 dealt with the remaining claims
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`(trial on Phase 1 was to go first; the plan was for a later trial on Phase 2 claims, including MGA’s
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`claims against Mattel).
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`(i)
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`(j)
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`On February 4, 2008, Judge Larson issued a stay in Phase 2 discovery.
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`Voir dire in the Phase 1
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`trial began on May 20, 2008, and trial concluded on
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`August 26, 2008.
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`(k)
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`On January 6, 2009, Judge Larson vacated the stay on Phase 2 discovery (the stay,
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`which dated from February 4, 2008, was 11 months in duration).
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`(1)
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`On May 22, 2009, Mattel
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`filed a Third Amended Counterclaim. The Third
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`Amended Counterclaini included the same 13 claims as before and added a 14th claim for
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`(m)
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`On September 24, 2009,
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`following Judge Larson’s retirement,
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`the case was
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`transferred to United States District Judge David 0. Carter.
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`(n)
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`On March 24, 2010, Mattel moved for
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`leave to file a Fourth Amended
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`Counterclaim. The Fourth Amended Counterclaim separated the fraudulent transfer claim into
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`two: avoidance of actual fiaudulent transfers and avoidance of constructive fraudulent transfer.
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`Mattel also added two new claims for prohibited distribution and breach of constructive trust. All
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`told the Fourth Amended Counterclaim had 17 claims.
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`(0)
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`On July 22, 2010, the Nirrthcircuit issued its opinion reversing the judgment in the
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`2008 trial.
`
`
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`-7-
`COMPLAINT
`
`

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`
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`(p)
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`On August _16, 2010, MGA filed counterclaims-in-reply, alleging trade secret
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`misappropriation, RICO violations, and wrongful injunction.
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`(q)
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`During the course of the litigation, massive discovery was conducted. Over 1.5
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`million records were produced by over 100 different parties,
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`in excess of 11.5 million pages.
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`There were over 5,000 requests for admissions, over 4,000 requests for production, and over 400
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`depositions taken — and a magistrate, two discovery masters, and an electronic discovery master
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`presided over all the discovery.’
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`(r)
`Judge Carter consolidated all issues in one trial, and thus dispensed with the “Phase
`1-Phase 2” differentiation. Jury selection began January 13, 2011, and the parties made opening
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`statements on January 18, 2011. After closing arguments on April 8, 2011, the jury returned a
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`verdict for MGA on April 21, 2011.
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`(5)
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`On August 4, 2011, the Court entered judgment for MGA, awarding $85,000,000 in
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`compensatory damages, $85,000,000 million in exemplary damages, $2,172,000 in fees and
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`$350,000 in costs on the trade secret claims, and $105,688,000 in fees and $31,677,000 in costs on
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`the copyright claims.
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`(t)
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`On January 24, 2013,
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`the Ninth Circuit Court of Appeals issued an opinion
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`affurning the $105,688,000 in fees and $31,677,000 in costs on the copyright claims, but reversed
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`judgment on the trade secret misappropriation claim on the ground that it was not a compulsory
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`counterclaim-in-reply (and directed the District Court to dismiss the claim without prejudice.)
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`(u)
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`(v)
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`On February 2, 2013, Mattel moved to interplead the funds awarded MGA.
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`On February 19, 2013, the Ninth Circuit issued its formal mandate.
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`(w)
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`On February 27, 2013, MGA moved to amend its complaint nunc pro tunc.
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`(x)
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`On December 17, 2013, the District court denied Mattel’s interpleader motion and
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`MGA’s motion to amend the complaint nunc pro tuna, and dismissed the trade secret claim
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`without prejudice.
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`\OOO\]O\UIJ>UJ|\J
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`1 Discovery was so complete and exhaustive Mattel’s counsel recently conceded all relevant
`documents relating to MGA’s trade secret claim have been produced.
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`-3-
`COMPLAINT
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`

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`I.
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`MGA TOOK STEPS TO PROTECT ITS VALUAl3LE TRADE SECRET
`MATERIALS AT TOY FAIRS
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`15.
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`The Toy Industry Association (“TIA”) was formed in 1916. For decades since its
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`formation, TIA has hosted an annual
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`toy fair in New York where all of the major toy
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`manufacturers worldwide come together to meet with retailers and to demonstrate their wares.
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`The New York Toy Fair (“NYTF) is customarily held in or about February of each year.
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`16.
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`During the NYTF, it has been the practice of many toy manufacturers, including
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`MGA, Hasbro, and even Mattel, to have private and secure showrooms. These showrooms are set
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`up for the purpose of private meetings between the toy manufacturers and their customers, the
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`retailers. Enny to these showrooms is regulated. Only retailers or distributors are permitted, often
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`by appointment only; many manufacturers require the use of non-disclosure agreements
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`(“NDAs”), and post signs and other infonnation advising the entrants to private showrooms that
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`they are obliged to hold in confidence the nonpublic information presented inside, and not to take
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`photographs or otherwise record what they see. MGA takes all of these precautions
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`and more.
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`17.
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`MGA considered the products and information on display in its private toy fair
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`showrooms to be confidential and took appropriate measures to protect their secrecy. Mattel’s
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`own witnesses characterized MGA’s efforts to protect its trade secrets as “a little bit excessive.”
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`Entry to the showroom was by appointment only. Visitors were met in a separate waiting area by
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`a greeter who required them to confu-in their identity with a picture ID and any supporting
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`information. A guard was posted in the showrooms. There were sign—in sheets for visitors, which
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`expressly forbid the unauthorized disclosure of MGA’s confidential information or the use of
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`photographic or recording equipment. Visitors to MGA showrooms were only shown the portions
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`of MGA’s gallery to which their business pertained, and were escorted throughout their time in the
`showroom. When they received wholesale and FOB2 price lists and other documents, they were
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`reminded that the information was for their use only, and the documents were additionally
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`stamped “confidential.”
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`r
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`2 FOB is an acronym for “free on board,” meaning the buyer pays for the transportation of the
`goods.
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`-9-
`COMPLAINT
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`18.
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`In the 2011 trial, MGA introduced an example of a sign-in sheet that visitors to the
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`showroom were required to sign acknowledging the confidentiality of MGA’s unreleased product
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`information and agreeing to maintain the secrecy of that information.
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`It stated in large letters at
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`the very top of the sign-in that:
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`Your permission to visit MGA Entertainment offices and facilities is
`granted subject to your agreement to keep confidential any information
`that may be disclosed to you concerning MGA’s business affairs,
`including but not
`limited to, MGA’s product
`lines, product names,
`designs, artwork, trade dress, advertising and/or marketing plans. By
`signing your name below, you agree that you will not disclose any
`information which MGA considers confidential
`to any third party,
`including but not
`limited to, any parties who are in the business of
`manufacturing or licensing products or providing services in competition
`with MGA’s products or services.
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`19.
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`The 2011 jury also heard Mattel sales executive Mateo Romano testify that he was
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`required to sign a confidentiality agreement before he could enter the MGA Hong Kong or New
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`York toy fair showrooms, and Romano characterized MGA’s focus on protecting confidential
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`information as “a little bit excessive” and “obsessive.”
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`20.
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`Mattel employees admitted in the 2011 jury trial that, absent the fraudulent conduct
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`described in detail below, they never would have been allowed access to that confidential MGA
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`21.
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`Mattel was well aware of these practices because Mattel
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`itself had carefully
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`regulated admission to its own private showrooms at
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`the NYTF for many years. Persons
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`requesting an invitation to Mattel’s toy fair booths were required to sign nondisclosure agreements
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`stating that they could share what they saw only “to those within your company, on a strict need-
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`to-know basis.” When they arrived at the welcome area of Mattel’s booth, they were greeted by
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`signs reminding them of their obligation and warning that “(i)nformation, communications, and
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`conversations in this area are intended to be confidential” and that “(i)t may be a violation of the
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`law to record such confidential
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`information, communications, and conversations without the
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`express consent of Mattel.”
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`22.
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`In the private showrooms, toy manufacturers typically present to the retailers and
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`distributors their products that are not yet on the market. The manufacturers will also periodically
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`
`
`- 10-
`COMPLAINT
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`

`
`
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`provide catalogs of their products to be marketed for the upcoming year. Given the fast pace and
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`highly competitive nature of the retail toy industry, the appearance, operation and intended play
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`pattern of an as-yet unmarketed toy is one of the most important trade secrets in the industry.
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`Other confidential information presented in showrooms includes wholesale and FOB price lists of
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`products not yet on the market, the manufacturers‘ advertising and marketing plans, and packaging
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`concepts for the next season. Knowing in advance which products will be advertised by the
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`manufacturer is very important, because it enables retailers to plan their likely purchases
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`(advertised products sell more units), their own in-store allocation of advertising support, and
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`other important marketing elements such as the content of advertising circulars.
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`A.
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`Information on Pricing is Confidential and Extremely Valuable
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`23.
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`MGA CEO Isaac Larian testified in 2011 that he considered MGA’s catalogs, sell
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`sheets and price lists in its showrooms to be confidential and “I00 percent” valuable information
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`that he would never have knowingly given to competitors.
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`24.
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`At the 2011 trial, a number of Mattel executives acknowledged the confidential
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`nature of FOB pricing; former Market Intelligence Department manager Sal Villasenor, former
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`vice president of strategic planning Matt Turetzky and senior vice-president of marketing Tim
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`Kilpin all admitted Mattel should not have had access to MGA’s FOB information.
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`25.
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`Mattel employees also acknowledged the value of FOB pricing to competitors.
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`Villasenor agreed that one of the reasons that he went to the New York Toy Fair was to obtain
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`confidential price lists, which were important to Mattel
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`in gaining a competitive advantage.
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`Villasenor also agreed that a toy company “(p)robably can” save a lot of money knowing what a
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`competitor is doing and how the competitor is going to price its product.
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`26.
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`The jury saw TX 27464-158, a November 12, 2004 email from Turetzky to
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`Villasenor thanking Villasenor for sending a single price list, in which Turetzky states, “This is
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`great. You saved Mattel close to 1 million” — demonstrating the substantial savings that Mattel
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`achieved by knowing 2004 confidential pricing information.
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`/ //
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`-11-
`COMPLAINT
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`._o
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`B.
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`Information on Advertising Plans is Also Confidential and Valuable
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`27.
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`MGA showed at
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`trial
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`that advertising makes a “huge” difference in MGA’s
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`projections for how many units of a product it will sell. As Mr. Larian explained, knowing the
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`marketing or advertising plans of a competitor is valuable because it allows a competitor to decide
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`whether or not to advertise, increase advertising or move its advertising to another product. This
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`is particularly true given that MGA advertises only a select few of its products. Knowing which
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`products MGA planned to advertise would allow Mattel to adjust its own marketing plan strategy
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`against MGA —- namely, outspend MGA a direct head-to-head advertising campaign, advertise its
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`own product first, or wait to increase its advertising afler MGA. And, of course, Mattel could
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`decide not to advertise and instead “ride off of (MGA’s) coat tails,” thereby saving Mattel money.
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`28.
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`Mattel’s senior director of marketing, Jill Nordquist, explained that advance
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`knowledge of whether a product would be advertised on television was valuable to a competitor
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`because “it’s highly proprietary information, and it would be basically telling anybody outside of
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`the company what we were planning on doing and what -- which items we consider to be our most
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`valuable, per se, items because we would choose to put TV against them and generate the most
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`volume against those items.”
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`C.
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`29.
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`Information on Unreleased Products is Confidential and Valuable
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`Mr. Larian also explained in detail the value of seeing MGA’s unreleased products:
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`Q. Why would it be valuable to a competitor to be able to go into your
`showrooms and look at those products?
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`-(objections overruled)
`
`THE WITNESS: Because when they come to your showroom, they can
`feel, touch, play like a retailer does with your product. They can get to
`know how the product works. How does it play. You cannot just do that
`by catalog sheet, and that’s why retailers from all over the world spend
`millions of dollars as a whole. 10,000 people come to toy shows. That’s
`why it's valuable. They come and feel and touch and play with the toy
`before they make a buying decision.
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`Q. So meeting the toy in person is the most valuable way of acquiring the
`infomiation —
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`A. It is.
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`-12-
`COMPLAINT
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`
`

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`Q. -- correct?
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`A. Otherwise, we would not Spend hundreds of thousands of dollars
`going to toy shows.
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`Mr. Lan'an also explained the value of acquiring photographs of competitor products before their
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`release.
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`30.
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`Mr. Larian went on to testify that seeing MGA’s unreleased products was valuable
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`to Mattel “(b)ecause they could change their designs. They could come up with product, they
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`could compete with that They could change their pricing, their marketing plans, sales plans,
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`everything."
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`31.
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`Mattel’s witnesses confirmed the value of MGA’s trade secrets. Turetzky testified
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`that lcnowing information about a competitor’s unreleased products “would help us compete in the
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`marketplace to know that information.” Turetzky understood that having access to unreleased
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`products would “certainly help our marketing plans,” help Mattel in planning its toy lines,
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`potentially help Mattel in