POSTED: 11:25 p.m. HST, Jan 17, 2011
SANTA ANA, Calif. — Toy giant Mattel Inc. and bitter rival MGA Entertainment Inc. are back in court in their years-long legal battle to determine who owns the right to make and market the popular Bratz dolls.
The archrivals are set to present opening statements Tuesday involving Mattel's copyright infringement allegations, along with MGA's counterclaim of unfair business practices and Mattel's accusation of theft of trade secrets by its competitor.
Two years ago, a federal jury awarded Mattel $100 million and found that Bratz designer Carter Bryant had developed the concept for the dolls while working for Mattel. An appeals court later overturned the verdict, and the case was sent back for a retrial.
This time, jurors will also be asked to determine the scope of an invention agreement signed by Bryant at Mattel before he went to work for MGA. At stake are the rights to the sassy, street-wise dolls line that flew off shelves and shook up the toy world when it was introduced in 2001.
The array of complex legal issues facing jurors is sure to create fireworks during a trial that is critical to Mattel and MGA, said Jack Lerner, a professor at USC Gould School of Law who specializes in intellectual property and technology issues and has closely followed the case.
The run-up to the trial has been nasty: MGA claimed that Mattel sent gumshoes to trade shows where MGA displayed new products, while Mattel alleged MGA routinely poached top staffers and encouraged them to bring along secrets from the Barbie-maker's vaults.
MGA, a much smaller company, has spent more than $150 million on legal fees since Mattel first sued in 2004. MGA also was forced to lay off more than 300 employees while defending the Bratz brand, which debuted to rave reviews. Mattel has not disclosed its legal expenditures.
"This is going to be a knockdown, drag-out fight, and it's going to go on for months," Lerner said. "The jury is going to be given a massive amount of questions to decide, each one of which could cost MGA. And it's higher stakes for MGA because Mattel is so much bigger of a company."
"If Mattel loses, they walk away. If MGA loses, there's all kinds of trouble," he added.
Mattel, which is based in El Segundo, sued MGA and Bryant seven years ago. Bryant settled on the eve of trial for an undisclosed amount, but the toy giant pursued its case against Los Angeles-based MGA.
In 2008, a federal jury in Riverside awarded Mattel $10 million for copyright infringement and up to $90 million for breach of contract after a lengthy trial. That verdict was overturned by the U.S. 9th District Court of Appeal after the panel found the trial judge incorrectly ruled that Mattel automatically owned Bryant's design under the terms of the invention agreement he signed with the company.
This time, U.S. District Judge David Carter in Santa Ana has decided to try the trade secrets and unfair competition claims at the same time as the copyright questions. The issues previously were split into separate trials.
The inclusion of the trade secret and unfair competition issues along with the original copyright infringement claim at the retrial could prove embarrassing and risky for both companies, Lerner said.
"When a jury sits through a four-month trial, the jury makes an overall determination as to who's the good guy and who's the bad guy," he said. "There's plenty of mud that MGA is going to be able to throw around, and there's plenty of mud that Mattel's going to be able to throw around."