May 24, 2024

Jury Sides With Mattel Rival Over Bratz Dolls

SANTA ANA, Calif. (AP) — A federal court jury found Thursday that the toymaker Mattel had misappropriated trade secrets from a smaller rival, MGA Entertainment, related to its line of Bratz dolls and awarded MGA $88.4 million.

In a stunning rejection of Mattel’s long-running claims against MGA, the jury found that MGA had proven that Mattel acted willfully and maliciously in misappropriating trade secrets.

A lawyer for MGA, Annette Hurst, said the judge would have discretion to as much as triple the damages.

The jury found that Mattel did not own the idea for the popular Bratz line or any of the sketches that led to the multi-ethnic dolls with oversized heads and feet, large eyes and lips, and small bodies.

The chief executive of MGA, Isaac Larian, openly cried while listening to the verdicts in the lawsuit pitting the toy giant Mattel against upstart MGA.

Hundreds of millions of dollars in potential damages and the rights to a blockbuster toy were at stake in the case that has dragged on since 2004 and cost both sides millions of dollars in legal fees.

Mr. Larian said during a break that he hoped the verdict would send a message to Mattel that it could not bully small-time entrepreneurs trying to break into the industry.

“I think justice prevailed in the end,” he said. “Hopefully this will be a major lesson for Mattel.”

Despite the verdict, Mr. Larian questioned whether Bratz dolls would be able to make a comeback in the aftermath of the suit.

“Mattel killed the Bratz brand. It is never going to be the same level as it was before,” he said.

Mr. Hurst said the outcome made clear that Bratz belongs to MGA.

The panel found that MGA did not steal any trade secrets. But the panel did not follow instructions to then move on to another section of the verdict form, and instead listed items that were Mattel trade secrets. Judge David O. Carter indicated he would address that later in the session.

In its case, Mattel asserted that the doll designer Carter Bryant developed the dolls while working for Mattel in 1999 and secretly took the idea to MGA, which developed the first-generation fashion dolls while obscuring Bryant’s involvement.

MGA denied the claims and countersued, accusing Mattel of engaging in corporate espionage and unfair business practices when it realized it couldn’t compete against the smaller company’s blockbuster toy.

MGA contended Mattel stole trade secrets, including information about future Bratz products, by sending spies with fake IDs to toy fairs so they could bolster Mattel products aimed at “tween” girls ages 9 to 11.

A jury awarded Mattel $100 million in 2008 and found that Bryant had developed the Bratz concept while with Mattel, but the verdict was overturned last year. In the appellate ruling, the court said some of the trial judge’s decisions didn’t take into account MGA’s sweat equity in developing and expanding the Bratz line from Bryant’s original ideas.

This time, jurors were asked to decide on claims by Mattel and MGA.

Jurors were also asked to consider punitive damages against both MGA and Mattel and decide whether Mattel had proven ownership of dozens of early Bratz-related sketches, drawings and the so-called “sculpts” that represent the first 3-D rendering of the toy.

Jurors also had to decide if Mattel had proven ownership of the idea for the name “Bratz” and the general concept.

For MGA, the panel had to decide whether, in return, Mattel misappropriated MGA’s trade secrets. The smaller company claimed Mattel stole 114 trade secrets from it over a seven-year period.

In the 2008 trial, a different judge relied on the jury’s verdict to establish a trust for the Bratz trademarks and issued an injunction prohibiting MGA from producing or marketing almost every Bratz fashion doll and future dolls that were substantially similar.

The appeals court took exception to elements of those decisions, saying the outcome did not take into account the “value added by MGA’s hard work and creativity” in developing the brand beyond Mr. Bryant’s first sketches and the first-generation Bratz dolls, which debuted in Spain in 2001 to rave reviews.

Other than damages, a key issue in the retrial was how to interpret the language of an invention agreement that Bryant signed with Mattel in 1999.

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