In an email Thursday, MGA Entertainment Chief Executive Isaac Larian said his company was willing to settle out of court with rival toymaker Mattel over a long-running legal battle but added that “it takes two to tango.”
A federal appeals court ruled that Mattel Inc. doesn’t have to pay $172 million to MGA Entertainment Inc. to settle a trade-secrets theft claim over the Bratz doll line of products because the claim shouldn’t have been tried by a jury in the first place.
The ruling filed by the U.S. 9th Circuit Court of Appeals is the latest wrinkle in a bitter, protracted dispute between two toy companies: El Segundo, Calif.-based Mattel, the world’s No. 1 toymaker and owner of the Barbie empire, and Van Nuys, Calif.-based MGA, a little-known company until it introduced Bratz in 2001. MGA is also the owner of Little Tikes Co., a toymaker based in Hudson.
Bratz dolls, designed with big heads and pouty looks, quickly became a sensation, appealing to older girls and cutting deeply into sales of Mattel’s Barbie products.
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.
“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.
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 had prepared a $137 million reserve to pay MGA.
But the Bratz brawl isn’t over.
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, Calif., 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, which ruled that MGA deserved “sweat equity” for manufacturing and marketing the dolls; a retrial began in federal court in Santa Ana, Calif., a year later.
During the second trial, an eight-person jury unanimously rejected Mattel’s copyright infringement claims; said Mattel didn’t own the rights to the dolls, early models or sketches; and said MGA didn’t steal trade secrets. Instead, it found that Mattel had stolen trade secrets from MGA.
In Mattel’s only win during the second trial, the jury found that MGA and Larian intentionally interfered with Mattel’s contractual relations with Bryant.
Analysts estimate that the two companies have already spent millions litigating the case, called one of the most expensive copyright infringement disputes ever. Larian said MGA would seek as much as $170 million in a new lawsuit.