The big-headed, pouty Bratz dolls, introduced in 2001, quickly became… (Christina House, For The…)
A federal appeals court has ruled that Mattel Inc. doesn't have to pay $172 million to MGA Entertainment Inc. to settle a trade secrets theft claim over Bratz dolls because a key claim should have been dismissed before trial.
The ruling filed Thursday by the U.S. 9th Circuit Court of Appeals is the latest wrinkle in a bitter, protracted dispute between two Southland toy companies: 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 with attitude quickly became a sensation, appealing to older girls and cutting deeply into sales of Barbie.
In a nine-page opinion for the three-judge panel, Chief Judge Alex Kozinski chided the two companies for fighting so fiercely over rights to the billion-dollar doll franchise.
For The Record
Los Angeles Times Sunday, January 27, 2013 Home Edition Main News Part A Page 4 Local Desk 2 inches; 69 words Type of Material: Correction
Bratz verdict: An article in the Jan. 25 Business section about litigation between Mattel Inc. and MGA Entertainment Inc. over rights to the Bratz doll franchise said that a federal appeals court for the second time reversed a verdict that had been in favor of MGA. In fact, a previous overturning involved a verdict that had favored Mattel, not MGA. Also, the latest action was only a partial reversal.
"While this may not be the last word on the subject, perhaps Mattel and MGA can take a lesson from their target demographic: Play nice," Kozinski wrote.
The unanimous decision by the three-judge panel found that MGA's counter-claim accusing Mattel of misappropriating trade secrets was not related to an earlier trade secret allegation by Mattel and, therefore, could not be included in the lawsuit. The panel left open the possibility of a separate action on the claim.
Thursday's ruling leaves MGA with an award of about $137 million, down from the original $310-million award the company received in a 2011 retrial.
Mattel spokesman Alan Hilowitz said Mattel was "pleased" with Thursday's ruling and looked forward to a "speedy and final resolution of this dispute." Hilowitz said the company has a $137-million reserve to pay MGA.
But the Bratz brawl isn't over.
MGA Chief Executive Isaac Larian said that the company "absolutely" plans to bring another suit against Mattel for trade secret theft, although he declined to say when. He said Thursday's ruling, which was the second time a verdict in favor of MGA has been overturned, was based on a "technicality" and had no bearing on the overall merit of the claim.
"We plan to obtain justice for Mattel's decade-long corporate-sponsored espionage," Larian said.
Mattel has long argued that MGA stole the concept for Bratz. It maintains that Bratz creator Carter Bryant, a former Barbie designer, came up with the idea for the dolls in 1999 during his second stint with Mattel 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 in Missouri -- an assertion often attacked by Mattel lawyers, who said Bryant was engaged in a massive cover-up with Larian.
During the original trial, in 2008, a jury in Riverside awarded $100 million in damages to Mattel in the copyright infringement case. MGA was also ordered to turn over the franchise to its rival and stop making and selling Bratz products. That decision was overturned by an appeals court in 2010.
In a retrial, a jury rejected Mattel's copyright infringement claims; found that Mattel didn't own the rights to the dolls, early models or sketches; and decided that MGA didn't steal trade secrets. Instead, it found that Mattel had stolen trade secrets from MGA.
But the jury found that MGA and Larian intentionally interfered with Mattel's contractual relations with Bryant.
Analysts estimate that the two companies already have spent millions on the case, called one of the most expensive copyright infringement disputes. Larian said MGA would seek as much as $170 million in a new lawsuit.
In an email Thursday, Larian said that MGA was willing to settle out of court with Mattel but added that "it takes two to tango."