Barbie versus Bratz -- who owns your ideas?

For those of you with young girls, you may be aware of the Barbie vs. Bratz issue. For the rest of us, it may seem like just a war of the dolls. However, it centers on an important concept in innovation and intellectual property: who owns an employee's idea. In this case, Mattel (maker of Barbie) claims that Carter Bryant designed the Bratz dolls while he was an employee of Mattel. Therefore, Mattel says owns the rights to the Bratz doll (which they view as a direct competitor).

Here is the twist: Bryant says he designed the dolls on his own time. Mattel says it doesn't matter since he signed an agreement that gave Mattel the right to anything he designed while employed. A judge and jury agreed with Mattel and ordered the Bratz makers, MGA Entertainment, to pay damages, turn over the Bratz product line Mattel and buy back and destroy all Bratz dolls still on toy stores' shelves.

Now the case is moving up the judicial system. According to the Wall Street Journal, on Wednesday -- just in time for Christmas -- an appeals court has stepped in:

In addition to staying a lower court's order, a panel of the Ninth Circuit Court of Appeals in Pasadena also ordered that the two companies enter mediation.
. . .
The appellate judges on Wednesday questioned whether the trial judge went too far by awarding MGA's Bratz doll franchise to Mattel and wondered why he didn't instead award Mattel a royalty or ownership stake in the company. The judges also questioned whether Mattel's "inventions agreement" at the center of the dispute gave the toy company ownership of all ideas the designer came up with, even when he was not at work.

Sounds like this one may go all the way to the Supreme Court -- and set a major precedent on who owns what ideas.