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MGA Wins $88.4 Million Award Against Mattel in Bratz Trial

Bratz Court Verdict
An MGA Entertainment Co.'s 'Bratz Diamondz' doll. Photographer: Daniel Acker/Bloomberg

MGA Entertainment Inc. won an $88.4 million award against Mattel Inc. from a jury that ruled MGA didn’t steal the idea for Bratz dolls from the rival toymaker or infringe its copyright.

The federal court jury in Santa Ana, California, found Mattel, the maker of the Barbie doll, liable for stealing closely held MGA’s trade secrets when its representatives used fake identities to gain access to MGA’s showrooms at toy fairs.

“I think this is really a great victory for all the entrepreneurs around the world, for MGA employees, for my family and more importantly, for all the immigrants who come to this country to pursue the American dream,” Isaac Larian, founder and chief executive officer of MGA, said after the verdict. “It also sends out a message to the multinational companies of the world that they won’t be allowed to bully us.”

Jennifer Keller, a lawyer for Van Nuys, California-based MGA, said the company can seek punitive damages that may triple the award because the jury found Mattel’s conduct was “willful and malicious,” as well as attorney fees.

The jury rejected Mattel’s claim that MGA stole its trade secrets in 2000, when MGA made an agreement with Carter Bryant, the designer who Mattel says worked for it when he came up with the idea for Bratz and made the first sketches. It also rejected claims that the dolls MGA started selling in 2001 violated Mattel’s copyright.

Mattel’s Next Move

Michael T. Zeller, a lawyer for Mattel, said the company will ask the judge to set aside the jurors’ findings and rule in favor of the Mattel claims they rejected.

“There is clear and compelling evidence that overwhelmingly proves that Carter Bryant made these drawings and sketches while he was employed at Mattel,” Zeller said.

The jury awarded Mattel $10,000 in damages on its claims that MGA interfered with the contract of Mattel’s former employee. The jury also found that that Mattel should have known as early as 2002 about the contract interference.

The judge will have to determine whether the damages are barred by the statute of limitations, Thomas McConville, another lawyer for MGA, said after the verdict was read.

A federal appeals court last year overturned a 2008 verdict in Mattel’s favor. A jury in Riverside, California, awarded Mattel $100 million in damages after agreeing that Bryant made most of the initial sketches for the dolls while he worked for El Segundo, California-based Mattel. Mattel had sought as much as $1 billion in damages.

Lost Profit

In the current trial, Mattel claimed lost profit of from $314 million to $544 million.

“We are disappointed by the verdict, but we remain committed to protecting the intellectual property that is at the heart of business success,” Mattel Chief Executive Officer Robert Eckert said in an e-mailed statement. “Mattel’s first priority is, and always has been, to make and sell the best toys in the world.”

The jury calculated a total of $88.5 million on MGA’s trade-secret claims. U.S. District Judge David O. Carter said he may revise that amount because the total, based on 26 instances of trade-secret theft for which the jury awarded $3.4 million each, was $88.4 million.

Carter also said that one of the $3.4 million trade-secret theft findings appeared to be duplicative and that he probably will strike it.

Designer’s Version

Bryant has always maintained he came up with the Bratz idea and made the first drawings in 1998, while he was living in Missouri with his parents between two periods of working for Mattel, MGA’s lawyers told the jurors.

The appeals court, in ordering a second trial, said the lower-court judge erred in ruling that Bryant’s employment agreement entitled Mattel to the designer’s drawings as a matter of law. The appeals court also found that the judge, Stephen Larson, who has since returned to private law practice, was wrong to award Mattel the rights to most of MGA’s Bratz products.

Mattel fell 2.3 percent in the minutes after the first verdict was read. After declining as much as 2.8 percent from its opening price today, shares fell 26 cents, or 1 percent, to $26.67 at 4 p.m. in Nasdaq Stock Market trading.

The case is Bryant v. Mattel, 04-09049, U.S. District Court, Central District of California (Santa Ana).

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