UPDATE 2-U.S. appeals court sides with Mattel in Bratz fight

Thu Jan 24, 2013 6:31pm EST

By Dan Levine

SAN FRANCISCO Jan 24 (Reuters) - A U.S. appeals court threw out a jury verdict worth more than $80 million against toy giant Mattel Inc on Thursday over trade secret claims relating to Bratz dolls that had been won by MGA Entertainment.

The ruling, from the 9th U.S. Circuit Court of Appeals in San Francisco, also removed an additional $85 million in enhanced damages imposed by a lower court judge against Mattel, which makes Barbie dolls. The 9th Circuit kept in place more than $100 million in attorney's fees won by MGA.

An MGA representative could not immediately be reached for comment.

Mattel spokesman Alan Hilowitz said the company has taken a reserve to cover the attorney's fees, and it is confident that MGA will not be able to reassert its trade secret claims due to the statute of limitations.

The long-running saga over MGA's pouty-lipped, large-headed Bratz dolls began in 2004 as the toys soared in popularity, and Mattel accused Van Nuys, California-based MGA of stealing its designs by hiring one of Mattel's key employees.

In 2008, a federal jury ordered MGA and its chief executive, Isaac Larian, to pay Mattel $100 million. The 9th Circuit threw out that verdict in 2010. At a retrial in 2011, a jury rejected Mattel's copyright claims and found the toy maker was liable on fresh trade secret allegations leveled by MGA.

In its ruling on Thursday, the appeals court found that MGA should not have been allowed to present its trade secret claims against Mattel to the jury, because they were not sufficiently related to Mattel's original allegations.

"That both Mattel and MGA claimed they stole each other's trade secrets isn't enough to render MGA's counterclaim compulsory," the court wrote.

The 9th Circuit concluded: "While this may not be the last word on the subject, perhaps Mattel and MGA can take a lesson from their target demographic: Play nice."

The case in the 9th Circuit is Mattel Inc. vs MGA Entertainment, 11-56357.

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