December 4, 2008 / 7:27 AM / 9 years ago

UPDATE 2-Mattel wins court ban of MGA's Bratz dolls

(Adds MGA comment, analyst, share price, bylines)

By Gina Keating and Aarthi Sivaraman

LOS ANGELES/NEW YORK, Dec 4 (Reuters) - A California federal judge ordered MGA Entertainment Inc to stop selling its popular Bratz dolls and banned it from using the toy’s name, finding that hundreds of Bratz products infringe copyrights owned by rival toymaker Mattel Inc MAT.N.

U.S. District Judge Stephen Larson also ordered MGA to recall all Bratz dolls from retailers and to destroy “specialized plates, molds and matrices” used to make the dolls, under the terms of a permanent injunction issued late on Wednesday.

The ruling -- which was stayed until at least early next year -- handed the biggest victory yet to Mattel in its more than four-year legal fight over the Bratz dolls. Mattel shares rose 6.7 percent.

“This is a large win for Mattel, if upheld, as it effectively removes Bratz from the competitive landscape,” Wachovia Capital Markets analyst Tim Conder wrote in a note.

“This is obviously much more important and critical than any one-time monetary damages,” he said.

The ruling appears to allow MGA and retailers to sell the Bratz dolls through the holiday shopping season, when toy sellers typically ring up a significant portion of annual sales.

But Larson rejected the idea of allowing MGA to continue to make the pouty-lipped, urban chic dolls that made its name and fortunes while paying Mattel a royalty.

He set a Feb. 11 hearing on post-trial motions.

“Mattel has established its exclusive rights to the Bratz drawings and the court has found that hundreds of the MGA parties’ products -- including all the currently available core female fashion dolls Mattel was able to locate in the marketplace -- infringe those rights,” Larson wrote in the ruling.

MGA TO APPEAL

Mattel said in a statement that it was pleased with the ruling.

MGA intends to appeal the injunction immediately.

“We will seek to stay enforcement of this order until our appeal is resolved so we can maintain the over 1,500 people that MGA employs, and continue to give our consumers a product they desire,” MGA Chief Executive Isaac Larian said in a statement.

The ruling, if upheld, would mean good news for Mattel’s iconic Barbie, which has lost market share to the Bratz dolls since their launch in 2001.

At the same time, it could cripple MGA, which derives a huge portion of its revenues from Bratz.

Mattel won the rights to the $1 billion-plus Bratz franchise earlier this year in a lawsuit against MGA and former Mattel Barbie designer Carter Bryant, who invented the Bratz concept while under contract to Mattel.

A jury later ruled Bryant had secretly sold the concept to MGA.

Mattel was also awarded rights to all but four concept drawings and models created by Bryant, but was granted only a fraction of the $2 billion in damages it had sought at trial. That left questions about the extent to which the dolls infringed on those drawings.

In his ruling, Larson said his own side-by-side review of the drawings and dolls left him with no doubts that MGA was infringing on Mattel’s copyrights.

Family-owned toy maker MGA has expanded the Bratz line since its 2001 debut to include Baby Bratz, Bratz Kidz, and Lil’ Bratz, as well as films and TV shows based on the line.

It is not clear whether those products also were found to infringe on Mattel’s copyright for the female fashion dolls that compete with its Barbie doll.

Mattel shares were up 80 cents to $14.00 on the New York Stock Exchange in late morning trade. (Editing by Kim Coghill and Gerald E. McCormick)

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