SANTA ANA, Calif. | A federal court jury rejected Mattel Inc.'s copyright-infringement claims Thursday involving MGA Entertainment's lucrative line of hip, urban Bratz dolls and awarded MGA $88.4 million for misappropriation of its trade secrets by the Barbie-maker.
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 from the smaller company.
MGA attorney Annette Hurst said the judge would have discretion to as much as triple the damages.
The jury found that Mattel does not own the idea for the popular Bratz line or any of the sketches that led to the multiethnic dolls with oversized heads and feet, large eyes and lips, and small bodies.
Further verdicts were expected later in the day as the complex, 28-page decision was read in U.S. District Court.
MGA Chief Executive Officer Isaac Larian openly cried while listening to the verdicts in the lawsuit pitting 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's not all right to 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.
Miss Hurst said the outcome made clear that Bratz belongs to MGA.
"This is the biggest turnaround you could possibly imagine. It's finally owned by MGA, and I hope it can reach the state of primary competitor to Barbie that it previously enjoyed," she said.
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.
Mattel won a minor point when the jury found that MGA and Mr. Larian interfered with Mattel's contractual relations with doll designer Carter Bryant and assigned $10,000 in damages, divided between the company and the CEO. But the damages were because the jury also found that Mattel should have discovered the interference and lost a window to make the claim.
The interference involved a two-week period when Mr. Bryant had given notice about leaving Mattel, but was still working there while helping MGA create the doll. MGA has maintained it did not know Mr. Bryant was still working at Mattel.
In its case, El Segundo, Calif.-based Mattel contended that Mr. 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 Mr. Bryant's involvement.
MGA denied the allegations and countersued, contending the Barbie-maker engaged 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.
By Douglas Holtz-Eakin
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