By Edvard Pettersson and Heather Burke
Dec. 4 (Bloomberg) -- Mattel Inc., the world’s biggest toymaker, whose products include the Barbie doll, won a court order banning MGA Entertainment Inc. from making and selling Bratz dolls that were found to infringe Mattel copyrights.
U.S. District Judge Stephen Larson in Riverside, California, yesterday granted Mattel’s request to stop MGA from making most of its multiethnic fashion dolls that have contributed to a drop in Barbie sales since being first sold in 2001. A jury earlier found that a Mattel designer came up with the Bratz name and characters and secretly took the idea to MGA.
“Mattel has established its exclusive rights to the Bratz drawings, and the court has found that hundreds of the MGA parties’ products, including all the currently available core female fashion dolls Mattel was able to locate in the marketplace, infringe those rights,” Larson said in his ruling.
The judge also granted Mattel’s request to order MGA not to use the name “Bratz.” El Segundo, California-based Mattel asked for an injunction against MGA after a two-phase trial.
The jury found that ex-Barbie designer Carter Bryant came up with the Bratz idea and made most of the original sketches for it while he was still at Mattel. It awarded Mattel $100 million in damages, 5 percent of the $2 billion the toymaker sought.
MGA, based in Van Nuys, California, said in a statement today that Larson’s injunction was too broad and inconsistent with “the limited jury verdict.” It said it will appeal.
Bratz Sales
Closely held MGA said in court papers that a ban on Bratz sales would be “lethal” for the company. Bratz sales through June were $3.1 billion, according to evidence at the trial. MGA said its Bratz profit was $405.4 million, while Mattel claimed it was as much as $777.9 million.
“We will seek to stay enforcement of this order until our appeal is resolved so we can maintain the over 1,500 people that MGA employs, and continue to give our consumers a product they desire,” MGA Chief Executive Officer Isaac Larian said in the statement.
Larson said his order won’t go into effect until after he has ruled on both sides’ post-trial motions. A hearing on those motions is set for Feb. 11.
“It could be quite a period of time before there is actual enforcement of the injunction,” Lawrence Hadley, a copyright lawyer with Hennigan Bennett & Dorman in Los Angeles, said yesterday in a phone interview.
‘Mattel’s Rights’
MGA may have a heavy burden trying to overturn the infringement ruling on appeal because appellate courts are reluctant to second-guess a jury’s and court’s factual findings, without clear and convincing evidence to the contrary, Hadley said.
“We’re extremely pleased that the court granted Mattel’s motion for an injunction and ordered MGA to stop selling Bratz products that infringe on Mattel’s rights,” Robert A. Eckert, Mattel’s chairman and CEO, said in a statement. The ruling “underscores what Mattel has said all along -- that MGA should not be allowed to profit from its wrongdoing,” he said.
Mattel argued that all Bratz dolls infringe its copyright because they use the same “sculpt” based on Bryant’s drawings. Bryant settled with Mattel weeks before the start of the trial in May. The terms weren’t disclosed.
MGA claimed that the jury found that only the first generation of Bratz dolls, which are no longer in production, infringed Mattel’s copyright. MGA pointed to a note the jury sent to the judge during deliberations asking whether they could find that only the first Bratz dolls infringed Mattel’s copyrights.
Doll Exemptions
In a separate order specifying which dolls MGA won’t be allowed to sell, Larson made exceptions for dolls he identified as “Cloe’s younger sister,” “the younger version of Yasmin,” and “the younger Alicia,” if they are packaged separately from infringing dolls. The judge made further exceptions for dolls he identified only by exhibit number.
Getting Bratz off the shelves might not help Mattel’s Barbie much even though MGA’s doll cut into market share in the past. Sales of both slid this year in the face of new competitors including Jakks Pacific Inc.’s Hannah Montana dolls and Mattel’s own High School Musical products, according to Sean McGowan, a Needham & Co. analyst in New York who rates Mattel a “strong buy.”
“Mattel still has to make dolls kids want,” McGowan said in a phone interview. “It’s not just a matter of getting rid of your competitors.”
Barbie Sales
Mattel rose 67 cents, or 5 percent, to $13.87 at 10:24 a.m. in New York Stock Exchange composite trading. Shares fell 34 percent in the year ending yesterday.
Barbie remained the top girls’ toy this year, the National Retail Federation said Nov. 19. Hannah Montana overtook Bratz as the No. 2 girls’ toy, with Bratz dropping to fourth place, according to the group’s 2008 Top Toys survey conducted by BIGresearch. The survey polled 8,758 consumers from Nov. 5 to Nov. 11.
Larian said last month that MGA cut 70 jobs because of “high legal fees” incurred in the suit.
Mattel announced last month it would cut about 1,000 jobs, or 3 percent of its workforce. The toymaker has incurred $44 million in incremental legal costs this year through September, about two-thirds of it related to the MGA case, Mattel spokeswoman Lisa Marie Bongiovanni wrote Nov. 4 in an e-mail.
“Maybe what comes out of this is a more fruitful settlement discussion,” McGowan said. “It might be in both parties’ interest to come to a settlement. Both companies would be incurring substantial legal bills fighting the fight that doesn’t seem to end.”
The case is Bryant v. Mattel, 04-09049, U.S. District Court, Central District of California (Riverside).
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