FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MATTEL, INC., a Delaware

corporation; MATTEL DE MEXICO

S.A. DE C.V.,

Plaintiffs-Appellants,

v.

MGA ENTERTAINMENT, INC., a

California corporation; MGA

ENTERTAINMENT (HK) LIMITED, a

Hong Kong Special Administrative

Region business entity; MGAE DE

MEXICO, S.R.L. DE C.V., a Mexico

business entity; ISAAC LARIAN;

CARLOS GUSTAVO MACHADO

GOMEZ; OMNI 808 INVESTORS, LLC;

IGWT 826 INVESTMENTS, LLC,

Defendants-Appellees.

No. 11-56357

D.C. No.

2:04-cv-09049-

DOC-RNB

OPINION

Appeal from the United States District Court

for the Central District of California

David O. Carter, District Judge, Presiding

Argued and Submitted

December 10, 2012—Pasadena, California

Filed January 24, 2013
2 MATTEL V. MGA ENTERTAINMENT

 This summary constitutes no part of the opinion of the court. It has

*

been prepared by court staff for the convenience of the reader.

Before: Alex Kozinski, Chief Judge, Stephen S. Trott

and Kim McLane Wardlaw, Circuit Judges.

Opinion by Chief Judge Kozinski

SUMMARY

*

Copyright

The panel affirmed in part and reversed the district court’s

judgment, after a new jury trial on remand from this court, in

an action under the Copyright Act.

On remand, the jury rejected the claim of Mattel, Inc., that

MGA Entertainment, Inc., infringed Mattel’s copyrights by

producing Bratz dolls. The jury also found that Mattel

misappropriated MGA’s trade secrets, and the district court

awarded attorneys’ fees and costs to MGA under the

Copyright Act.

The panel held that MGA’s counterclaim-in-reply for

misappropriation of trade secrets under California law was

not compulsory and thus was not properly permitted because

it did not rest on the same aggregate core of facts as Mattel’s

trade secret misappropriation counterclaim. The panel

vacated the jury’s verdict on MGA’s claim, as well as related

damages, fees, and costs.
MATTEL V. MGA ENTERTAINMENT 3

The panel held that the district court did not abuse its

discretion in awarding attorneys’ fees under the Copyright Act

to MGA, the prevailing party on the copyright infringement

claim.

COUNSEL

Kathleen M. Sullivan (argued), Quinn Emanuel Urquhart &

Sullivan, LLP, New York, NY; John B. Quinn, Susan R.

Estrich and Michael T. Zeller, Quinn Emanuel Urquhart &

Sullivan, LLP, Los Angeles, CA, for Plaintiffs-Appellants.

Clifford M. Sloan (argued), Allon Kedem and David W.

Foster, Skadden, Arps, Slate, Meagher & Flom LLP,

Washington, D.C.; Thomas J. Nolan, Jason D. Russell and

Hillary A. Hamilton, Skadden, Arps, Slate, Meagher & Flom

LLP, Los Angeles, CA, for Defendants-Appellees.

OPINION

KOZINSKI, Chief Judge:

The last time Mattel and MGA were here, we predicted

that “the entire case will probably need to be retried.” Mattel,

Inc. v. MGA Entm’t, Inc., 616 F.3d 904, 918 (9th Cir. 2010).

On remand, the district court agreed and ordered a new trial.

The jury rejected Mattel’s claim that MGA infringed Mattel’s

copyrights by producing Bratz dolls. While Mattel doesn’t

challenge that result, it does challenge the jury’s verdict that

Mattel misappropriated MGA’s trade secrets, and the district
4 MATTEL V. MGA ENTERTAINMENT

court’s award of attorneys’ fees and costs to MGA under the

Copyright Act. 

I. BACKGROUND

In late 2006, Mattel sought leave to amend its complaint

by adding a claim that MGA had stolen its trade secrets. The

district court allowed Mattel to plead the claim, but only as a

counterclaim. Then, in 2010, after we had decided the first

appeal, MGA filed a new claim against Mattel for

misappropriating its trade secrets. See Cal. Uniform Trade

Secrets Act, Cal. Civ. Code § 3426 et seq. Mattel moved to

dismiss MGA’s claim, arguing that the statute of limitations

had run because the events at issue happened more than three

years earlier. See Cal. Civ. Code § 3426.6. The district court

denied Mattel’s motion, concluding that “Mattel’s trade secret

misappropriation counterclaim and MGA’s trade secret

misappropriation counterclaim-in-reply are logically related.”

Thus, MGA’s counterclaim-in-reply was compulsory and

therefore permissible. 

The jury found for MGA, and awarded more than $80

million in damages. The district court then awarded MGA an

equal amount in exemplary damages under the California

Uniform Trade Secrets Act, which authorizes exemplary

damages if the misappropriation was “willful and malicious.”

Cal. Civ. Code § 3426.3(c). The court also awarded tradesecret attorneys’ fees and costs. In addition, because the jury

found for MGA on Mattel’s copyright claim, the district court

awarded attorneys’ fees and costs to MGA under the

Copyright Act. See 17 U.S.C. § 505.
MATTEL V. MGA ENTERTAINMENT 5

Mattel appeals both the district court’s decision that

MGA’s trade-secret counterclaim was compulsory and the

award of fees under the Copyright Act.

II. ANALYSIS

A. MGA’s trade-secret claim

Counterclaims-in-reply are permitted only if they are

compulsory. See Davis & Cox v. Summa Corp., 751 F.2d

1507, 1525 (9th Cir. 1985), superseded on other grounds by

28 U.S.C. § 1961. To be compulsory, a counterclaim must

“arise[] out of the transaction or occurrence that is the subject

matter of the opposing party’s claim.” Fed R. Civ. P.

13(a)(1)(A). We apply “the logical relationship test for

compulsory counterclaims.” In re Pegasus Gold Corp.,

394 F.3d 1189, 1195–96 (9th Cir. 2005) (internal quotation

marks omitted). “A logical relationship exists when the

counterclaim arises from the same aggregate set of operative

facts as the initial claim, in that the same operative facts serve

as the basis of both claims or the aggregate core of facts upon

which the claim rests activates additional legal rights

otherwise dormant in the defendant.” Id. at 1196 (internal

quotation marks omitted); see also Moore v. N.Y. Cotton

Exch., 270 U.S. 593, 610 (1926).

MGA’s claim did not rest on the same “aggregate core of

facts” as Mattel’s claim. While Mattel asserted many claims

that covered numerous interactions between Mattel and

MGA, Mattel’s specific allegations regarding trade secrets

were that several of their employees, including Gustavo

Machado and Ron Brawer, defected to MGA and disclosed

Mattel’s trade secrets. By contrast, MGA’s trade-secret claim
6 MATTEL V. MGA ENTERTAINMENT

rested on allegations that Mattel’s employees stole MGA

trade secrets by engaging in chicanery (such as masquerading

as buyers) at toy fairs. That both Mattel and MGA claimed

they stole each other’s trade secrets isn’t enough to render

MGA’s counterclaim compulsory. In re Pegasus, 394 F.3d at

1196. What matters is not the legal theory but the facts.

“[E]ven the most liberal construction of [‘transaction’] cannot

operate to make a counterclaim that arises out of an entirely

different or independent transaction or occurrence compulsory

under Rule 13(a).” 6 Charles A. Wright & Arthur R. Miller,

Federal Practice & Procedure § 1410, at 52 (3d ed. 2010).

The district court ruled that it was “more than reasonable

to conclude at least some of the trade secret information

allegedly misappropriated by Machado and Brawer

incorporated trade secret information” that Mattel had stolen

from MGA. But this is not borne out by the pleadings, as the

district court recognized: “MGA does not expressly allege

that Machado and/or Brawer brought market intelligence

group information to MGA from Mattel.” Nor would it

matter if they had. That the same information may have

shuttled back and forth between Mattel and MGA isn’t a

sufficient nexus to support a compulsory counterclaim. 

Because MGA’s trade-secret claim should not have

reached this jury, we vacate the verdict along with the related

damages, fees and costs. See Cal. Civ. Code

§§ 3426.3(c), 3426.4. On remand, the district court shall

dismiss MGA’s trade-secret claim without prejudice. 
MATTEL V. MGA ENTERTAINMENT 7

B. Copyright Attorneys’ Fees

Whether or not a prevailing party is entitled to attorneys’

fees under the Copyright Act “is reposed in the sound

discretion of the district courts.” Fantasy v. Fogerty, 94 F.3d

553, 555 (9th Cir. 1996) (Fogerty II); see also 17 U.S.C.

§ 505. The most important factor in determining whether to

award fees under the Copyright Act, is whether an award will

further the purposes of the Act. Fogerty II, 94 F.3d at 558.

The Act’s “ultimate aim is . . . to stimulate artistic creativity

for the general public good.” Twentieth Century Music Corp.

v. Aiken, 422 U.S. 151, 156 (1975). That aim is furthered

when defendants “advance a variety of meritorious copyright

defenses.” Fogerty v. Fantasy, 510 U.S. 517, 527 (1994)

(Fogerty I).

Here, the district court explained, “MGA [has] secured the

public’s interest in a robust market for trendy fashion dolls

populated bymultiple toy companies.” MGA’s “contribution

to the state of the law in the field of copyright in a case of this

magnitude and notoriety” was important because MGA’s

“failure to vigorously defend against Mattel’s claims could

have ushered in a new era of copyright litigation aimed not at

promoting expression but at stifling the ‘competition’ upon

which America thrives.” The district court did not abuse its

discretion in awarding MGA fees for fighting against Mattel’s

claim “that was stunning in scope and unreasonable in the

relief it requested.”

Mattel argues that, because its claim was objectively

reasonable, MGA is not entitled to fees. This argument seeks

to resurrect the long-rejected requirements of frivolousness

and bad faith. See Apple Computer, Inc. v. Microsoft Corp.,
8 MATTEL V. MGA ENTERTAINMENT

35 F.3d 1435, 1448 (9th Cir. 1994). At one point, a copyright

defendant had to show that the plaintiff’s claim was frivolous

or made in bad faith in order to be entitled to fees; but no

longer. Id. Even assuming Mattel’s claim was objectively

reasonable, the district court didn’t abuse its discretion in

awarding MGA fees.

Mattel also maintains that it should have been provided

with unredacted copies of MGA’s legal invoices. But the sort

of information Mattel seeks is attorney work product. See

MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 505 (9th Cir.

1986). Protecting MGA’s work product was particularly

important here, because MGA was still engaged in litigation

with Mattel. In any event, the district judge reviewed

unredacted invoices in camera, which is a sufficient safeguard

against unreasonable bills.

Mattel’s remaining arguments about apportionment and

calculation are equally unconvincing. The district court

properly exercised its discretion in awarding and calculating

attorneys’ fees and costs. See Entm’t Research Group, Inc. v.

Genesis Creative Group, Inc., 122 F.3d 1211, 1216–17 (9th

Cir. 1997).

III. CONCLUSION

MGA’s claim of trade-secret misappropriation was not

logically related to Mattel’s counterclaim; we therefore

reverse the district court’s holding that MGA’s counterclaimin-reply was compulsory. Because the district court did not

abuse its discretion in awarding fees and costs under the

Copyright Act, we affirm that award.
MATTEL V. MGA ENTERTAINMENT 9

While this may not be the last word on the subject,

perhaps Mattel and MGA can take a lesson from their target

demographic: Play nice.

AFFIRMED IN PART, REVERSED IN PART AND

REMANDED. 

NO COSTS.