MGA Sues Mattel for Trade-Secret Theft, Seeks $1 Billion

MGA Entertainment Inc. sued Mattel Inc. (MAT) for trade-secret theft in California state court, seeking $1 billion in damages after a federal appeals court threw out a $172.5 million verdict over the claims.

“This has been one of the most heavily contested trade secret cases in American legal history,” closely held MGA said in a complaint filed today in Los Angeles County Superior Court. “What began as a copyright ownership dispute in 2004, morphed over the years into massive litigation involving numerous claims between fierce competitors.”

MGA prevailed at a 2011 jury trial on its claims that Mattel employees used fake identities to gain access to MGA’s showrooms at toy fairs to steal proprietary information about its products. The jury awarded $85 million in damages to which U.S. District Judge David Carter in Santa Ana, California, added $85 million in punitive damages and $2.5 million in legal costs.

The trade-secret claims were added in the legal fight between Mattel, the maker of the Barbie doll, and MGA, the maker of the rival Bratz doll. Mattel accused MGA of having stolen the idea of Bratz, claiming the designer originally developed it while working at Mattel before he took it to MGA.

The Santa Ana jury, at what was the second trial over Bratz’s origins, rejected Mattel’s copyright claims.

Legal Expenses

Last year, the U.S. Court of Appeals in San Francisco threw out the trade-secret verdict, saying Carter had wrongly allowed those claims to be added to the case. The appeals court upheld $137.2 million in legal expenses Carter had ordered Mattel to pay to Van Nuys, California-based MGA for having to defend the copyright claims, which the judge had were “was stunning in scope.”

“In January 2013, the United States Court of Appeals agreed with Mattel that the verdict and damages on MGA’s toy fair claims must be vacated,” Alan Hilowitz, a spokesman for El Segundo, California-based Mattel, said today in an e-mailed statement. “We are confident that the same stale claims brought in MGA’s lawsuit today are barred by the statute of limitations, and we look forward to the speedy and final resolution of this dispute.”

The case is MGA Entertainment Inc. v. Mattel Inc., BC532708, California Superior Court, Los Angeles County.

To contact the reporter on this story: Edvard Pettersson in federal court in Los Angeles at epettersson@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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