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UPDATE 2-Bratz dolls to get reprieve, manufacturer says
(Recasts, adds more details)
By Gina Keating
LOS ANGELES Dec 30 (Reuters) - Bratz dolls and products, which had been ordered off the shelves for infringing on patents held by Barbie maker Mattel Inc, will receive an 11th-hour reprieve, their manufacturer said on Tuesday.
A judge indicated at a hearing that he will modify an injunction to allow stores to sell Bratz products through the end of 2009, MGA Entertainment Inc officials said.
U.S. District Judge Stephen Larson "indicated he will be modifying his Dec. 3 stay ... to allow purchases and sales (of Bratz items)" beyond a previously set deadline of Feb. 11, MGA attorney Tom Nolan said.
MGA had asked Larson to postpone his order barring the company from selling products that infringe on Mattel's MAT.N copyrights until MGA can appeal the ruling to the Ninth U.S. Circuit Court of Appeals.
A Mattel representative had no immediate comment.
MGA told the court retailers were skittish about placing orders for spring and fall of 2009 because of uncertainty about whether the toys would be available, Nolan said.
MGA has invested "tens of millions of dollars" developing spring and fall Bratz lines and is awaiting orders from retailers in January, Nolan said.
"Retailers wanted assurances that if they buy them they can sell them," he said.
It was not immediately clear whether MGA would keep profits from those sales or if they would be placed in an escrow account until the appeals process is completed.
MGA Chief Executive Isaac Larian, who will attend the Hong Kong Toy Fair next week to pitch the new Bratz lines to retailers, described the ruling as "a good day for MGA, its employees and Bratz."
In an email, Larian said the company "will continue to pursue our appeal rights and we are confident that at the end of this bitter litigation, the rights to Bratz will stay with MGA."
MGA had claimed in court documents that it faced imminent insolvency if the injunction was enforced in February, as retailers canceled spring orders for Bratz merchandise.
Larson's sweeping order requires MGA not only to stop making and selling thousands of Bratz products and to destroy the patterns for the items, but to recall unsold merchandise from retailers.
Nolan said Tuesday's ruling helped the company "avoid the catastrophic effects of laying off 1,500 employees" as a result of those potential cancellations.
The judge denied as premature a request by MGA to delay enforcing the injunction until the federal appeals court has ruled.
Larson indicated he will work with the parties to include language in the new order to allay retailers' fears about the ongoing availability of Bratz products, Nolan said.
Larson also set a Jan. 5 hearing to rule on whether he should appoint a receiver to monitor MGA's financial dealings at the request of Mattel.
In a motion filed late on Monday, Mattel accused MGA of failing to make timely financial disclosures, of funneling "millions" of dollars to Larian's family members and of selling Bratz merchandise through a company controlled by Larian.
"At minimum, the receiver should be authorized to investigate and monitor any and all financial and business matters involving Bratz and to report them to the court and to Mattel," Mattel said in court documents.
Larian called the accusations "baseless" and "mud throwing" and said he was prepared to answer them at Monday's hearing.
The case, Carter Bryant v. Mattel, is 04-09049, in U.S. District Court in Riverside, California. (Reporting by Gina Keating; Editing by David Gregorio)
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