Mattel V Mga Entertainment Emergency Motion For Stay Pending Appeal

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CA No. 09-55673 DC No. 04-cv-9049 SGL (RNBx) IN THE

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT ____________ MGA ENTERTAINMENT, INC., MGA ENTERTAINMENT HK LTD., and ISAAC LARIAN, Appellants, vs. MATTEL, INC., a Delaware Corporation, Appellee.

____________ On Appeal from the United States District Court for the Central District of California (Hon. Stephen G. Larson, Presiding)

____________ EMERGENCY MOTION UNDER CIRCUIT RULE 27-3 APPELLANTS’ EMERGENCY MOTION FOR STAY PENDING APPEAL OF PERMANENT INJUNCTION (Redacted for Public File) ____________ Thomas J. Nolan (Bar No. 66992) Jason D. Russell (Bar No. 169219) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 300 South Grand Avenue, Suite 3400 Los Angeles, CA 90071-3144 Telephone: (213) 687-5000 Facsimile: (213) 687-5600

Mark E. Haddad (Bar No. 205945) Robert A. Holland (Bar No. 174642) Alycia A. Degen (Bar No. 211350) SIDLEY AUSTIN LLP 555 West Fifth Street, Suite 4000 Los Angeles, California 90013 Telephone: 213-896-6000 Facsimile: 213-896-6600

Russell J. Frackman (Bar No. 49087) Patricia H. Benson (Bar No. 60565) MITCHELL SILBERBERG & KNUPP LLP 11377 West Olympic Boulevard Los Angeles, California 90064-1683 Telephone: (310) 312-2000 Facsimile: (310) 312-3100 Attorneys for Appellants MGA Entertainment, Inc., MGA Entertainment HK, Ltd., and Isaac Larian

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CIRCUIT RULE 27-3 CERTIFICATE A.

Telephone Numbers And Office Addresses Of All Attorneys For The Parties To The Appeal

Mark E. Haddad (Bar No. 205945) [email protected] Robert A. Holland (Bar No. 174642) [email protected] Alycia A. Degen (Bar No. 211350) [email protected] SIDLEY AUSTIN LLP 555 West Fifth Street, Suite 4000 Los Angeles, California 90013 Tel: 213-896-6000 Fax: 213-896-6600

Counsel for Appellants MGA Entertainment, Inc., MGA Entertainment HK, Ltd., and Isaac Larian

Thomas J. Nolan (Bar No. 66992) [email protected] Jason D. Russell (Bar No. 169219) [email protected] SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 300 South Grand Avenue, Suite 3400 Los Angeles, CA 90071-3144 Tel: (213) 687-5000 Fax: (213) 687-5600

Counsel for Appellants MGA Entertainment, Inc., MGA Entertainment HK, Ltd., and Isaac Larian

Russell J. Frackman (Bar No. 49087) [email protected] Patricia H. Benson (Bar No. 60565) [email protected] MITCHELL SILBERBERG & KNUPP LLP 11377 West Olympic Boulevard Los Angeles, California 90064-1683 Tel: (310) 312-2000 Fax: (310) 312-3100

Counsel for Appellants MGA Entertainment, Inc., MGA Entertainment HK, Ltd., and Isaac Larian

Ronald L. Olson Daniel P. Collins [email protected] MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue, 35th Floor Los Angeles, CA 90071-1560 Tel: (213) 683-9100 Fax: (213) 687-3702

Counsel for Appellee Mattel, Inc.

John B. Quinn [email protected] Michael T. Zeller [email protected]

Counsel for Appellee Mattel, Inc.

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Jon D. Corey [email protected] Brett Dylan Proctor [email protected] QUINN EMANUEL URQUHART OLIVER & HEDGES LLP 865 S. Figueroa Street, 10th Los Angeles, CA 90017-2543 Tel: (213) 443-3000 Fax: (213) 443-3100 Sanford I. Weisburst [email protected] QUINN EMANUEL URQUHART OLIVER & HEDGES LLP 51 Madison Avenue, 22nd Floor New York, NY 10010 Tel: (212) 849-7170 Fax: (212) 849-7100

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Counsel for Appellee Mattel, Inc.

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Facts Showing The Existence And Nature Of The Emergency MGA1 is the maker of the hugely successful Bratz brand of fashion

dolls and accessories. Over the past eight years, Bratz became the only brand of fashion dolls in half a century to challenge the market dominance of the behemoth Mattel and its iconic Barbie brand. When MGA introduced Bratz, Mattel had never sold any product called Bratz, or any doll that looked remotely like Bratz. After its attempts to create competing products failed, Mattel filed this lawsuit, accusing MGA of copyright infringement and seeking $1.4 billion in damages. A jury found nonwillful infringement, but, in a stinging repudiation of Mattel’s injury claim, awarded Mattel a relative pittance on its copyright infringement claim – $10 million, a fraction of a percent of the damage Mattel claimed to have suffered. Mattel never sought a preliminary injunction or the rights to the Bratz trademark prior to trial. Nevertheless, after the trial, it pressed these demands, and despite the jury’s verdict, the district court gave Mattel all it asked for. In a series of sweeping Injunctive Orders, the court allowed Mattel to achieve its professed litigation objective – to “KILL BRATZ.” Sealed Exs. 43 at 0547; 44 at 0564.

“MGA” refers to appellants MGA Entertainment, Inc. (“MGAE”), its subsidiary MGA Entertainment HK, Ltd. (“MGA HK”), and founder and CEO Isaac Larian.

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First, the district court barred MGA from selling not just the particular female dolls that the court found infringed the copyright, but from using the name Bratz on any item in the full line of Bratz products.2 Ex. 4 at 3, Ex. 2 at 4-5. The ban thus extends to many other character dolls that neither the jury nor the district court found to be infringing, as well as to thousands of Bratz brand accessories, from clothes to cars to furniture, all products that the district court acknowledged MGA created independently. Ex. 4 at 2-3; Ex. 7 at 9 n.6; Ex. 37 at 60:24-61:13. The court also ordered perhaps the largest toy recall in U.S. history. Come New Year’s, MGA must impound and/or destroy all MGA Bratz products that remain on retailers’ shelves. Ex. 2 at 6-7; Ex. 6 at 11, 22; Ex. 7 at 7, 11.

The court’s orders go beyond enjoining MGA from selling products under the Bratz name. They also require MGA to give Mattel all of the Bratz trademarks so that Mattel can sell its products under the Bratz brand that MGA built. Thus, in a matter of months, Mattel will have the exclusive right to extract The orders were initially entered December 3, 2008, finalized with only very minor modifications on April 27, 2009, and initially implemented through an order on May 21, 2009, that also denied a stay pending appeal. See Exs. 1-7.

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the benefit of the Bratz trademarks MGA spent hundreds of millions of dollars fostering – or to simply to let the brand die, restoring Barbie’s unrivaled hegemony in the market for fashion dolls. Ex. 4 at 2-3. Worse yet, in its order last week denying MGA’s request for a stay pending appeal, the district court ordered MGA to start immediately transferring its trade secrets to Mattel. The district court directed that “MGA shall immediately make available” to a court-appointed monitor “for transfer to Mattel” any “portion of the Bratz Assets necessary to enable Mattel to begin preparation of its own Bratz line for the Spring, 2010 sales season.” Ex. 7 at 13 ¶ V.B.3; see id. at 11 ¶ V.B.1.h; id. at 9-10 n.6 (broadly defining “Bratz Assets” to include products, intellectual property, marketing assets, customer information, and other trade secrets, not limited to those covered by the Injunctive Orders). MGA is now at the mercy of the monitor’s judgment as to which of MGA’s assets and most critical trade secrets will be given to its arch-rival—long before this Court will have a chance to review the underlying verdict and orders. If these orders are not immediately stayed, the harm to MGA will be devastating and irreversible. To start with, rivals like Mattel and MGA spend millions of dollars devising their strategies for how to design, brand, and market their products and how to appeal to ever-evolving consumer tastes. E.g., Sealed Exs. 49, 51; see generally Sealed Ex. 53 at 0665-91. They spend more still to v

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protect those plans from their competitors. Starting now, however, the district court has given a monitor access to all of MGA’s Bratz-related assets, including its secret branding and marketing plans (Ex. 7, at 9-10 n.6), and required MGA to begin transferring its assets and secret information to its most ardent rival. MGA seeks emergency consideration also because

As the district court recognized at a hearing on May 18, 2009, “there are things that need to be done for the 2010 [Bratz] line now. Not a month from now or even two months from now, but literally now.” Ex. 39 at 111:24-112:1.

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See, e.g., Ex. 39 at 92:15-21; 93:8-9 (district court acknowledging “arguably irreparable damages” to MGA, including by “compromising” MGA’s “contracts” and “relationships with the people that [MGA] is selling to now.”); ; Ex. 7 at 12 ¶ V.B.1.o. (district court refusing to limit Mattel’s ability to initiate “legal proceedings anywhere in the world” to assert its newly awarded rights in the Bratz brand). Retailers, suppliers, distributors, licensees, and MGA thus all need to know now whether MGA has authority to present its Bratz line pending appeal. vii

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Even if Mattel chooses to sell Bratz in Spring 2010

Mattel could not copy MGA’s existing line even if it wanted to, because, under the district court’s orders, MGA still owns thousands of complementary and independently developed Bratz products (even though MGA can no longer call them “Bratz”).

A brand is not a broach. Mattel cannot just borrow it for a season and return it to MGA unscathed. From any practical or legal perspective, implementing the district court’s orders before this appeal is decided makes no sense. An unopposed motion viii

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to expedite is pending, and this appeal can be fully briefed by September. See Dkt. Entry 6921899. The disruption of a massive brand transfer should occur, if ever, only once. A court-appointed monitor is in place to ensure that MGA properly accounts for Bratz profits and promotes the Bratz brand during this appeal. Ex. 7 at 9-13. Nothing this Court might order later, after considering this stay motion on a standard schedule, could repair the damage MGA faces now from implementation of the district court’s orders. So long as this Court lacks the power to purge MGA’s trade secrets from Mattel’s mind, to resuscitate a dead brand, or to reset consumer predilections and partner expectations, the damage will be done. The motion warrants emergency consideration. Finally, MGA has sought an emergency stay at the earliest opportunity, because the district court effectively insulated its orders from appellate review until now. The district court initially released its unexpectedly broad but seemingly final orders on December 3, 2008, causing mass confusion among MGA’s retailers, suppliers, distributors, and licensees. MGA immediately sought relief in the district court, filed multiple declarations in support of a stay, obtained a stipulated briefing schedule and hearing date, and noticed an appeal. See CA No. 08-57015. The district court then unexpectedly took the hearing off calendar, and the court went dark. MGA promptly sought an emergency stay from this Court, whereupon the district court set a new hearing date. The district court ix

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then indicated that its December 3rd Injunctive Orders were not final and would not become final until after the court decided then-pending post-trial motions; the court also stated that it was ordering a limited stay in any event through the end of 2009. Ex. 5 at 1. Although the district court stated that it expected to finalize its Injunctive Orders quickly, it did not do so until April 27, 2009. Ex. 38 at 82:2283:2; Ex. 6. B.

The District Court’s Denial Of A Stay On May 8, 2009, MGA filed an ex parte application in the district

court for a stay pending this appeal. That application and its supporting declarations explained the irreparable harm to the Bratz brand, and to MGA’s business reputation and financial viability, that the district court’s orders already are causing and would cause if the stay is not extended pending appeal. See Sealed Exs. 47-53. The court expedited briefing on the motion, and heard argument on May 18, 2009. On May 21, 2009, the district court denied the stay. Ex. 7 at 7. At the same time, the court appointed a monitor with powers, inter alia, to oversee MGA’s operations related to Bratz and the accounting of the revenues and profits from the sale of Bratz through 2009 – far more protection for Mattel that would be usual in a case like this and even more reason for a stay. Ex. 7 at 9-13. The district court provided no protection for MGA pending appeal against Mattel harming or destroying the brand. The court instead stated that “[a]t the end of the x

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2009 year . . . the intellectual property will be in [Mattel’s] hands. What you do with it beyond then is going to be [Mattel’s] business.” Ex. 39 at 64:9-12. C.

Notice To And Service Of Counsel For Other Parties On May 22, 2009, MGA’s counsel notified Mattel’s counsel via e-

mail that MGA would be filing this Emergency Motion on May 26, 2009. Mattel’s counsel in Los Angeles will be personally served with this motion and the supporting papers on May 26; other counsel will be served by overnight delivery. D.

Request For Expedited Briefing Of This Motion MGA asks the Court to shorten the briefing schedule for this motion

to stay. The issues are well-known to the parties, as MGA and Mattel briefed motions to stay last December in both the district court and before this Court, and briefed them again this month in the district court. The district court recognized the urgency of determining who will be producing and selling Bratz for 2010, and shortened the briefing and hearing schedule for the stay motion before that court. Because significant deadlines are fast approaching for whichever company is going to produce Bratz for 2010, MGA respectfully asks the Court for expedited briefing.

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CORPORATE DISCLOSURE STATEMENT (Fed. R. App. P. 26.1) MGA Entertainment, Inc., and MGA Entertainment HK, Ltd., are corporations. No publicly held corporation owns 10% or more of the stock of either of these corporations.

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TABLE OF CONTENTS Page FACTUAL AND PROCEDURAL BACKGROUND ..............................................1 A.

The Jury Trial..............................................................................2

B.

The District Court’s Injunctive Orders .......................................6

C.

MGA’s Initial Appeal And Application For A Stay...................8

ARGUMENT .............................................................................................................9 I.

This Court Is Likely To Overturn The Injunctive Orders...................11 A.

The Injunction Lacks Any Lawful Foundation ........................11 1.

The Injunction Violates The Seventh Amendment Because It Conflicts With The Jury’s Verdict And Role.................................................................................11

2.

The District Court Applied The Wrong Standard For Infringement.............................................................13

3.

The District Court Failed To Follow eBay .....................15

B.

The District Court Impermissibly Imposed A Constructive Trust.....................................................................16

C.

The District Court Based Its Orders On A Jury Verdict Tainted By Ethnic Bias .............................................................20

II.

MGA Will Suffer Irreparable Harm Without A Stay .........................22

III.

A Stay Will Not Cause Irreparable Harm To Mattel ..........................24

IV.

The Public Interest Strongly Favors A Stay........................................26

CONCLUSION........................................................................................................26

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TABLE OF AUTHORITIES Page(s) FEDERAL CASES Advanced Med. Optics, Inc. v. Alcon Labs., Inc., No. Civ. A. 03-1095, 2005 WL 3454283 ...........................................................24 Aliotti v. R. Dakin & Co., 831 F.2d 898 (9th Cir.1987) ...............................................................................14 Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435 (9th Cir. 1994) ..............................................................................14 Brookfield Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036 (9th Cir. 1999) ............................................................................17 Concrete Co. v. MMC Holdings, Inc., 201 F. Supp. 2d 1192 (M.D. Ala. 2001) ............................................................24 Conversive, Inc. v. Conversagent, Inc., 433 F. Supp. 2d 1079 (C.D. Cal. 2006) ..............................................................17 Danjaq LLC v. Sony Corp., 263 F.3d 942 (9th Cir. 2001) ..............................................................................12 Dimick v. Schiedt, 293 U.S. 474 (1935)............................................................................................12 Dyer v. Calderon, 151 F.3d 970 (9th Cir. 1998) (en banc) ..............................................................20 eBay Inc. v. MercExch., LLC, 547 U.S. 388 (2006)......................................................................................15, 16 Golden Gate Rest. Ass’n v. City and County of San Francisco, 512 F.3d 1112 (9th Cir. 2008) ............................................................................11 Grosso v. Miramax Film Corp., 383 F.3d 965 (9th Cir. 2004) ..............................................................................17

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TABLE OF AUTHORITIES Page(s) Haley v. Blue Ridge Transfer Co., 802 F.2d 1532 (4th Cir. 1986) ............................................................................21 Herbert Rosenthal Jewelry Corp. v. Kalpakian, 446 F.2d 738 (9th Cir. 1971) ........................................................................13, 15 Hilton v. Braunskill, 481 U.S. 770 (1987)............................................................................................11 Johansen v. Combustion Eng’g, Inc., 170 F.3d 1320 (11th Cir. 1999) ..........................................................................12 Kennon v. Gilmer, 131 U.S. 22 (1889)..............................................................................................12 Kiernan v. Van Schaik, 347 F.2d 775 (3d Cir. 1965) ...............................................................................21 L. & J.G. Stickley, Inc. v. Canal Dover Furniture Co., Inc., 79 F.3d 258 (2d Cir. 1996) .................................................................................24 Los Angeles Police Protective League v. Gates, 995 F.2d 1469 (9th Cir. 1993) ............................................................................12 Mattel, Inc. v. Azrak-Hamway Intern., Inc., 724 F.2d 357 (2d Cir. 1983) ...............................................................................14 Mattel, Inc. v. Goldberger Doll Mfg. Co., 365 F.3d 133 (2d Cir. 2004) ...............................................................................14 McCoy v. Goldston, 652 F.2d 654 (6th Cir. 1981) ..............................................................................21 MDY Indus., LLC v. Blizzard Entm’t, Inc., No. CV-06-2555-PHX-DGC, 2009 WL 649719 (D. Ariz. Mar. 10, 2009) .......23 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, 518 F. Supp. 2d 1197 (C.D. Cal. 2007) ..............................................................15 Miller v. LeSea Broad., Inc., 927 F. Supp. 1148 (E.D. Wis. 1995) ..................................................................24 ii

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TABLE OF AUTHORITIES Page(s) Mister Donut of Am., Inc. v. Mr. Donut, Inc., 418 F.2d 838 (9th Cir. 1969) ..............................................................................18 Multi-Channel TV Cable Co. v. Charlottesville Quality Cable Operating Co., 22 F.3d 546 (4th Cir. 1994) ................................................................................23 Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997) ...............................................................................18 Newsome v. Up-To-Date Laundry, Inc., 219 F.R.D. 356 (D. Md. 2004) ...........................................................................13 Ohio-Sealy Mattress Mfg. Co. v. Sealy, Inc., 585 F.2d 821 (7th Cir. 1978) ..............................................................................12 Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147 (2d Cir. 2001) ...............................................................................13 Satava v. Lowry, 323 F.3d 805 (9th Cir. 2003) ..............................................................................13 Self-Realization Fellowship Church v. Ananda Church of Self-Realization, 59 F.3d 902 (9th Cir. 1995) ................................................................................20 Simon Prop. Group, Inc. v. Taubman Ctrs., Inc., 262 F. Supp. 2d 794 (E.D. Mich. 2003) ............................................................24 Standard Havens Products Inc. v. Gencor Indus., Inc., 897 F.2d 511 (Fed. Cir. 1990) ...........................................................................23 Thompson v. Altheimer & Gray, 248 F.3d 621 (7th Cir. 2001) ..............................................................................21 United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (1918)..............................................................................................18 United States v. Gonzalez, 214 F.3d 1109 (9th Cir. 2000) ............................................................................22

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TABLE OF AUTHORITIES Page(s) United States v. Henley, 238 F.3d 1111 (9th Cir. 2001) ......................................................................20, 21 Velez v. Roche, 335 F. Supp. 2d 1022 (N.D. Cal. 2004)..............................................................12 Wang Labs., Inc.. v. Toshiba Corp., No. 90-1477-A, 1991 WL 333701 (E.D. Va. Aug. 23, 1991)............................24 Whitfield v. Lear, 751 F.2d 90 (2d Cir. 1984) .................................................................................17 STATE CASES Chandler v. Roach, 156 Cal. App. 2d 435 (1957) ..............................................................................18 City of Hope Nat’l Med. Ctr. v. Genentech, Inc., 43 Cal. 4th 375 (2008) ........................................................................................20 Communist Party v. 522 Valencia, Inc., 35 Cal. App. 4th 980 (1995) ...............................................................................16 Desny v. Wilder, 46 Cal. 2d 715 (1956) ...................................................................................17, 18 Donahue v. Ziv Television Programs, Inc., 245 Cal. App. 2d 593 (1966) ......................................................................18 Haskel Eng’g & Supply Co. v. Hartford Accident & Indem. Co., 78 Cal. App. 3d 371 (1978) ................................................................................16 K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 Cal. App. 4th 939 (2009) .............................................................................19 CONSTITUTIONAL PROVISIONS U.S. Constitution, Seventh Amendment..................................................7, 11, 12, 21

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TABLE OF AUTHORITIES Page(s) RULES Federal Rule of Evidence 606(b) .............................................................................21 OTHER AUTHORITIES 2 DAN B. DOBBS, DOBBS LAW OF REMEDIES § 6.6(3) (2d ed. 1993) .......................19 RESTATEMENT (FIRST) OF RESTITUTION § 210 cmt. .................................................19 1 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 2:15 (4th ed. 2008); 3 MCCARTHY § 18:2 (4th ed. 2008) ........................................................18

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FACTUAL AND PROCEDURAL BACKGROUND In October 2000, a young fashion designer named Carter Bryant transferred ownership to MGA of several two-dimensional drawings of four proposed Bratz dolls (Sealed Ex. 46) and became a consultant to MGA. Ex. 16 at 3048:10-15. After months of intensive design and development, MGA introduced its version of Bratz dolls in 2001. Ex. 8 ¶ 8; see also, e.g., Ex. 25. MGA has since invested hundreds of millions of dollars creating over 14,000 new Bratz products and developing a strong brand, and it has been a huge success. Ex. 23 at 6380:226381:3. With the Bratz brand, MGA became the only credible threat to Mattel’s market dominance in fashion dolls, and prompted Mattel’s strategy to “KILL BRATZ.” Sealed Ex. 44 at 0564. Mattel filed suit years after Bratz was introduced to the market alleging that Bryant “create[d] the concept, design and name of Bratz” and drawings and models of Bratz dolls, and began assisting MGA in producing Bratz dolls, before his Mattel contract expired. Sealed Ex. 41 at 35 ¶ 26. Mattel claimed ownership over and asserted claims against MGA for copyright infringement of Bryant’s drawings, as well as for conversion, unfair competition, interference with contractual relations, and aiding and abetting breaches of fiduciary duty and duty of loyalty. Sealed Ex. 41 ¶¶ 82-87, 116-66.

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The Jury Trial In Phase 1(a) of a two-phase jury trial, the jury found that Bryant had,

alone or together with others, created Bratz drawings and a preliminary “sculpt” – a three-dimensional “draft” of a blank, unpainted doll figure – while employed by Mattel, and that MGA was liable to Mattel on the state law claims. Ex. 17 at 1-5. In Phase 1(b), the jury addressed the damages on these state law claims and the copyright infringement claim. At the outset of Phase 1(b),

After privately interviewing each juror Ex. 20 at 5647:5-11) but refusing to let any party or counsel see the transcripts (Ex. 22 at 5693:11-19), the court found that, on the last day of Phase 1(a) deliberations, when the jury was deadlocked over certain issues, Juror No. 8 “indicated that her husband, an attorney, [had] told her about [a] client or clients who are Iranian and who are stubborn, rude, . . . and have stolen other person’s ideas.” Ex. 21 at 1 ¶ 1 (emphasis added); see also Ex. 20 at 5663:5-11; Ex. 24 at 3-4. These revelations were disturbing, not only because Mr. Larian, the founder and CEO of MGA, immigrated to the U.S. from Iran when he was 17 years old, but because the jurors were told about his background in voir dire and were questioned whether they could be fair in a case involving someone from “the Middle East.” 2

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Ex. 11 at 317:21-25. The court expressed shock that this juror would “go through the voir dire process that we went through and then harbor and make such a statement, harbor such a feeling and then make such a statement.” Ex. 20 at 5655:24-5656:4. The court characterized Juror No. 8’s remarks as “grossly inappropriate” and her presence as a “cancer” in the proceedings, and dismissed her. Ex. 22 at 5694:5; Ex. 20 at 5662:6; Ex. 21 at 1-2. Even though Juror No. 8 deliberated and voted in Phase 1(a), the district court denied MGA’s motion for a mistrial. The court held that the constitutional right to unbiased jurors applies only in criminal, not civil, cases. Ex. 24 at 8-10. It found that Juror No. 8’s statements reflected only her husband’s views, and did not establish that “she herself held certain preconceptions regarding Persians and/or Iranians.” Id. at 7. The court did not reconcile this finding with Juror No. 6’s concern that Juror No. 8 was not objective or with her dismissal from Phase 1(b), but did find that that Juror No. 8 was not “biased . . . in the legal sense” because “[c]ourts do not require that jurors . . . be without preconceived notions,” and because “perfect justice is not of this world.” Id. at 11. MGA sought a writ of mandamus ordering a new trial. This Court denied the petition, on the ground that mandamus is inappropriate when relief is available on appeal. CA No. 08-73438.

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The trial continued with Phase 1(b), where the court instructed the jury to evaluate copyright infringement through the lens of a “substantial similarity” test and not the (correct) “virtually identical” test. Ex. 32 at 29-30. Mattel’s evidence on the scope of copyright infringement emphasized similarities between the Bryant drawings and the four “first generation” Bratz dolls,3 which were on the market only through early 2003. For later generation dolls, Mattel pointed to MGA’s use of the same, blank production sculpt. Ex. 33 at 8153:218154:1, 8154:14-18, 8156:17-21. MGA acknowledged some similarities between the first generation dolls, particularly the fashions, and Bryant’s drawings. Ex. 25 at 6959:6-9; Ex. 34 at 8196:22-8197:1. However, MGA identified significant differences between Bryant’s drawings and the preliminary sculpt that Bryant commented on and the final sculpt that took many more months to create and that was used in making the dolls, and demonstrated that the dolls were given a new look each season, to keep pace with the changing tastes of their young consumers. See generally Exs. 25, 26. MGA also demonstrated that the profits from later generation dolls were driven by changing themes, characters, fashions, face paint and hair, which MGA contended reflected only MGA’s independent and extensive 3

See, e.g., Ex. 18 at 5422:8-5424:12 (opening statement comparisons of first generation Sasha, Jade, Chloe, and Yasmin dolls to Bryant drawings), Ex. 33 at 8141:20-8142:1 (closing argument comparisons of drawings and 2001 dolls – “Let’s look at some of the dolls and drawings side by side.”); Id. at 8142:19-21 (more of same). 4

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creativity and resources. See, e.g., Ex. 27; Ex. 34 at 8187:1-9, 8188:1-6, 8220:148222:18, 8224:5-17. Despite the differences between the first and later generations – which Mattel itself acknowledged (Ex. 33 at 8154:2-9; 8155:14-15) – Mattel asked the jury to award it all profits from all Bratz sales since 2001, which Mattel estimated at over $1.4 billion. Id. at 8157:19-8158:22. Mattel argued no alternative calculation. MGA, however, presented evidence that MGA’s profits from all Bratz products were $405 million (Ex. 29 at 7693:21-25), then provided the jury with options for attributing profits to infringement related to Carter Bryant’s contribution, particularly infringement related to only the first generation dolls.4 MGA also proposed a special verdict form that would have allowed the jury to identify the infringing categories of dolls. Ex. 28 at 2-6. But Mattel opposed this, arguing that the jury’s “damages award will reflect” the scope of infringement, and the district court acquiesced and used a general verdict form. Ex. 31 at 7978:5-10, 7981:22-7982:1; Ex. 36. The court instructed the jury to

4

See, e.g., Ex. 29 at 7784:1-9 (calculating profits from first generation dolls at $4 million); Ex. 29 at 7709:14-17, 7711:14-18 (identifying revenues from first generation dolls as 2.5% of total Bratz revenues); Ex. 34 at 8233:5, 8234:21 (calculating profits from later generation dolls at $18.9 million); Ex. 34 at 8225:138226:11, 8229:9-16, 8232:14-8235:2 (providing various calculations concerning indirect profits from different categories of merchandise). 5

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award the damages it found were attributable to infringement, but did not request the jury to specify what it found infringing. Ex. 32 at 46-47. On the next-to-last day of deliberations, the jury sent the court a note stating that it had a “dilemma” about “appropriation [sic] of the first generation, $4 million profit,” and asking: “Can we find that the first generation dolls violate the copyright of Mattel but that subsequent generations of dolls do not violate the copyright?” With the parties’ consent, the court said it could. Ex. 35. Evidently, the jury did exactly that. The jury awarded Mattel only $10 million total on its copyright claim ($6 million for MGA, $3 million for Larian, and $1 million for MGA-HK). Ex. 35 at 5. The jury also awarded Mattel zero damages on Mr. Larian’s ownership percentage of MGA, which Mattel had requested – albeit speculatively – largely by estimating Mr. Larian’s future Bratzrelated profits. Id. The jury also awarded identical damages on each of the three state law claims of $20 million against MGA and $10 million against Mr. Larian. Id. at 2. Finally, the jury found the infringement was not “willful.” Id. at 4-5. B.

The District Court’s Injunctive Orders On September 29, 2008, Mattel filed motions for equitable remedies

based on the jury’s verdicts. The district court later noted that “the measurable value to Bratz, the brand Bratz, to the dolls Bratz, to everything that came of it, is so much a function of what Isaac Larian and his team at MGA have put into it,” 6

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that giving Mattel “everything that is of value” relating to Bratz was “quite a leap.” Ex. 37 at 60:24-61:13. Nevertheless, in orders issued on December 3, 2008, the district court imposed a constructive trust on all of MGA’s worldwide trademarks, service marks and domain names that include “Bratz” and “Jade,” enjoined MGA from using these trademarks “anywhere in the world,” and ordered MGA to transfer and assign all “Bratz” and “Jade” trademarks and domain names to Mattel, so Mattel can sell its own Bratz line. Ex. 4 at 2-3. It also made all copyrights in Bryant’s drawings and doll sculpt subject to the constructive trust. Ex. 3 at 5. It further declared that Mattel owns all “Bratz-related works, ideas, and concepts that Carter Bryant conceived or created while employed by Mattel, as found by the jury in this case, including the idea for the [Names].” Id. at 2. Finally, it enjoined MGA from selling Bratz female fashion dolls or related Bratz materials, and required MGA to contact all retailers, distributors, wholesalers, importers, exporters, licensees, and customers, and post a notice on its website, to recall and impound all such MGA Bratz products. Ex. 2 at 2-4, 7-9. The district court admitted that the “jury returned an award of damages that was far less than that sought by Mattel” and that, under the Seventh Amendment, it was bound by the jury’s “implicit or explicit factual determinations.” Ex. 1 at 9. Nevertheless, it concluded that it could “make no 7

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principled inferences” from the jury’s outright rejection of Mattel’s $1.4 billion demand “and must therefore engage in its own factfinding.” Id. at 10 (emphasis added). After conducting its own review of evidence, the court concluded that every full-sized female Bratz doll was “substantially similar” to the drawings and preliminary sculpt that the jury found were created by Bryant while he worked at Mattel. Id. at 11. In explaining its orders, the court referred to the “hundreds of millions of dollars” that MGA had earned from Bratz. Id. at 13. C.

MGA’s Initial Appeal And Application For A Stay On December 11, 2008, MGA noticed an appeal and sought a stay

from the district court pending appeal of the Injunctive Orders, explaining through extensive supporting declarations the catastrophic harm that they would impose, and providing a stipulated briefing schedule and hearing date. When the district court, sua sponte, took the hearing date off calendar without replacing it, MGA filed an emergency stay motion in this Court. Case No. 08-57015, Docket # 6. The district court then restored the stay hearing to its calendar. On January 7, 2009 the district court ordered a limited stay to permit retailers to purchase Bratz through December 31, 2009, and stated that its Injunctive Orders would not become final until after the court decided the parties’ post-trial motions (this Court thereafter dismissed the appeal). Ex. 5 at 1. On February 11, the court heard argument on the post-trial motions and promised a 8

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decision soon. Ex. 38 at 82:22-83:2. But “soon” did not come for over two more months, or nearly five months after the original orders. On April 27, 2009, the court resolved the post-trial motions and officially finalized, with only very minor modifications, the Injunctive Orders. Ex. 6. MGA filed a timely Notice of Appeal from the Injunctive Orders on May 4, 2009, and moved for a stay pending appeal, again supported by substantial evidence, on May 8, 2009. On May 21, 2009, the district court denied the stay and appointed a monitor to facilitate the transfer of Bratz from MGA to Mattel and begin taking Bratz net profits into escrow. Ex. 7 at 7, 9-13. The court ordered MGA to “immediately make available . . . for transfer to Mattel” those MGA “Bratz Assets” – which are defined to include all Bratz-related materials, whether or not covered by the Injunctive Orders – that Mattel needs to begin production of its own Bratz line. Id. at 9-10 n.6, 13 ¶ B.3. ARGUMENT It may be, as the district court said, that “perfect justice is not of this world.” But the imposition of the Injunctive Orders is a gross miscarriage of justice. For conduct that the jury found caused relatively minor harm to Mattel, the district court not only barred MGA from selling any Bratz female fashion dolls and required a massive recall, but barred MGA from ever selling any product named Bratz again and bestowed upon Mattel all of MGA’s Bratz trademarks and their

9

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associated value and goodwill. The district court’s disproportionate orders rest on multiple stark errors of law, any one of which would require reversal. For example, the district court not only disregarded the Seventh Amendment’s mandate that a court respect the jury’s factual findings when fashioning equitable relief, it wrongly chose the overbroad “substantial similarity” test to analyze infringement. The court further erred in giving Mattel MGA’s Bratz trademarks on the legally impermissible theories that a party can own an “idea for a name,” and that a standard form employment contract creates a fiduciary relationship. The underlying verdicts were also tainted by the presence of a juror outspoken in her bias against the ethnicity of MGA’s founder and CEO, yet the district court mistakenly held that the Constitution protects only criminal, and not civil, defendants from racially and ethnically biased jurors. Unless this Court stays these orders pending appeal, however, MGA will not get the benefit of a successful appeal. In the absence of a stay, a successful appeal will be of little value to MGA, for the Injunctive Orders will have destroyed the Bratz brand and irreparably harmed MGA. Under the familiar standards,5 the Injunctive Orders should be stayed pending appeal.

In evaluating a stay pending appeal, this Court considers: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the

5

(footnote continued …)

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THIS COURT IS LIKELY TO OVERTURN THE INJUNCTIVE ORDERS A.

The Injunction Lacks Any Lawful Foundation 1.

The Injunction Violates The Seventh Amendment Because It Conflicts With The Jury’s Verdict And Role

The district court’s injunction violates the Seventh Amendment. Mattel attributed all of MGA’s profits from all dolls and products – $1.4 billion in Mattel’s estimation – to willful copyright infringement based on the final “sculpt” of the female dolls, and claimed the loss of that profit as its harm. By awarding Mattel only $10 million for copyright infringement, the jury flatly rejected Mattel’s theory. The jury’s verdict is irreconcilable with the district court’s independent findings that all the Bratz full-sized female fashion dolls infringe because all use the same final sculpt. That was Mattel’s theory, too, and the jury rejected it. The Seventh Amendment right to a jury trial prohibits a district court from imposing equitable relief based on a factual finding that conflicts with the jury’s verdict. The “Seventh Amendment prohibits re-examination of a jury’s determination of the facts, which includes its assessment of the extent of plaintiff’s

(… footnote continued)

proceeding; and (4) where the public interest lies.” Hilton v. Braunskill, 481 U.S. 770, 776 (1987); Golden Gate Rest. Ass’n v. City and County of San Francisco, 512 F.3d 1112, 1115 (9th Cir. 2008). Moreover, ‘“the required degree of irreparable harm increases as the probability of success [on the merits] decreases.”’ Golden Gate Rest. Ass’n, 512 F.3d at 1116 (citation omitted). Thus, if ‘“the balance of hardships tips sharply in . . . favor”’ of a stay, that relief is warranted if the appeal presents ‘“serious legal questions.”’ Id. (citation omitted). 11

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injury.” Johansen v. Combustion Eng’g, Inc., 170 F.3d 1320, 1328 (11th Cir. 1999) (citing Kennon v. Gilmer, 131 U.S. 22, 29 (1889)); Velez v. Roche, 335 F. Supp. 2d 1022, 1037 n.5 (N.D. Cal. 2004) (same); see Dimick v. Schiedt, 293 U.S. 474, 486 (1935) (litigants “entitled” under Seventh Amendment “to have a jury properly determine the question of liability and the extent of the injury by an assessment of damages”). This Court has reversed judicial conclusions even when they do not conflict with the jury’s explicit holding, but merely ignore a jury finding implicit in the “level of damages it awarded.” Los Angeles Police Protective League v. Gates, 995 F.2d 1469, 1474 (9th Cir. 1993); see Ohio-Sealy Mattress Mfg. Co. v. Sealy, Inc., 585 F.2d 821, 844 (7th Cir. 1978). The district court’s view that the verdict permits “no principled inferences” does not justify denying MGA its constitutional right to a jury trial. The jury’s verdict would have expressly identified whether any later generation dolls infringed if the district court had accepted MGA’s special verdict form. The district court was obliged, under the Seventh Amendment, to structure the trial to ensure that the jury would decide all factual issues equally relevant to both damages and equitable relief, and its failure to do so alone warrants reversal. See Danjaq LLC v. Sony Corp., 263 F.3d 942, 961-62 (9th Cir. 2001) (trial court can “run afoul of the Seventh Amendment” by ordering bifurcation in a way that permits reexamination of facts decided by jury). Even where a case is bifurcated 12

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and tried to two separate juries, “the court must carefully craft the verdict form for the first jury so that the second jury knows what has been decided already.” Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 169 n.13 (2d Cir. 2001); see Newsome v. Up-To-Date Laundry, Inc., 219 F.R.D. 356, 364 (D. Md. 2004). Compliance with that requirement is essential where, as here, the second factfinder is the judge. 2.

The District Court Applied The Wrong Standard For Infringement

The district court’s injunction fails for another independent reason: it applies the wrong legal standard to the analysis of infringement. This error infects the jury’s initial infringement finding as well as the court’s subsequent (and constitutionally impermissible) infringement finding, because both jury and judge applied the “substantial similarity” standard. Exs. 19, 30, 32 at 29-30. As this Court and the Second Circuit have held, the correct standard in cases involving natural forms is whether the accused copy is “virtually identical” to the original, not whether it is “substantially similar.” Most recently, in Satava v. Lowry, 323 F.3d 805, 812-13 (9th Cir. 2003), this Court held that a jellyfish sculpture receives only “thin” protection against “virtually identical” copying, because an artist “may not prevent others from copying elements of expression that nature displays for all observers.” The Ninth Circuit has recognized this principle at least since its decision in Herbert 13

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Rosenthal Jewelry Corp. v. Kalpakian, 446 F.2d 738, 742 (9th Cir. 1971), the “jeweled-bee pin” case. Cf. Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435 (9th Cir. 1994) (applying “virtual identity” standard). The district court rejected the “virtual identity” standard because it found the human form capable of a wider range of expression than jellyfish. Ex. 30 at 2. This analysis conflicts with the Ninth Circuit’s repeated invocation of the thin copyright standard when confronted with natural forms, e.g., Aliotti v. R. Dakin & Co., 831 F.2d 898, 901-02 (9th Cir.1987), and with the other cases the district court relied upon. For example, in Mattel, Inc. v. Goldberger Doll Mfg. Co., 365 F.3d 133, 135 (2d Cir. 2004), the Second Circuit confronted allegations that a competitor had copied the “central expressive features of Barbie’s face.” The court held that the scope of protection accorded the human form – specifically as expressed in dolls – was “of course, quite limited” and extended only to “Mattel’s realization” of those particular features. Id. at 135. The court explained that because “[o]ne artist’s version of a doll face with upturned nose, bow lips, and widely spaced eyes will be irresistible to an eight-year-old collector [and] [a]nother artist’s version . . . will be a dud . . . getting the doll’s face and expression exactly right is crucial to success.” Id. at 136 (emphasis added). See also Mattel, Inc. v. Azrak-Hamway Intern., Inc., 724 F.2d 357, 360 (2d Cir. 1983) (protecting “only the particularized expression” of a muscleman body in a fighting pose). 14

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Copyright thus protects only one particular realization of human features, and not another artist’s effort to get his own realization of those features “exactly right.” Applying the substantial similarity rather than the virtual identity test in a context like this gives the copyright holder far too great a power to restrict competition and consumer choice – precisely the concern first recognized more than three decades ago by this Court in Rosenthal. If the district court had applied the correct legal standard, it could not have concluded that every female Bratz doll was virtually identical to Mr. Bryant’s drawings and the draft sculpt. Under the correct standard, the jury likely would not have found any infringement. Without these predicates, there is no basis for the court’s equitable relief. 3.

The District Court Failed To Follow eBay

Finally, the injunction violates the Supreme Court’s holding in eBay that an injunction does not “automatically follow[] a determination that a copyright has been infringed” because infringement alone does not create irreparable harm. eBay Inc. v. MercExch., LLC, 547 U.S. 388, 392-93 (2006). Invoking a pre-eBay rule, the District Court held that past infringement plus a likelihood of future infringement satisfies the irreparable harm requirement. Ex. 1 at 11-12. Whether this rule negates the holding in eBay is an important question this Court should decide. See, e.g., Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, 518 F. Supp. 2d

15

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1197, 1211 n.13 (C.D. Cal. 2007) (“After eBay, Plaintiffs cannot rely on the pure fact of infringement in order to establish irreparable harm.”). B.

The District Court Impermissibly Imposed A Constructive Trust The district court’s errors do not stop with the injunction against

MGA selling any Bratz full-sized female fashion dolls. If anything, the court’s error in giving all of MGA’s Bratz trademarks to Mattel – and thus precluding MGA from selling even non-infringing products under the Bratz name – is even more stark. The trademarks represent all of the goodwill and value that the market associates with the trademark BRATZ after MGA’s investment of hundreds of millions of dollars, and the sale of over 14,000 MGA Bratz products, over nearly nine years. Yet the district court, in one breathtaking order, invoked the legal vehicle of a “constructive trust” to hand these trademarks to Mattel. At the hearing on post-trial motions, the district court admitted that the constructive trust was “something which is bothering the Court.” Ex. 38 at 37:16-38:13. For good reason. No court has afforded such a remedy in comparable circumstances,6 and to do so here violates federal and state law. First, Mattel is not entitled to a constructive trust unless it can point to a “res” that rightfully belongs to Mattel. Communist Party v. 522 Valencia, Inc., 6

The only case cited by the district court for its extraordinary remedy, Haskel Eng’g & Supply Co. v. Hartford Accident & Indem. Co., 78 Cal. App. 3d 371 (1978), was an inapposite “tracing” of property case. 16

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35 Cal. App. 4th 980, 990 (1995). Neither Bryant nor Mattel ever owned the trademarks or rights to the Bratz name. Such rights to a name can be established only through use in commerce, and it is undisputed that MGA is the company that created the BRATZ trademarks. See Brookfield Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1046 (9th Cir. 1999); Conversive, Inc. v. Conversagent, Inc., 433 F. Supp. 2d 1079, 1089-90 (C.D. Cal. 2006). The district court, however, found that because Mr. Bryant had the “idea for the name” Bratz while at Mattel, Mattel owned the name Bratz, which MGA merely enhanced by acquiring trademark rights to it.7 Treating an idea for a name as the “res” – Mattel’s property – to support a constructive trust over the trademarks was erroneous as a matter of law. Under California law, ideas are not protectable property. See Desny v. Wilder, 46 Cal. 2d 715, 732, 733-34 (1956); see also Whitfield v. Lear, 751 F.2d 90, 92 (2d Cir. 1984) (“Under California law … an idea is not recognized as a property right” and cannot support claims “actionable only to vindicate legally protected property interests”). As this Court has held, the creator of an idea may be entitled, through contract, to compensation for conveying the idea; but “the bargain is not for the idea itself, but for the services conveying that idea.” Grosso v. Miramax Film Corp., 383 F.3d 965, 967 (9th Cir. 2004)

7

See Ex. 1 at 7; see also id. at 3, 5-6 & n.2; Ex. 3 ¶ 1; Ex. 6 at 5; Ex. 9 at 3. 17

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(emphasis added)).8 Treating ideas for a name as protectable property would also, in any case, be preempted by the Copyright Act. See Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 849-50 (2d Cir. 1997) (state law cannot expand protection over matters not protected in copyright). Second, even if Mattel had some interest in the name “Bratz,” the BRATZ trademarks are not an “enhancement” of that name in the way that, e.g., appreciation is an enhancement of the value of land. Rather, a trademark is an independent symbol of goodwill, the significance and value of which are created by and are inseparable from the investment and the business – in this case, MGA – associated with the marks. See United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97-98 (1918); Mister Donut of Am., Inc. v. Mr. Donut, Inc., 418 F.2d 838, 842 (9th Cir. 1969); 1 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 2:15 (4th ed. 2008); 3 MCCARTHY § 18:2. As the jury’s verdict reflects, virtually all of the value represented by the trademarks is the product of MGA’s independent efforts and investments over several years, including its development of Bratz products that have nothing to do with Bryant’s drawing or ideas.

8

See also Desny, 46 Cal. 2d at 733-34; Donahue v. Ziv Television Programs, Inc., 245 Cal. App. 2d 593, 609 (1966); Chandler v. Roach, 156 Cal. App. 2d 435, 441 (1957) (contract enforceable only between parties; does not create ownership). 18

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Equity does not entitle Mattel to the benefits of MGA’s independent investments and innovations.9 Finally, there is no basis for the state law claims on which the constructive trust is based. Mattel’s constructive trust claim depends heavily on Bryant’s purported breach of fiduciary duty to Mattel. Yet the district court erred in ruling, before trial and as a matter of law, that Bryant – a low-level, employee fashion designer – owed Mattel a fiduciary duty.10 The court imposed a fiduciary duty merely because the Mattel form contract recited that new employees were accepting a position and obligations of “trust.” See Ex. 9 at 5-6, Ex. 12 at 3-4. This recitation is insufficient, as a matter of law, to impose a fiduciary relationship. As the California Supreme Court has held, “every contract to some extent requires a party to repose trust and confidence

9

See, e.g., 2 DAN B. DOBBS, DOBBS LAW OF REMEDIES § 6.6(3) (2d ed. 1993) (equity does not allow plaintiff to capture “the fruits of the defendant’s own labors or legitimate efforts”); RESTATEMENT (FIRST) OF RESTITUTION § 210 cmt. b (1937) (constructive trust extends to “only a share in such proportion” as the trust property bears to the entire fund of commingled property). The other state law claims (to the extent not preempted by the Copyright Act) could not support a constructive trust as opposed to an ordinary damages remedy, and are in any case preempted by state law. See K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 Cal. App. 4th 939, 954-62 (2009) (state statute preempts common law claims, including breach of confidence claims, “based on the same nucleus of facts” as would support a trade secrets claim).

10

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in the other,” but that alone “does not give rise to a fiduciary duty.” City of Hope Nat’l Med. Ctr. v. Genentech, Inc., 43 Cal. 4th 375, 391 (2008) (emphasis added) (alteration and internal quotation omitted); see id. at 389. Indeed, in City of Hope, the California Supreme Court refused to impose a fiduciary duty as a matter of law even where one party had expressly bargained to develop another party’s particular “secret idea” in return for “royalties.” Id. at 387-92. Bryant merely signed a form employment agreement. Whether Bryant owed a fiduciary duty to Mattel was, at the very least, an issue to be “considered by the trier of fact” (id. at 391), which independently requires vacating the constructive trust. C.

The District Court Based Its Orders On A Jury Verdict Tainted By Ethnic Bias The court’s equitable remedies depend on the jury’s underlying

liability verdict, and yet that verdict is tainted. It is the product of deliberations that included a biased juror.11 The constitutional right to a jury trial is “violated by ‘the bias or prejudice of even a single juror.’” See United States v. Henley, 238 F.3d 1111, 1120 (9th Cir. 2001) (quoting Dyer v. Calderon, 151 F.3d 970, 973 (9th Cir. 1998) (en banc)); see also Dyer, 151 F.3d at 985. Here, the racist comment of Juror No. This Court may address this issue in this appeal, because matters which “provide[] the legal authority to issue an injunction” are “inextricably bound up with the injunctive order.” Self-Realization Fellowship Church v. Ananda Church of Self-Realization, 59 F.3d 902, 905 (9th Cir. 1995). 11

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8, the complaint of Juror No. 6 that Juror No. 8 was not objective or trying to be, and the court’s dismissal of Juror No. 8 from Phase 1(b) as a “cancer,” demonstrate that the Phase 1(a) deliberations were corrupted by the presence of a biased juror. See Henley, 238 F.3d at 1121 (rejecting assertion that people who use racial slurs are not racially biased). The district court’s rationale – that civil litigants have no constitutional protection against biased jurors – is wrong. That ruling conflicts with the plain language of the Seventh Amendment, is unsupported by any decision of this Circuit, and is contrary to decisions in other circuits. McCoy v. Goldston, 652 F.2d 654, 657 (6th Cir. 1981); Thompson v. Altheimer & Gray, 248 F.3d 621, 622 (7th Cir. 2001); Kiernan v. Van Schaik, 347 F.2d 775, 778 (3d Cir. 1965); Haley v. Blue Ridge Transfer Co., 802 F.2d 1532, 1535 n.4 (4th Cir. 1986). The district court compounded the denial of due process by refusing to provide any access to the record of its juror interviews. Contrary to the district court’s view, Federal Rule of Evidence 606(b) does not justify its decision. Rule 606(b) is inapplicable on its face, because Juror No. 6’s spontaneous complaint about Juror No. 8’s bias was not made “[u]pon inquiry into the validity of a verdict or indictment.” Even where Rule 606(b) is implicated, this Court has explained the “powerful case” that Rule 606(b) “is wholly inapplicable to racial bias.” See Henley, 238 F.3d at 1120. The only constitutionally permissible conclusion is that 21

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the deliberations with Juror No. 8 were invalid and the verdict must be vacated. United States v. Gonzalez, 214 F.3d 1109, 1111-12 (9th Cir. 2000). II.

MGA WILL SUFFER IRREPARABLE HARM WITHOUT A STAY If this Court does not immediately stay the Injunctive Orders pending

appeal, MGA will suffer irreparable harm. As set forth in detail on pp. iii – xi, supra, and in the declarations submitted to the district court and attached here as Exhibits 48 to 53, absent a stay, the Injunctive Orders will cause

See, e.g., Ex. 39 at 92:15-21; 93:8-9 (district court acknowledging “arguably irreparable damages” to MGA, including by “compromising” MGA’s “contracts” and “relationships with the people that [MGA] is selling to now.”).

The district court has not limited Mattel’s ability to initiate “legal proceedings anywhere in the world” to assert its newly awarded rights in the Bratz brand –

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further undermining MGA’s business relationships. Ex. 7 at 12 ¶ V.B.1. This is precisely the sort of irreparable harm that justifies a stay.12

12

See, e.g., Multi-Channel TV Cable Co. v. Charlottesville Quality Cable Operating Co., 22 F.3d 546, 552 (4th Cir. 1994) (irreparable harm shown by “possibility of permanent loss of customers to a competitor or the loss of goodwill”); Standard Havens Products Inc. v. Gencor Indus., Inc., 897 F.2d 511, 515 (Fed. Cir. 1990) (granting stay pending appeal where defendant faced “irreparable harm in the form of employee layoffs, immediate insolvency, and, possibly, extinction”); MDY Indus., LLC v. Blizzard Entm’t, Inc., No. CV-06-2555PHX-DGC, 2009 WL 649719, at **2-3 (D. Ariz. Mar. 10, 2009) (granting stay of copyright injunction because, without one, defendants “likely will have lost all of their market share to competitors during the duration of the appeal and will be unable to regain their business”).

13

That qualified statement was made by a Mattel employee who was admittedly “out-thought and out-executed” by MGA (Sealed Ex. 44 at 0561), after failing at Mattel’s stated mission to “KILL BRATZ.” Sealed Ex. 44 at 0564. 23

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Courts routinely grant stays where asset transfers cannot readily be undone.15 III.

A STAY WILL NOT CAUSE IRREPARABLE HARM TO MATTEL Mattel, in contrast, faces no irreparable harm. Unlike many who

complain of infringement and fend off stays, Mattel never sold the original goods. It has no association with Bratz products in the minds of customers or any third parties, and thus faces no irreparable damage to its reputation or market share, or any job losses, from MGA’s continued sale of Bratz.16 Mattel expresses

14

E.g., L. & J.G. Stickley, Inc. v. Canal Dover Furniture Co., Inc., 79 F.3d 258, 262 n.2 (2d Cir. 1996) (“The likelihood of consumer confusion also tends to prove irreparable harm.”). Miller v. LeSea Broad., Inc., 927 F. Supp. 1148, 1152 (E.D. Wis. 1995) (granting stay of injunction requiring sale of television station where it "could be difficult, if not impossible, to undo the sale" after a successful appeal); see, e.g., Simon Prop. Group, Inc. v. Taubman Ctrs., Inc., 262 F. Supp. 2d 794, 798-99 (E.D. Mich. 2003) (granting stay of injunction pending appeal where it was uncertain whether certain steps under injunction “would be reversible or compensable if Defendants prevail on appeal”); Concrete Co. v. MMC Holdings, Inc., 201 F. Supp. 2d 1192, 1195 (M.D. Ala. 2001) (granting stay of injunction removing business partner where “the difficulties involved in reinstating [him] promise to be substantial”). 15

See Wang Labs., Inc.. v. Toshiba Corp., No. 90-1477-A, 1991 WL 333701, at *1 (E.D. Va. Aug. 23, 1991); Advanced Med. Optics, Inc. v. Alcon Labs., Inc., No. Civ. A. 03-1095, 2005 WL 3454283, at *11; GTE Prods., 772 F. Supp. at 920-21.

16

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Ex. 54 at 5. But the district court has now given Mattel far more protection than other litigants have when a stay pending appeal is granted: the court has appointed a monitor who will report monthly on MGA’s operations and inform the district court if MGA is not adequately supporting Bratz or accounting for Bratz profits during the appeal. Ex. 7 at 9-13. Mattel waited eight years without seeking an injunction giving it control of Bratz; given the monitor’s oversight, another few months pending appeal will cause Mattel no irreparable harm. MGA therefore is not seeking a stay of all of the May 21, 2009, Order Appointing MGA Monitor. Rather, MGA is seeking a stay of only the provisions that (i) require MGA to provide the Monitor its assets and trade secrets to assist Mattel in selling a Bratz line (Ex. 7 ¶¶ V.B.1.h; V.B.3); (ii) require the Monitor to collect MGA’s monthly Bratz profits in amounts and by accounting to be determined (Id. ¶¶ V.B.1.g.; V.B.2,) and (iii) otherwise authorize the Monitor and Mattel to implement the Injunctive Orders (Id. ¶¶ V.B.1.e; V.B.1.o). The remaining, exceptionally broad provisions, which, e.g., allow the Monitor full access to all of MGA’s Bratz operations and accounting for all Bratz-related

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revenues and profits, are more than sufficient to protect Mattel’s interests pending appeal.17 IV.

THE PUBLIC INTEREST STRONGLY FAVORS A STAY Giving Bratz to Mattel now creates a substantial risk that the Bratz

brand will be destroyed. It would allow Mattel to “KILL BRATZ” before the appeal is decided. Sealed Exs. 43 at 0546-47; 44 at 0564. That would disserve the public interest, because Bratz is one of the few brands to succeed against Mattel. The repercussions of transferring Bratz to Mattel also extend beyond MGA and Mattel. They implicate relationships with retailers, suppliers, distributors, licensees, and customers worldwide. Sealed Exs. 52; 53 at 0688. Should such a massive disruption ever occur, it should happen only after this Court has reviewed the decision below. CONCLUSION The Court should stay, in their entirety, the Injunctive Orders (entered December 3, 2008) (Exs. 1-4), the Order Lifting Stay On Permanent Injunction (entered April 27, 2009) (Ex. 6), and the Order Denying Ex Parte Application For

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