New Decision in Mattel, MGA Bratz Lawsuit
Bloomberg reported yesterday that, “MGA Entertainment’s $172.5 million victory over Mattel for theft of trade secrets was thrown out by a federal appeals court that said the company’s counterclaims shouldn’t have been allowed to go to the jury. The three-judge panel of the U.S. Court of Appeals in San Francisco upheld the trial judge’s decision to award MGA $137.2 million for having to defend against Mattel’s claims that MGA’s Bratz dolls infringed Mattel’s copyrights.”
Mattel issued the following statement regarding Ninth Circuit Court of Appeals recent decision. “We are pleased that the Ninth Circuit Court of Appeals agreed with Mattel that the verdict and damages on MGA’s toy fair claims must be reversed, and the claims must be dismissed by the District Court,” said the statement from Mattel. “The Ninth Circuit’s decision vacates the district court’s judgment awarding MGA approximately $172 million, consisting primarily of compensatory and punitive damages, for the claims MGA made arising out of conduct at toy fairs. Consistent with the Court’s affirmance of the award of fees and costs against Mattel arising out of the separate copyright claims, Mattel has taken a reserve of $137.8 million with respect to the fourth quarter of 2012 to cover these fees and costs. While MGA can in theory bring a new lawsuit based on its toy fair claims, we are confident that such a lawsuit will be barred by the statute of limitations. We look forward to the speedy and final resolution of this dispute, and will continue to focus our efforts on successfully competing in the marketplace,” Mattel’s statement concluded.
MGA Entertainment also issued a statement. “We prevailed again in the Ninth Circuit Court of Appeals today when the high court found that a federal district court properly awarded MGA more than $137 million in attorney’s fees and costs as a result of defending itself for years against Mattel’s baseless claim to the Bratz dolls,” said Isaac Larian, MGA’s CEO. “We are gratified that the Ninth Circuit affirmed the largest fee and cost award in a copyright infringement case in U.S. history and continued to hold Mattel liable for pursing its frivolous claims against us.”
Larian continued. “The Ninth Circuit also refused Mattel’s request to dismiss with prejudice MGA’s counterclaim against Mattel for its illegal, corporate-sponsored espionage. On a purely technical issue and having nothing to do with the merits of the claims, the Ninth Circuit found that MGA’s trade secrets claim should not have been tried in the same case as Mattel’s copyright claim. The Court’s ruling allows MGA to bring its trade secrets claim in a new action. The first jury awarded MGA $85 million for Mattel’s theft, which was doubled by the court in punitive damages for Mattel’s willful and deliberate campaign of espionage,” Larian said in the statement. “We remain thankful for all of the hard work done by the first jury and Judge Carter and we are confident that when the second jury hears about Mattel’s sneaking into our showrooms and egregious theft of scores of our secrets over the years, they will be even more appalled than the first jury and award MGA even greater damages,” Larian said.
Additionally Larian said that he planned to bring another lawsuit against Mattel alleging that Mattel engaged in trade secret theft. He also pointed out that he would be interested in settling with Mattel and moving forward if Mattel would come forward and work with him on this issue.
Hasbro Announces Prelim 2012 Results
Hasbro announced its preliminary full-year 2012 results. “In 2012, we met many of the objectives we set for Hasbro,” said Brian Goldner, Hasbro’s president and CEO, in a statement. “Based on preliminary results, we returned the U.S. and Canada segment to historical operating profit levels; we grew revenues in the Games category against our 2012 objective of stabilizing revenues; and we grew revenues in our Girls category. We also experienced double-digit growth in our emerging markets business and achieved profitability in most major emerging markets a year ahead of our plan.”
Goldner continued. “We had a number of strong product initiatives, but consumer demand through much of the holiday season was less than anticipated in both the U. S. and certain international markets. As a result, fourth quarter revenues did not meet our expectations. Despite the lower-than-anticipated revenue, we grew our operating profit margin and earnings per share absent fourth quarter restructuring charges and the impact of foreign exchange.”
Based on preliminary full-year results, the Company expects to report earnings per diluted share for 2012, excluding fourth quarter restructuring charges, in the range of $2.73 to $2.75. This includes an approximate $0.10 per diluted share negative impact from foreign exchange in 2012. Absent the unfavorable impact of foreign exchange, earnings per diluted share excluding fourth quarter restructuring charges are expected to be in the range of $2.83 to $2.85.
Final 2012 reported earnings will reflect pre-tax restructuring charges of approximately $37 million recorded in the fourth quarter, or approximately $0.21 per diluted share, associated with the commencement of a cost savings initiative the Company is implementing. Additionally, 2012 earnings include $11.1 million, or $0.06 per diluted share, of previously announced severance costs recorded in the first quarter 2012. Reported 2012 earnings per diluted share are expected to be in the range of $2.52 to $2.54.
The Company’s reported 2011 earnings per diluted share of $2.82, which included the impact of a $20.5 million favorable tax adjustment, or $0.15 per diluted share, and pre-tax expense of $14.4 million, or $0.07 per diluted share, related to costs associated with establishing Hasbro’s Gaming Center of Excellence in Rhode Island. Earnings per diluted share for 2011 excluding these two items were $2.74.
The Company expects to report full-year 2012 revenues of approximately $4.09 billion, compared to $4.29 billion in 2011. Absent a $99 million negative impact from foreign exchange, full year 2012 revenues declined 2 percent. For the fourth quarter 2012, the Company anticipates revenues to be approximately $1.28 billion, including a negative $8 million impact from foreign exchange, compared to $1.33 billion in 2011.
The Company expects to incur charges of approximately $37 million pre-tax in 2012, and an additional estimated $20-$30 million in 2013 associated with these planned actions to reduce ongoing expenses, including an approximate 10 percent reduction in workforce, facility consolidation and process improvements. These actions are anticipated to begin to deliver savings in 2013, with full recognition in 2015 as all aspects of the plan are implemented.
TIA Moves PlayCon Dates
Toy Industry Association (TIA) announced that PlayCon 2013 is now May 6–8. The conference and networking event will take place at The Hyatt Regency Scottsdale Resort and Spa at Gainey Ranch in Scottsdale, Ariz. (PlayCon was initially scheduled for May 15–17.)
For more information about PlayCon, click here.