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Mattel-MGA Copyright Infringement Lawsuit is No Child’s Play

Posted on October 14th, 2011

A Los Angeles judge has thrown out a business litigation lawsuit filed by toymaker Mattel Inc. against rival MGA. It is the latest development in a complicated business dispute between the two toymakers that California business litigation lawyers have been closely following.

At the heart of all the litigation is MGA’s popular Bratz doll. The lawsuit was filed in September just as Mattel was getting ready for a corporate infringement and trade secrets trial against MGA. The lawsuit had alleged that MGA had transferred millions in funds in order to avoid payouts in litigation over the popular dolls.

The hip-hop inspired doll has quickly provided stiff competition to Mattel’s best-selling Barbie dolls. According to Mattel, the idea for the doll had been conceived while the designer Carter Bryant was working at Mattel. Mattel alleges that MGA and its owner stole the idea for the doll.

Jurors will also be asked to consider a counterclaim by MGA which alleges that Mattel hired corporate spies to get information about the company’s toy launches. For this, MGA is claiming damages of up to $200 million.

Mattel won the first round at a trial where it was awarded $100 million, but that verdict was overturned. The first trial did not include MGA’s claim. In the current trial, jurors are deliberating on claims from both companies.

Mattel is claiming that MGA transferred approximately $450 million in funds, including dividends and assets to MGA owner Isaac Larian and his family members in order to make the company appear bankrupt, and prevent the company’s creditors, including Mattel, from getting their hands on any payout.

All this commercial litigation has already hurt Mattel’s profits. The company posted higher revenues in the first quarter of 2011, but litigation-related expenses cost the company’s first quarter earnings to fall by proximity 30%.