Mattel 2015 Annual Report Download - page 87

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The following table shows the future minimum obligations for purchases of inventory, services, and other as of
December 31, 2015:
Other
Purchase
Obligations
(In thousands)
2016 $ 417,963
2017 11,639
2018 5,691
2019 2,075
2020 1,105
$ 438,473
Insurance
Mattel has a wholly-owned subsidiary, Far West Insurance Company, Ltd. (“Far West”), that was established to insure
Mattel’s workers’ compensation, general, automobile, product liability, and property risks. Far West insures the first $1.0
million per occurrence for workers’ compensation risks, the first $0.5 million for general and automobile liability risks, the first
$2.0 million per occurrence and $2.0 million per year for product liability risks, and up to $1.0 million per occurrence for
property risks. Various insurance companies, that have an “A” or better AM Best rating at the time the policies are purchased,
reinsure Mattel’s risk in excess of the amounts insured by Far West. Mattel’s liability for reported and incurred but not reported
claims at December 31, 2015 and 2014 totaled $13.9 million and $14.2 million, respectively, and is included in other
noncurrent liabilities in the consolidated balance sheets. Loss reserves are accrued based on Mattel’s estimate of the aggregate
liability for claims incurred.
Litigation
Litigation Related to Carter Bryant and MGA Entertainment, Inc.
In April 2004, Mattel filed a lawsuit in Los Angeles County Superior Court against Carter Bryant (“Bryant”), a former
Mattel design employee. The suit alleges that Bryant aided and assisted a Mattel competitor, MGA Entertainment, Inc.
(“MGA”), during the time he was employed by Mattel, in violation of his contractual and other duties to Mattel. In September
2004, Bryant asserted counterclaims against Mattel, including counterclaims in which Bryant sought, as a putative class action
representative, to invalidate Mattel’s Confidential Information and Proprietary Inventions Agreements with its employees.
Bryant also removed Mattel’s suit to the United States District Court for the Central District of California. In December 2004,
MGA intervened as a party-defendant in Mattel’s action against Bryant, asserting that its rights to Bratz properties are at stake
in the litigation.
Separately, in November 2004, Bryant filed an action against Mattel in the United States District Court for the Central
District of California. The action sought a judicial declaration that Bryant’s purported conveyance of rights in Bratz was proper
and that he did not misappropriate Mattel property in creating Bratz.
In April 2005, MGA filed suit against Mattel in the United States District Court for the Central District of California.
MGA’s action alleges claims of trade dress infringement, trade dress dilution, false designation of origin, unfair competition,
and unjust enrichment. The suit alleges, among other things, that certain products, themes, packaging, and/or television
commercials in various Mattel product lines have infringed upon products, themes, packaging, and/or television commercials
for various MGA product lines, including Bratz. The complaint also asserts that various alleged Mattel acts with respect to
unidentified retailers, distributors, and licensees have damaged MGA and that various alleged acts by industry organizations,
purportedly induced by Mattel, have damaged MGA. MGA’s suit alleges that MGA has been damaged in an amount “believed
to reach or exceed tens of millions of dollars” and further seeks punitive damages, disgorgement of Mattel’s profits and
injunctive relief.
In June 2006, the three cases were consolidated in the United States District Court for the Central District of California.
On July 17, 2006, the Court issued an order dismissing all claims that Bryant had asserted against Mattel, including Bryant’s
purported counterclaims to invalidate Mattel’s Confidential Information and Proprietary Inventions Agreements with its
employees, and Bryant’s claims for declaratory relief.