F OR P UB LIC AT ION 

### UN ITED STA TES C OUR T OF AP PE ALS F OR TH E N IN TH C IR C U IT

M AT TEL , I

NC ., a De lawar e c or po ratio n; M A T T EL D E M EX I CO S.A. DE C.V., Plain tif

fs- Ap pe lla nts ,

v. MGA E NTER TAI NMENT , I NC ., a California c orporation; MGA E NT E R TA I NME NT (HK) L I MI TED , a Hong Kong Special Administrative Reg ion business entity ; MGAE D E M EX I CO , S

. R

. L. DE C.V., a Mexico bu sin e ss e nti ty ; I SAA C L AR I AN ; C A RLO S G US TAVO M AC HADO G OM EZ ; O M N I 808 I N V ESTO RS , L L C; I G WT 826 I

NV E S TME NT S , L L C, Defendants-A

ppellees

. No. 11-56357

D.C. No. 2:04-cv-09049- DOC-RNB

OPI NI ON

Appea l from the United States District Court fo r t he Ce ntr a l D istri c t of

Ca lif or nia David O. Car

ter, District Judge, Pre siding Argued and Submitted De c e mbe r 1 0, 20 12 —Pa sa de na , Ca lif or nia Filed January

24, 2013M A T T EL V
. MGA E NTER TAI NMENT

2

T hi s s ummary cons t i t ut es no par t of t he op i ni on of

t he cour t

. I t ha s * b een p repa red b y co urt s t af f f o r t he co nveni ence o f

t he read er. B e fo re : A le x Kozi ns ki, Chi e f Jud g e , St e ph e n S. Tr ott and Ki m Mc L ane War dla

w, Cir c uit Judg e s. Opinion by

Chief J udg e Kozinski

SUMMAR

Y *

Co pyr igh t The pa nel af firmed in part and re verse d the district court’s jud g me nt, a ft e r a ne w jur y tr ia l on re mand fr om thi s cou rt , in an a c tio n und e r t

he Cop y ri g ht A c t.
On re mand, the jury reje cted the c laim of Mattel, I nc., that MGA Enter

tainment, I nc., infring ed Mattel’s co py rig hts by producingBr atz dolls . The jury also found that Mattel misa p p r o p r iate d

M G A ’ s tr a d e s e c r e ts , an d th e d is tr ic t c ourt awa rded attorney s’ fe es and co s t s to MGA under the Cop y ri g ht A c t. The pan el held that MGA’s c ounterc laim-in-re ply for misap p ropriation of tra de sec rets under California lawwas no t c omp uls or

y and thu s w a s n ot p ro pe rl y

pe rm itt e d b e c a

us e it did not rest on the same ag g reg ate c ore of fa cts as Mattel’s trade secr et misappropriation counterc l aim. The pa nel vacated the jury ’s verdic t on MG A’s cla im, as well as re lated dama g e s, fe e s, and

c os ts.M A T T EL V
. MGA E NTER TAI NMENT 3

Th e pa ne l he ld t hat th e dis tr ic t c ourt

did no t a bu se its discretion in awa

rding attorney s’ fe e s u

n d e r th e Co py rig ht Act to MGA , t he pre vailing pa rty on the copy

rig ht infring ement c la im.

CO UN SEL
Kathl e e n M . Su lli va

n ( argue d) , Q uinn E manu e l U rq uh art & Sul li van , L L P, N e w Y or k, NY ; John

B . Q uinn, Sus an R. Es tr ic h a nd Mic ha e l T . Z e lle r, Qu inn Em anu e l U rq

uh art & Sul liv an, L L P, L os An g e le s, CA , f or Pla int if fs -A pp e lla nts

. Cl if f ord M. Sl o an( ar g u e d ) , A ll o nK e d e m a n d D a v id W. F os te r, Ska dd e n, Ar

ps , Sl a te , M e a g he r & Flo m L L P, Washington, D.C.; Thomas J

. No l an, Jason D. Russell and Hillary A. Hamilton, Skadden, Arps, Slate, Meag her & Flom L L P, L os An g e le s, CA , f

or De fe nd ants -A

pp e lle e s.

OP IN ION
KOZ I NSKI , Chief J udg e: The last ti m e Mattel and MGA wer e her e, we predic ted that “the entire case will probably need to be retrie d.” Ma tte l, Inc. v. MGA Entm’ t, Inc. , 616 F.3d 904, 918 (9th Cir. 2010). On re mand , the dis tr ic t c ourt a g re e d and or de re d a ne w tri a l. The jury reje cted Mattel’s claim that MGA infr inge d Mattel’s copy rig hts by prod u ci ng Br atz dolls . Whil e Mattel doe sn’t challeng e that re sult, it does challeng e the jury ’s ver dict that Mattel misappropriate d MGA’s trade secrets, and the districtM A T T EL V
. MGA E NTER TAI NMENT

4
court’s a war d of attorney s’ fees and costs to MGA under the Copy rig ht Act.
I. BACKG ROUND
I n late 2006, Mattel soug ht leave to amend its complaint by adding a cla im that MGA had stolen its trade sec rets. The dis tr ic t c ourt

a llo we d M a tte l to ple a d the c la im, bu t only a s a c ount ercl a im. Th e n, in 2 01 0, a ft e r w e ha d d e c ide d th e fi rs t appea l, MGA filed a ne w claim ag ainst Mattel for misappropriating its trade sec rets. See Cal. Uniform Tra de Se c re ts A c t, C a l. C iv. Cod e § 34 26 e t se q. Matte l mo ve d to dismiss MGA’s c laim, arguing that the statute of limitations had run be cause the eve nts at issue happene d more than thre e y ear s ear lier. See Cal. Civ. C ode § 3426.6. The district court denied Mattel’ s mo ti o n , c o n c ludingthat “Mattel’s tra de sec ret misappropriation counte rcla im and MGA’s trade sec ret misa p p r o p r ia ti o n c o u nterc laim-in-re ply

are logic ally

related.” Thus, MGA’s c ounterc laim-in-re ply was c ompulsory

and there fore permissible. The jury found for

MGA, an d aw arded more than $80 milli on in damag es. The dist rict court then awa rded MGAan e qu a l amou

nt i n e xemp lary

dama g e s und e r t

he Ca lifo rnia Uniform Tra de Secr ets Act, wh i ch author izes ex emplary damag es i f t he mi sappropr iation was “willful and malicious.” Cal. Ci v
. Co d e § 3 4 2 6

. 3 ( c )

. T h e c o u rt a ls o aw ar d e d tr a desecr et attorne y s’ fe es and costs. I n addition, beca use the jury found for MGA on Mattel’s c opy

rig ht claim, the district court aw ar d e d a tt o r

n e y s ’ f e e s an d c o s ts to M G A u n der the Copy rig ht Act. See 17 U.S.C. § 505.M A T T EL V
. MGA E NTER TAI NMENT 5

Mattel appe als both the district court’s de cision that MGA’s tra de-se cre t counterc laim was compuls o ry and the awa rd of fe e s und e r t

he Cop y ri g ht A c t.
II. AN AL YSI S
A. M G A’ s t r ade -s e c r e t c lai m Counterclaims-in-r eply

are permitted only

if t hey are comp u l s ory
. See D avis & Cox v. Summa Corp. , 751 F.2d 1507, 1525 (9th Cir. 1985), supersede d on other grounds by 28 U. S

. C

. § 1 9 6 1

. T o b e c o mp u l s o r y , a c o u n t e r c l a i m m us t “ar ise[] out of the transa ction or occur renc e that is the subject mat ter of the op po sin g pa

rt y ’s c la im. ” F e d R. Civ . P. 13(a) (1)( A). We apply “t h e log ical re lationship test for compulsory

counter claim s
. ” In re Pe gasus Gold Corp. , 394 F.3d 1189, 1195–96 ( 9th Cir. 2005) (interna l quotation marks omitted). “Alogic al re lati o n s h i p exis ts when the counter claim ar ises from the same ag g reg ate set of oper ative fac ts as the initial claim, i n that the same ope rative f acts ser ve as the basis of both claims or the a g g reg ate c ore of fac ts upon wh ic h th e c laim res ts a c tiv a te s a dd iti on a l le g a l r ig hts otherwise dor

mant in the defe ndant.” I d. at 1196 (interna l qu otatio n ma

rk s o mit te d) ; se e als o M oo re v. N.Y

. Cotton Exc h. , 270 U.S. 593, 610 (1926).
MGA’s c laim did not rest on the s ame “ ag g reg ate c ore of fa c ts” a s Matte l’ s c la im. Whil e Matte l a sse rt e d ma ny c la ims that cover ed numer o u s interac tions between Mattel and MGA, Matte l’ s sp e c if

ic a lle g a tio ns re g ard ingtr a de se c re ts wer e that seve ral of the ir employ ees, inc luding Gustavo Mac h ad o and Ron Br awe r, def ecte d to MGA and disclosed Matte l’ s tr a de se c re ts. B y c on tr a st, MG A’ s tr a de -s e c re t c la imM A T T EL V
. MGA E NTER TAI NMENT

6 rested on a lleg ations that Mattel’s employ ees stole MGA trade secr ets by eng ag ing in c hicane ry (such a s masquera ding as buy er s ) at t oy

fairs. Tha

t both Mattel and MGA cla imed they stole each o ther’s tra de sec rets isn’t enoug h to rende r MGA’s c ounterc laim compulsory

. In re Pe gasus , 394 F.3d at 1196. What m at t er s is not the leg al theory but the fac ts

. “[E] ven the most liberal c onstruction o f [‘ tr a n s action’] cannot op e rate to m a ke a

c ounte rc la im that ari se s o ut o f a n e nti re ly di ff er en to r i n d ep en d en tt ra nsaction or oc curr ence compulsory under Rule 13( a).” 6 Charles A. Wright & A rthur R. Miller, Fe de ra l P ra c tic e & Pr oc e du re § 1410, at 52 (3d e d. 2010).
Th e dis tr ic t c ourt

ru le d th a t it

wa s “mo re tha

n r e a so na ble to conclude a t

l e as t s o m e of the trade secr et information alleg edly misappropriate d by

Macha do and B raw er incorpora ted trade secr et information” that Mattel had stolen from MGA. But this is not bor ne out by the pleading s, as the d i s t ri ct co u rt re co gn i z ed : “M GA d o e s n o tex p re s s l y al l ege th a t M a c h a d o an d

/o r B r aw e r b r o u g h t m ar

k e t i n te ll ig ence g ro up inf or matio n to MG A f

ro m M attel. ” No r w ou ld i t matter i f t hey

had. That the same infor mation may

have shutt le d b a c k a

nd fo rt h b etw een Matte l and

MG A i sn ’t

a sufficie nt nexus to support a compulsory counter claim.
Be cause MGA’s tra de-s ecret cla im should not have rea ched this jury , we va cate the ver dict along with the re lated d a ma g e s , f

e e s an d c osts. See C al

. Civ. Code §§ 34 26

. 3 ( c ) , 3 4 2 6

. 4

. O nr e m an d , t h e d i s t r i c tc o u rt s h a ll dismiss MGA’s tra de-se cre t claim without prejudice.M A T T EL V
. MGA E NTER TAI NMENT 7

B. Copyright Attorneys’ F ees Whe the r or no t a pre va ili ng pa rt y is e nti tle d to a tto rn e y s’ fee s under the Copy

rig ht Act “is re po s ed i n the sound discretion of the district courts.” Fa nta sy v. Fo ge rty , 94 F.3d 553, 555 (9th Cir. 1996) ( Fogerty I I ); s e e als o 17 U. S.C. § 5 05 . The mos t impo rt ant fa c tor in d e te rm ini ngwh e the r t o awa rd fe e s und e r t

he Cop y ri g ht A c t, is wh e the r an awa rd wi ll f u rth e r th e p u r

p o s e s o f th e Act. F

o gerty II , 94 F.3d at 558. Th e Ac t’ s “ ult imate a im i s
. . . to sti mul a te art ist ic c re a tiv ity for the g ener al public g ood.” Twentieth Century M usic Corp. v. Aiken , 422 U.S. 151, 156 (1975). That aim is furthere d when de fenda

nts “adva nce a var iety

of meritorious copy

rig ht d e f e n s e s
. ” Fo gertyv. Fa nta sy , 510 U.S. 517, 527 (1994) ( Fogerty I ).
Her e, the district cour

t expl ained , “ M G A

[h a s ] sec ured the pu b l i c ’ s i n t e r e s t i n a r o b u s t m ar k e t f o r t r e n dy f

a s h i ondo lls populated by multipl e toy companies.” MGA’s “ contribution to t he state of the law i n th e fi e ld o f co py ri g ht in a c a se of thi s mag nitude and notoriety ” was important beca u s e M GA’s

“ fa ilure to v ig or ou sly

de fe nd a g a ins t Mat te l’ s c la ims c ou ld have ushe red in a new era of copy rig ht litigation aimed not at promoting e x pression but at stifling the ‘c ompetition’ upon wh ic h A me ri c a thr ive s. ” Th e dis tr ic t court did no t a bu se its discretion in awa

rding MGA fe es for

fig hting a g ainst Mattel’s claim “that was stunning in scope and unre asonable in the relief it requested.”
Matte l argue s th a t, b e c a us e its cla im w a s o bje c tiv e ly rea sonable, MGA is not entitled to fee s. This argument seeks to r e surr e c t th e lo ng-r e

je c te d r e qu ir e me nts of

fr ivo lou sn e ss and bad f aith. See Apple Computer, Inc. v. Microsoft Corp. ,M A T T EL V
. MGA E NTER TAI NMENT

8 35 F.3d 1435, 1448 ( 9th Cir. 1994). At one point, a copy rig ht defe ndant had to show that the plaintiff’s cla im was frivolous or made in bad fa ith in order to be e ntitled to fees; but no longe r. Id. Ev e n a ssumin g Matte l’ s c la im w a s o bje c tiv e ly re a so na ble , th e dis tr ic t c ourt

did n’ t a bu se it s di scr e tio n in awa rd ingMG A f

e e s. Mattel also m aintains that it should have bee n provided with unreda cted c opies of MGA’s leg al invoices. But the sor t of information Matte l s ee k s is attorney work produc t. See MGIC Inde m. Corp. v. W eisman , 803 F.2d 500, 505 (9th Cir. 19 86 ). Pr ote c tin g MG A’ s w or k p ro du ct was pa

rt ic ula rl y important here , beca

use MGA wa s still eng ag ed in litigation with Mattel. I n any

event, the district judg e re viewed unreda cted invoice s in camer a, which is a sufficie nt safeguard a g a ins t unre a so na

ble bil ls.
Mat t el’s remaining arguments about apportionment and calc ulation are equally

unconvincing

. The district cour t proper ly exercised its discretion in awa rding and ca lculating attorney s’ fe es and c osts. See Entm’t Researc h Group, Inc. v. Gene sis Creative Group, Inc. , 1 22 F .3 d 1 21 1, 12 16 –1 7 (9t h Cir. 1997).
III . C ON CL USI ON
MGA’s c laim of trade -sec ret misappropr iation was not logic ally related to Mattel’s counte rcla im; we there fore re ve rs e the dis tr ic t c ourt ’s ho ldi ng that MG A’ s c ounte rc la imin-reply was c ompulsor y
. Be cause the district court did not abuse its discre tion in awardi n g fee s and costs under the Copy rig ht Act, we a ffirm that a war d.M A T T EL V
. MGA E NTER TAI NMENT 9

Whil e thi s ma

y no t be the la st w or d o n th e su bject, perha ps Mattel and MGA c an take a lesson from their targ et demog raphic : Play

nice.
AF F IRMED IN P ART, REVE RS ED IN P ART AND REMAND ED.
NO CO STS.