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VOL. 123 | NO. 169 | Thursday, August 28, 2008

Jury Awards Mattel Inc. $100 Million in Bratz Suit

By GILLIAN FLACCUS | Associated Press Writer

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RIVERSIDE, Calif. (AP) - A federal jury awarded Mattel Inc. $100 million in damages Tuesday after a serious girl fight between the house of Barbie and the maker of her chief rival, the pouty-lipped Bratz dolls.

MGA Entertainment Inc. and its chief executive officer, Isaac Larian, were told to pay a total of $90 million in three causes of action related to Mattel's employment contract with designer Carter Bryant, who developed the Bratz concept.

The jury also ordered MGA, Larian and subsidiary MGA Hong Kong to pay a total of $10 million for copyright infringement.

The amount fell far short of the $1.8 billion that Mattel attorneys had demanded in their closing arguments. Still, the world's largest toy maker hailed the damage award as a victory.

"Mattel has pursued this case first and foremost as a matter of principle," Mattel CEO Robert A. Eckert said. "We have an obligation to defend ourselves against competitors who choose to engage in fraudulent activities against us."

Larian said he would appeal, and MGA attorney Thomas Nolan contended that the three awards related to the contract dispute were duplicative.

U.S. District Judge Stephen Larson must decide if any of the damages are duplicative and will determine a final amount to be paid to Mattel after another hearing. Nolan said he planned to ask Larson to set total damages at no more than $40 million.

The jury did not award any punitive damages and found that neither Larian nor MGA acted willfully when they used Bryant's drawings, which could have increased the damages.

"We are thrilled that this jury sent a strong message that they want these companies to compete in the marketplace and not the courtroom," Nolan said.

Larian said MGA would keep making Bratz dolls.

"It's much more manageable right now, and this jury found there was no guilt," he said.

The same jury that decided the damages phase concluded last month that Bratz designer Carter Bryant came up with the Bratz concept while working at Mattel. Jurors placed the value of Bryant's drawings at $31,500, and awarded that plus interest to Mattel.

In his closing arguments, Mattel attorney John Quinn said MGA owed Mattel at least $1 billion in Bratz profits and interest, while Larian aided in the breach of contract and owed nearly $800 million for his complicity.

MGA attorneys countered that the jury should award Mattel as little as $30 million because the company had built the doll line's value with smart additions, branding and packaging.

The jury awarded damages of $20 million against MGA and $10 million against Larian in each of three causes of action - intentional interference with contractual relations, aiding and abetting breach of fiduciary duty, and aiding and abetting breach of the duty of loyalty.

They also found that MGA owed Mattel $6 million for copyright infringement, while Larian owed $3 million in distributions he'd received from Bratz-related sales and MGA Hong Kong owed $1 million.

The amount of damages turned on the question of whether jurors believed MGA should only be held responsible for profits derived from the first four Bratz dolls - which came from Bryant's drawings - or from all the subsequent Bratz dolls and related products.

The four original dolls made just $4 million in profit their first year and comprised only 2.5 percent of MGA's entire Bratz revenue, said Raoul Kennedy, one of MGA's attorneys.

In the past seven years, MGA has built the popular brand to include more than 40 characters and expanded it with spin-offs such as Bratz Babyz, Bratz Petz, Bratz Boyz and items like helmets, backpacks and bedsheets.

Quinn said MGA owed Mattel for the entire Bratz empire, amounting to at least $1 billion in Bratz profits and interest. Quinn argued that Larian, too, personally gained nearly $800 million in stock value and distributions flowing from the success of the dolls.

After their introduction in 2001, the Bratz line exploded in popularity among "tweens" - girls 7 to 12. The highly stylized fashion dolls have oversized feet, heads and hands, curling lashes and huge, almond-shaped eyes daubed with exotic-colored eyeshadow.

Sales of Barbie - a near rite-of-passage in American girlhood - have slid since Bratz's Yasmin, Cloe, Jade and Sasha came on the scene. Domestic sales of Barbie were down 15 percent in 2007 and 12 percent in the first quarter of 2008, while international sales increased 6 percent in 2008 as opposed to 12 percent the previous year.

Bryant settled with Mattel on the eve of trial. The terms of that settlement have not been made public.

____

On the Net:

MGA Entertainment Inc.: http://www.bratz.com

Mattel Inc.: http://www.barbie.everythinggirl.com

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 74 196 20,828
MORTGAGES 86 244 23,989
FORECLOSURE NOTICES 0 31 3,078
BUILDING PERMITS 138 453 43,046
BANKRUPTCIES 64 174 13,354
BUSINESS LICENSES 21 56 6,678
UTILITY CONNECTIONS 30 82 7,871
MARRIAGE LICENSES 14 59 4,702