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Mattel - where security isn't child's play.


IN 1959, THE FIRST BARBIE doll took the toy market by storm. Since then more than 500 million dolls have been sold. That's a lot of Barbies. That's a lot of money. That's a lot of security.

Mattel Inc., the company responsible for designing, developing, and marketing Barbie and a plethora of other popular toys, has put a considerable amount of time and money into safeguarding these and other patents from major toy industry competitors. "Toys are a big business," notes Ed Lavin, director of safety, security, and administrative purchasing for Mattel. "All our jobs here at Mattel depend on us being able to sell toys. If the competition gets in the market ahead of us, it can have a direct effect on our livelihood."

Mattel has not always been a billion-dollar toy company. It began as a garage workshop-based doll furniture manufacturer in 1945. Its original founders, Harold Matson and Elliot Handler, developed the company name by combining letters of their last and first names, respectively. Still headquartered in Hawthorne, CA, Mattel today has over 11,000 employees and has offices and facilities in the United States and 19 foreign countries.

Mattel has expanded not only its toy line and facilities since those early days but also its security responsibilities. "The concerns the company faced in the 1940s are the same ones it faces in 1990 - safeguarding proprietary information and preserving the physical security of the manufacturing and administrative facilities," says Lavin. "Except today, both of these concerns have taken on a worldwide scope."

In an industry where a company's success each year may depend on a single toy, counterfeiting can be a lucrative business. It has become such a big business that Mattel has personnel, such as Louise Love, whose sole responsibility is directing anticounterfeiting efforts. Love, Mattel's primary liaison with its foreign affiliates, locates counterfeiters and copyright infringers and coordinates investigations and legal action.

Lavin and his staff are serious about clamping down on counterfeiters. "We'll do whatever is necessary to keep them out of business, whether it takes countless cease-and-desist letters or court orders for seizure of the product. We may have as many as 100 different investigations going on at any time throughout the world."

The latest wave of counterfeits concerns a doll series created by West German doll designer Annette Himstedt. The dolls, which are made of a durable vinyl, are scaled to almost life-size proportions and are extraordinarily realistic. Mattel owns the sole licensing agreement for distribution in the United States and sells the dolls for about $450 each through doll shops.

According to Lavin and Love, several doll shops are buying the dolls and making molds out of the original dolls. They then produce porcelain counterfeits - porcelains are cheaper and easier to reproduce - and sell them for $100 to $150 each. Lavin explains that with just one fair quality mold, a counterfeiter can make up to 200 dolls.

"We have identified over 50 businesses that are either selling the molds to other small businesses or selling the molds and the porcelain imitations. It's a major problem," grimaces Lavin. "We're estimating that the counterfeiters are probably taking as much as $4 million to $5 million away from us, but we're fighting this operation like crazy."

Zeroing in on these particular counterfeiters is not an easy task because most are small mom-and-pop operations and are widely scattered geographically. "Their philosophy," according to Lavin, "is that Mattel is too big of a company to worry about a small operation in Anywhere, USA. But that's not so. We are going after each one with the help of the media and legal action."

Mattel has already located the most flagrant violator and has initiated legal action. In the meantime, Mattel sends undercover investigators to areas where informants have discovered violations. Some doll shop owners, upset that they may be selling imitations, have agreed to assist Mattel too. In these cases, shop owners approached by counterfeit suppliers order a supply of the dolls, then send the received dolls to Mattel for counterfeit verification. Mattel then uses these doll as evidence in court.

Copyright infringement is another touchy subject with Mattel, especially when the product is composed of legitimate Mattel pieces. The worst problem Mattel had in this arena involved employees in a foreign affiliate. Normally, defective parts or factory seconds are placed in receptacles to be destroyed later. In this case, however, some employees smuggled out the defective parts and assembled the toys themselves in their homes to be sold later on the black market.

"The toys would be legimate Mattel products," Lavin explains, "because they were using real Mattel parts, but they contained imperfections. We put a stop to that situation by applying more stringent requirements for the destruction of imperfect parts."

SAFEGUARDING CORPORATE SECRETS inside Mattel requires other tactics. In 1987, the company underwent major restructuring, reducing its headquarters staff and worldwide manufacturing capacity. Since then Lavin has not had the staff to provide constant, on-site training to address protecting proprietary information. However, he does conduct group meetings where he discusses ways to avoid disclosing even the most harmless company information.

"Most people think an industrial spy is someone in a trench coat, lurking in the shadows. In reality, however, most information is discussed in trade shows, at toy fairs, over cocktails, etc. Employees have to be made aware how innocently they can disclose information without even realizing it," Lavin explains.

Mattel emphasizes to each employee that to keep its commercial advantage over the competition it must keep its trade secrets in-house. To do so, the company adheres to a safeguarding propietary information policy and incorporates agreements such as the employee patent and confidence agreement and a vendor nondisclosure agreement. The basic objective of the policy is to prevent disclosure of any information that could result in harm to the company in the form of loss of market; loss of a specific customer; loss of manufacturing knowledge; increased costs; legal liability; loss of personnel; and loss or impairment of customer, supplier, or public goodwill.

To keep product and toy idea information out of the hands of its competitors, the company insists employees discuss secret information only with those who have a need to know; keep unreleased or prototype products in secure, locked areas; and dispose of confidential trash in proper receptacles.

Employees are required to sign an employee patent and confidence agreement, which must also be signed by a witness. This agreement assigns all proprietary subject matter, such as inventions, improvements, and ideas conceived while under employment at Mattel, to be the exclusive property of the company. In signing the agreement, employees also agree never to compete with the company in the development, marketing, or servicing of any product the company was involved with during their employment or thereafter. Such agreements are regular procedures in today's competitive industries.

Once employees are in the throes of product development, Mattel keeps tabs on all stages through a project development file. In these files each stage of design and development is tracked by the project engineer and responsible department manager. The file tracks development from the original design stage - which includes information such as the product dates on idea disclosures, work orders on sculptures or models, patent search requests, and marketing research reports - to the finishing touches, including dates for marketing.

Even on a slow day, Mattel is host to a number of creative individuals who want to make their ideas become a part of children's lives across the world. To protect them and itself from undue liability, Mattel has vendors and inventors who agree to work with the company sign a confidential nondisclosure agreement. In signing the agreement, the vendor or inventor

* acknowledges that the confidential information relating to the company's products, business practices, or financial information is a trade secret of Mattel,

* agrees not to use the information for any other purpose during a 10-year term beginning on signing the agreement,

* agrees not to reveal the information to a third party without specific approval from Mattel, and

* agrees to disclose information to his or her employees on a need-to-know basis only.

PROTECTING PROPRIETARY INFORMATION isn't limited to securing what Barbie will wear next year or the next breakthrough in the See 'N Say toy line. Protecting proprietary information also encompasses protecting the carriers of the company's secrets - its personnel.

"There's nothing as emotionally disturbing as terrorism," comments Lavin. "And because we sell toys all over the world, there's always the possibility of getting under someone's skin and being perceived as a symbol of American imperialism, corrupting children abroad."

Lavin adds that there's also the danger of simply being at the wrong place at the wrong time. "Who knows?" sighs Lavin. "One of our executives could be traveling in an area where a terrorist group may be out to get the president of, say, Chase Manhattan Bank. That president may not show up at a scheduled restaurant but our executive does and gets kidnapped instead. We can't just go around with the assumption that because we're a toy company nothing bad can happen to us."

To safeguard its employees, Mattel has produced a handbook filled with guidelines it encourages its employees to follow in the event of foreign travel. The thrust of the handbook is to prevent any would-be terrorist or kidnapper from gaining enough information on employee movements to surprise and overcome an employee.

This Executive Protection Handbook makes the executive more aware of the threat of criminals both at home and abroad and offers precautions for security. The handbook also provides helpful information on bomb threats, letter and parcel bombs, vehicle security, and hostage behavior in case of kidnapping.

The handbook and Mattel's procedures have been well used to date, especially at facilities located in countries that have experienced deteriorating political conditions, such as China and several South American countries. "We have sales representatives who travel to Bogata and San Salvador and other personnel who go to China quite frequently," explains Lavin. "They call us a day or so ahead of departure to get briefed on the situation at hand. This past June during the Tiananmen Square crisis, they were in touch with us daily."

The possibility of managing natural crises has not escaped the security department at Mattel. It has developed a crisis management plan to minimize the effects of personnel injuries due to natural disasters such as fires, earthquakes, and environment pollution.

SAFEGUARDING INFORMATION, personnel, and products also demands a certain use of state-of-the-art equipment. Over the past few years, Mattel has increasingly turned toward technology as a strong helpmate in security.

In 1985 it installed a security and safety alarm monitoring central station, which is housed in the headquarters in Hawthorne. The system, which is connected to the company's affiliates throughout the world, monitors facilities for fire detection, chemical spills, intrusion detection, and other hazards.

If such an incident occurs, the alarms at the local facility's station will alert personnel there first, then the central station in Hawthorne. If the local station does not respond to the alarm within a specific period, the security staff at the command center communicates proper safety procedures to the facility. If the facility still does not respond, the command station alerts the facility's local law enforcement agency or fire department.

Besides the high-tech communications system, Mattel also relies on closed-circuit television (CCTV) systems to assist its security officers in patrolling the 500,000-sq.-ft. headquarters facility. This system is also tied into the central station.

"We can have about 55 cameras operating at one time," explains Leo Myers, Mattel's safety and security systems engineer. "These cameras are viewing our perimeter, our company store, our lobbies, hazardous materials room, and exits. We also prepare temporary CCTV installations in potential trouble areas for limited periods. For example, many times it is necessary to exhibit prototype toys and their displays for sales representatives and customers. It is less time-consuming to install a camera in a room where the prototype is displayed for the entire exhibition period, whether it be a day or a week, than to have to dismantle the display and secure it in a locked area on a daily basis."

Mattel rarely uses hidden cameras because the company believes in the deterrent effect a camera has on its employees. Myers explains: "In our manufacturing, administrative, and distribution facilities, we have a specific philosophy - cameras keep honest people honest."

Besides cameras watching the comings and goings of employees, Mattel uses a card system to control who gets access to specific departments in the headquarters facility. Access to departments containing highly market-sensitive or classified information, such as the payroll, design and development, and mail room, along with the laboratory, requires specific authorization. In all, says Lavin, the company has approximately 21 levels of access authorization.

Mattel is now coordinating the move to its new corporate headquarters building in El Segundo, CA, just a short drive from its present site. "From a security point of view," says Lavin, "we applaud the move because the present facility was built to accommodate large-scale manufacturing and shipping of materials, not to house and safeguard corporate information. With the new building we'll be in a better position to control all the areas."

Lavin notes that security is being included from the ground up, as the department offers input on security and safety equipment and access control considerations. "I've noticed a definite increase in the interest concerning security by top management. But the resources available to us will never be as much as I would like - everyone else has the same problem. It forces you to become more creative."

The expansion of Mattel's manufacturing and distribution facilities into a worldwide network has convinced the toy company that security is not a game but an integral part of its success in the world's toy market.

PHOTO : In the past 30 years, Mattel has invested substantial time and money to protect the Barbie Doll.

About the Author . . . Joan H. Murphy is associate editor at Security Management.
COPYRIGHT 1990 American Society for Industrial Security
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Author:Murphy, Joan H.
Publication:Security Management
Date:Jan 1, 1990
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