Federal judge slashes damages in OMG Girlz lawsuit

A federal judge in Santa Ana on Monday tentatively levied a $17.8 million disgorgement of profits against toymaker MGA Entertainment in a years-long doll copyright dispute but declined to grant $53.6 million in proposed punitive damages.

If the tentative ruling holds, it would be a significant decrease from the complete $71 million award jurors rendered against MGA last year.

During the third trial in the case, jurors found MGA infringed on $17.8 million worth of trade dress counterclaims brought by pop group The OMG Girlz, rapper Clifford "T.I." Harris and his singer wife, Tameka "Tiny" Harris. The jury rendered an additional $53.6 million to compensate the group for alleged years of brand harm and to punish MGA for the alleged infringement of the seven dolls at the heart of the case.

However, U.S. District Judge James V. Selna tentatively found the Harris family, represented by Sheppard Mullin Richter & Hampton LLP partner John R. Keville, did not provide enough clear and convincing evidence to prove MGA acted with willfulness when it manufactured the "L.O.L. Surprise! O.M.G." dolls in question.

According to the Lanham Act, intentional infringement is a crucial factor when considering punitive damages in these cases.

"The Harrises presented evidence through ... an email exchange where MGA employees discuss the lyrics of a song, which they believed included reference to the 'O.M.G. dolls.' ... The email exchange and testimony tend to support a finding that some employees and at least one designer were aware of the OMG Girlz existence in December 2019. However, this evidence largely fails to show that there was a deliberate intent to copy their trade dress upon learning of their identity," Selna wrote.

MGA is led by Umberg/Zipser LLP partner Mark A. Finkelstein. He was joined by other attorneys at the firm, as well as Willenken LLP. Neither of the lead attorneys in the case responded to emails by press deadline on Tuesday.

Additionally, Selna tentatively disagreed with the pop group's argument that bad faith infringement was proved because MGA's target audience overlapped with Black and Hispanic mothers who bought the flashy dolls and said they were misled. Selna also disagreed with the group's argument that MGA's failure to investigate the alleged consumer confusion was enough to show deceitful intent.

Keville had argued this consumer confusion deprived the band of financial opportunities.

"Here, the evidence shows that, at most, MGA and [MGA CEO Isaac Larian] were negligent about investigating an alleged claim of infringement, but not that they acted with reckless indifference or willfulness," Selna wrote.

"Ordinarily, consumer confusion supports a finding of actual diversion of sales because a plaintiff's customers move from the plaintiff to the infringer. However, the OMG Girlz do not make dolls. The closest argument that the Harrises present is that Tameka Harris 'was interested' in making dolls and initially pursued the potential of making dolls before abandoning the project when prototypes didn't turn out the way she liked."

In several post-trial briefs, MGA's counsel argued the OMG Girlz's request for enhanced punitive damages was improper and excessive, while the $17 million profits finding should be lowered to a fixed profits finding of $9 million.

Keville, for the group members, argued the enhancement request was justified under trademark law because it was based on deterrence, an increase of a conservative award and a compensation of intangible harms.

In his tentative analysis, the judge disagreed with MGA's fixed finding argument and found the company did not meet its burden to reduce the attributability of the profits on the basis of comparative analysis.

"Common law misappropriation, even without a companion statutory claim, can support a remedy of disgorgement of profits. ... Here, the court finds that the proper profits calculation is $17.8 million and that the profits are attributable to MGA," Selna wrote.

If the ruling holds, it would be the first win for the music artist counterclaimants in the four-year case. A first trial resulted in a mistrial due to an improper examination of a witness. The second trial resulted in a win for MGA that was reversed after Selna found a new U.S. Supreme Court decision regarding First Amendment defenses to trademark infringement claims warranted a third trial. MGA Entertainment Inc. v. Clifford T.I. Harris et al., 2:20-cv-11548 (C.D. Cal., filed Dec. 22, 2020).