Mattel Loses Lawsuit With MGA Entertainment Over Bratz Dolls

SANTA ANA, California (Nichola Groom) - Mattel Inc, after waging a seven-year legal war against a tiny California company, swallowed a surprise defeat on Thursday after a U.S. jury decided that MGA Entertainment Inc is the rightful owner of the once-billion dollar line of pouty-lipped Bratz dolls.

The astonishing loss for the world's largest toy maker concluded a case that began in 2004, when MGA's line of dolls was all the rage among teen and preteen girls. Mattel accused Van Nuys, California-based MGA of stealing its designs by hiring away a key employee.

Mattel CEO Robert Eckert sat stone-faced, staring straight ahead as the verdict was read on Thursday in a Santa Ana, California, federal courtroom. He said afterward that he was disappointed by the verdict.

"We remain committed to protecting the intellectual property that is at the heart of business success," Eckert said in an email.

MGA Chief Executive Isaac Larian, meanwhile, said the case has been a prolonged battle for his family.

"It very well shows that in America, even huge corporations are not above the law," Larian told Reuters afterward.

A federal jury in 2008 ordered MGA and Larian to pay Mattel $100 million, but a federal appeals court threw out that ruling last year.

MGA then accused Mattel of gaining entry to toy fairs with false credentials to steal trade secrets and concealed evidence of these activities.

The jury found Mattel misappropriated trade secrets from MGA and awarded MGA $88.5 million in damages. The jury also decided MGA had interfered with Mattel's contract with designer Carter Bryant, but awarded only $10,000 in damages to Mattel.

BMO Capital Markets analyst Gerrick Johnson said the failure to settle will go down as a "tremendously bad decision" by Mattel management.

"It means they wasted $400 million or so of shareholder money to get zero return," Johnson said.

At the height of its popularity, in 2005 and 2006, the urban-chic Bratz dolls -- sporting short skirts and flirty, midriff-baring tops -- ate into Mattel's market share and were viewed as a threat to Mattel's key Barbie franchise.

The craze died down, however. MGA accused Mattel of costing the company hundreds of millions in litigation.

U.S. District Judge David Carter said the trade secrets damages could be lowered to $88.4 million due to a calculation mistake by the jury.

Wells Fargo analyst Tim Conder said he expected Mattel to appeal, but called the likelihood of a material change "doubtful."

Mattel's shares fell as much as 2.8 percent to a low of $26.17 after the verdict was announced, before bouncing back slightly to stand 0.9 percent lower at $26.70. The stock had been roughly flat throughout the morning session.

The case in U.S. District Court, Central District of California is Mattel Inc. v. MGA Entertainment Inc., 04-9049.

(Reporting by Nichola Groom and Dhanya Skariachan; Writing by Dan Levine; Editing by Maureen Bavdek, Gerald E. McCormick and Matthew Lewis)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[lscarf]

11:03 AM on 04/25/2011

The mighty Mattel was my main customer...until they hired my key employees, clandestinely met with my independent contractors and hired them-- setting in motion actions that ruined my small, woman/minority-owned business. Disgraceful corporate behavior. They know that their pockets are much deeper and they take full advantage. I am so glad to see a US jury penalize them for their predatory practices.

[hatetologin]

02:26 AM on 04/25/2011

I have always loved the Bratz dolls. They were very diverse - black, brown, white, etc. I love it! I'm glad MGA won and I hope they find a way to bring back the line and build enthusiasm for the dolls again.

[IM5688]

10:09 PM on 04/23/2011

I wouldn't worry about the influence of a doll on children. How many girls actually tried to be a Barbie when growing up? How many guys actually tried to be a GI Joe? I would worry more about my daughters viewing people like Paris, Lindsay, Miley, and others who set poor examples. I also remember Beatles dolls and Elvis dolls. Did they harm kids too???

[Pks29733steel]

09:30 PM on 04/23/2011

What was Mattel thinking? Ummm....we make dolls, wait they are making one too....wait, they sell outfits for their dolls. They are coping our Barbie... wait, it's not tall enough....still sue...we need the money...

[tanx8]

05:06 AM on 04/24/2011

The issue was the exclusivity contract between Mattel and the employee Bryant. If Bryant had created the concept of Bratz during his employment with Mattel then Mattel will own the intellectual property rights.

[ecurbwl]

09:05 PM on 04/23/2011

Some how,these dolls remind me of Obama. They radiate an "arrogant attitude".

[Aggiemom]

11:36 PM on 04/23/2011

Somehow you remind me of Barbie. Are you blonde?

[houseiowapark]

09:22 PM on 04/22/2011

Barbie rules

[irochfpst]

08:37 PM on 04/22/2011

i'm not here to comment about the dolls appearance on way or another. the point is that mattel was behaving like a bully. this is what the big players do. someone stood up to them and won fairly and squarely. mattel has dominated the market. competition is good for them. let them clean up their act if they want to get their customers back.

[Sharon Welty]

07:57 PM on 04/22/2011

These dolls are so ugly who would allow their children to play with them!!! NASTY !

[dtallwalk]

12:32 AM on 04/24/2011

See people like you are why we need to watch out and not let our kids
Hang out with your kids, being Judgmental is not a skill I will let my kid
Learn from your kid. Funny thing is you do not even know I am doing it.
Keeping my kids away from your kids I mean. Continue living in your
Own world please.

[Jenny-Ann]

07:41 PM on 04/22/2011

All three of my daughters (who are 12, 8 &5) have been and will be allowed to play with Bratz dolls.
I don't know about the rest of you, but I actually parent my own children. I talk to them. I explain things to them. I don't just shove toys at my children and think all is well. If I have a problem with the way a doll is dressed (which I do most often in this case), I do something most parents today find unthinkable. I sit down and talk to my children about how I feel and why I feel the way I do.
If your child's doll (or other toy) is teaching them anything, you have a problem. You see, it's not up to the toy to raise your child/ren. It's up to YOU.
If you really think that your daughter is going to turn into a little hooker because she's allowed to play with a Bratz doll, then you've probably done a crappy job as a parent.

[JRsNana]

11:39 PM on 04/22/2011

Wow - congrats. Hope your rotator cuff heals up well.

[planetjeffy]

07:37 PM on 04/22/2011

wow...lots of doll hostility here
who knew

[sportster777]

04:05 PM on 04/22/2011

matell sell toxic toys from china....

[NJmikeV]

02:14 PM on 04/22/2011

Oh look! Hooker dolls.

How appropriate for children.

[Mary Karius]

12:53 PM on 04/22/2011

Still won't buy Bratz dolls - EVER. That is the LAST image of a girl I want my daughter to embrace.

[turleyguy56]

12:35 PM on 04/22/2011

Bratz dolls were not allowed in my home when my Daughter was of the age for dolls. I really don't think the dolls project the kind of positive image that any decent child should embrace as a role model. Those Bratz dolls just look like the trash you see lurking in clubs in the worst part of any large American city.
Working for a school district has allowed me to see the result of the negative influence these dolls and the culture they represent has had on the kids in our district. Many of them look just like the dolls and are getting the wrong kind of attention from their peers, and are being labled and laughed at by the more responsible students. They are also the ones that seem to be finding themselves regularly being disciplined over attitude and respect issues.

[Sherry Martin]

02:40 PM on 04/22/2011

Seriously, all that caused by dolls? You know this for sure how? You dont think perhaps that parents who are not aware - or uncaring of what their children are doing may be behind disciplinary problems?

So what causes the boys to get in trouble? Spongebob?

In the criminal justice system, a defense of " I played with bratz dolls" is not gonna fly.

I cant believe someone who works for a school district totally ignores the other influences in a childs life- like parents, school, peers, and media.

I gotta go rob a liquor store now so I can get a boob job and trashy clothes like my bratz doll has.

[JumpySnark]

07:39 PM on 04/22/2011

Spongebob is a notorious jelly junkie, who deals patties for a well-known crab head.

[Jenny-Ann]

07:42 PM on 04/22/2011

Sherry, I think yours is one of the most reasonable comments I'm finding here.

[remogul65]

12:31 PM on 04/22/2011

I felt that the Bratz battle was a blatant attempt to squeeze a company out of an already dominated market. I DID give my girls Bratz when they were kids and they were very happy and well adjusted AND still are. They weren't really too keen on the Barbies because "they didn't look like anyone I know", their words, not mine. When they see their old dolls, they still ask me why did I stop buying them for them...