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Monday, Jul 4, 2022

Bratz v. Barbie: Rematch Set

For Isaac Larian, the change in chief executives at Mattel Inc. two years ago seemed like a chance at a new start between Mattel and his MGA Entertainment Inc., two toy companies locked in an epic legal battle for nearly a decade. Larian said he found out otherwise. Attempts to settle the charges and counter-charges of theft of trade secrets between the two companies went nowhere, he said, as did attempts to sit down with Bryan Stockton, the new head of the El Segundo toymaker to clean the slate. “I have reached out to him and Chris Sinclair (former chairman of the board),” Larian said. “They have not called back.” So the courtroom drama between MGA, maker of the popular Bratz line of dolls and Mattel, the toy behemoth behind Barbie and Hot Wheels, continues. The Van Nuys company filed a lawsuit Jan. 13 in Los Angeles Superior Court alleging that Mattel employees used trickery and deception, including falsified business cards and invoices, at trade shows around the globe to purloin proprietary information about unreleased MGA products. “Mattel, the world’s largest toy company, embarked on this scheme to acquire and maintain an unlawful competitive advantage and monopoly in the toy market,” the 41-page complaint states. “It succeeded wildly.” MGA is seeking $1 billion in actual damages and an unspecified amount for enhanced damages, plus attorney fees. To date, MGA has spent $200 million in legal costs for two multi-month jury trials and two appeals that centered on a dispute over who owned the intellectual property that gave birth to the Bratz dolls. In the process, Mattel and MGA combined have amassed 11.5 million pages of evidence and taken more than 400 depositions. The latest lawsuit brings to state court allegations already raised in federal court – but dismissed a year ago due to a technicality when a judge ruled the corporate espionage allegations were largely unrelated to the core Bratz dispute. Mattel spokesman Alan Hilowitz said in a prepared statement that the company was confident that these “stale claims” would be barred by the statute of limitations and looked forward to a “speedy and final resolution” of the dispute. He also said Mattel in the past had “repeatedly” met with MGA in the hopes of settling the dispute but nothing came of it. “Mattel will continue to focus its efforts on successfully competing in the marketplace,” Hilowitz said in the statement. Brash newcomer MGA, founded in 1979 as an exporter of electronic products, is a privately held company that employs 1,200 workers in offices around the world and 250 in the Valley. Larian would not disclose annual sales. The company took a huge leap when in 2001 it introduced Bratz , a line of large-eyed, pouty-lipped urban dolls that proved better selling than Mattel’s Barbie line. The first lawsuit was filed by Mattel in 2004, alleging that Bratz creator Carter Bryant was working at Mattel at the time he created the Bratz line and therefore Mattel owned the doll line. Bryant settled with Mattel prior to trial and in July 2008 a federal jury ruled in Mattel’s favor and awarded the company ownership of Bratz. An appellate court, however, reversed that ruling in 2010. The jury in a 2011 retrial sided with MGA in the Bratz case and also declared that Mattel had stolen other trade secrets from its smaller rival. But MGA’s big payday of $170 million in damages was swept away on appeal in January 2013. A three-judge panel ruled the trial judge should not have allowed MGA to bring up allegations that Mattel had stolen trade secrets by deceptive means at toy fairs in New York City and elsewhere. The judges upheld a payment to MGA of $138 million to cover legal costs. MGA said after that ruling it would file a new lawsuit, which it did this month. The latest complaint alleges in detail how between 1992 and 2009, the Mattel Market Intelligence Department used elaborate means of fake business cards, fake invoices and high-tech cameras to defraud competitors in order to extend its dominance in the global marketplace. “During the period from at least 2001 to 2006, Mattel dispatched its well-trained and supplied spies to the toy industry’s major preview events around the globe, where they lied their way into competitors’ showrooms,” the complaint states. Jaime M. Katz, an analyst who follows Mattel for Morningstar Inc. in Chicago, said that even though MGA was successful in federal court on its espionage claims before the appeal, the company might have just let the matter drop. “At some point you are spending more money on lawyers than you are getting back,” said Katz, who suspects that even if a jury decides in MGA’s favor again it’s unlikely it would ever see $1 billion in damages. “This is a significantly larger sum (than the first case) and it has not necessarily changed,” she said. Big discount Larian said he had no second thoughts about pursuing the litigation and disagrees with the notion that he is litigious. He stresses that Mattel started the fight with its first lawsuit. “This time they picked on the wrong guy,” said Larian, who emigrated from Iran when he was 17. “It is absolutely worth it to preserve the American Dream for future immigrants, my children and grandchildren.” The chief executive also said the ongoing litigation will not distract him from pursuing new initiatives at his company. Last year, MGA launched a new product line – Mooshka, or paper dolls that come to life. The company also expanded its Lalaloopsy line to add eight new dolls, the Lalaloopsy Workshop doll playsets, Lalaloopsy Babies collection nad Lalaloopsy Loopy Hair, which includes dolls with extra-long yarn-like hair. “We have the most incredible design team in the U.S. and in the toy industry,” Larian said. As for the $1 billion he is seeking in court – an amount that some see as having no relation to the damages his company suffered – Larian said the amount isn’t as crazy as it sounds. He points to documentation from one of Mattel’s own witnesses in the last jury trial that put the value of the Bratz line at $1.4 billion. “I am giving them a 40 percent discount,” he quipped.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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