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Bratz doll maker MGA wins court battle with Mattel

A jury in the federal retrial over who owns the rights to the billion-dollar Bratz franchise finds that Mattel stole trade secrets from MGA and owes the company $88.5 million.

April 22, 2011|By Andrea Chang, Los Angeles Times
  • MGA Chief Executive Isaac Larian, left, celebrates a victory over Mattel Inc. outside federal court in Santa Ana.
MGA Chief Executive Isaac Larian, left, celebrates a victory over Mattel… (Christine Cotter / Associated…)

Score one for the little guy.

In siding with MGA Entertainment Inc. over rival Mattel Inc. in the retrial over who owns the rights to the billion-dollar Bratz doll franchise, a federal jury said the toy giant had not proved its allegations of copyright infringement.

What's more, some jurors said they sympathized with MGA's plight as a small company trying to compete with the industry behemoth.

"I don't think anyone should be able to bully someone and own everything," said juror Nadine Done, 22.

The eight-person jury unanimously rejected Mattel's copyright infringement claims; said Mattel did not own the rights to the dolls, early models or sketches; and said MGA did not steal trade secrets.

Instead, it found that Mattel had stolen trade secrets from MGA and owed MGA $88.5 million. MGA had accused its rival of stealing 114 trade secrets; the jury awarded damages on 26 of them.

In Mattel's only win, the jury found that MGA and its chief executive, Isaac Larian, intentionally interfered with Mattel's contractual relations with Bratz creator Carter Bryant, a former Barbie designer. Mattel was awarded a total of $10,000 on those claims.

The decision came Thursday in federal court in Santa Ana, capping eight days of jury deliberations, nearly three months of testimony and years of corporate bickering. Dozens of spectators packed U.S. District Judge David O. Carter's courtroom for the announcement, including the CEOs of both companies.

The decision was a major turnabout from the first trial in 2008, when a jury in Riverside awarded $100 million in damages to Mattel in the copyright infringement case; MGA was ordered to turn over the franchise to Mattel and stop making and selling Bratz products.

As the 28-page, 23-question verdict form was read, Larian's family members, including his wife, daughter and two sons, embraced one another and let out sighs of relief. On Mattel's side, lawyers seated in the audience looked shocked, and CEO Bob Eckert leaned back in his chair and rubbed his forehead with his hand.

During a court recess in the middle of the three-hour reading of the verdict, Larian said he was deeply moved and felt "vindicated." The Iranian immigrant openly wept as the decision was read. "The American dream lives," he said. "This is a victory for all entrepreneurs, immigrants who came here."

Annette Hurst, a lawyer for MGA, said there was "no longer any doubt whatsoever about MGA's ownership of Bratz."

"We came a long way," she said.

In a statement, Eckert said Mattel was "disappointed by the verdict, but we remain committed to protecting the intellectual property that is at the heart of business success."

Mattel stock dropped slightly Thursday. It was down less than 1% to $26.67.

Both sides are set to be back in court late next month. MGA's lawyers said they would ask for punitive damages of up to two times the amount of the $88.5-million award as well as attorneys' fees, which MGA lawyer Jennifer Keller said were "extremely high."

Mattel lawyers said they planned to file motions asking Carter to set aside the verdict and declare a new trial; they also said they would dispute the trade secret damages. "This is not the final word in this case," Mattel lawyer Susan Estrich said.

The case pitted two Southland toy companies against each other: El Segundo-based Mattel, the world's No. 1 toy maker and owner of the Barbie empire, and Van Nuys-based MGA, a little-known company until it introduced Bratz in 2001. The big-headed, pouty dolls became a sensation, appealing to older girls and deeply cutting into sales of Barbie.

Mattel has long argued that MGA stole the concept for Bratz. It maintains that Bryant came up with the idea for the dolls in 1999 during his second stint with the company and violated the terms of his "inventions agreement" by taking the concept to MGA, which went on to produce and market the franchise.

Bryant testified that he conceived of Bratz in 1998 when he was on a break from Mattel and living with his parents in Missouri — an assertion often attacked in court by Mattel lawyers, who said Bryant was engaged in a massive cover-up with Larian.

The 2008 jury decision was overturned last year by an appeals court, which ruled that MGA deserved "sweat equity" for manufacturing and marketing the dolls. The appeals court said Mattel couldn't claim a monopoly over dolls with a bratty attitude. The trial also was moved to the Orange County federal court.

This time around, jurors heard not only the copyright claims but also accusations from each company that the other side stole trade secrets. Among its claims, MGA accused Mattel of sending employees into its showrooms at industry trade shows to spy on its products. It also said Mattel distributed an internal "how to steal" manual.

Mattel is expected to appeal the verdict if a new trial isn't declared, but toy analysts said doing so could hurt the company's reputation and urged Mattel to walk away.

"If they decide to appeal, I think their stock goes down. At this point everyone wants to move on," said Gerrick Johnson of BMO Capital Markets. "The irony of the whole thing is Mattel brought this case seven years ago, spent about $400 million on it and what did they get in return? The right to pay Isaac Larian $89 million. That's pretty amazing."

Now that a verdict has been reached, the question remains over how viable the Bratz franchise is. Many worry that the brand may be irreparably damaged by years of litigation. On top of that, the fashion doll category has grown more competitive in the last decade, making a total comeback of Bratz unlikely.

Not surprisingly, the two sides blamed each other for Bratz's dwindling value.

"Larian has so lost his focus on his business — he's allowed this property to wither on the vine," Estrich said.

"Mattel killed the Bratz brand," Larian shot back. "It will never be the same level it was before."

andrea.chang@latimes.com

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