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Saturday, May 28, 2022

A Lesson Not Learned

Let me just put it like this: Isaac Larian, as much as anyone, ought to know better. Larian is the founder and chief executive of MGA Entertainment Inc. in Van Nuys. The man is creative, clearly has executive intelligence and, perhaps more than anything, is tenacious. The Iranian immigrant built from scratch one of the world’s most successful toy companies. He’s also pugnacious. I mean, who else after a decade of litigation would have the stomach to renew a fight with Mattel Inc., the El Segundo toy company that is the world’s largest? Especially after some $200 million in legal fees, of which $60 million or so will never be recouped? The history of the epic battle between MGA and Mattel is recounted in our front page story by reporter Mark Madler, but in a nutshell it goes like this: Mattel filed a lawsuit 10 years ago alleging it really owned the intellectual property of MGA’s incredibly popular Bratz dolls, which had surpassed Barbie as prom queen in the bedrooms of young girls. Initially a jury bought the argument, which rested on the allegation the doll’s designer had actually come up with the idea for the dolls while working at Mattel, before jumping ship for MGA. The jury decision appeared to be a knockout blow for MGA, but like many big verdicts in the U.S. legal system, it was overturned on appeal. And then it got even worse for Mattel. A federal jury in subsequent litigation awarded MGA $170 million, agreeing that Mattel had undertaken unrelated corporate espionage to steal product ideas from its competitor. Fast forward to the appeal, and guess what? The award was struck down by a judge who ruled the claim never should have been heard in the first place because it was unrelated to the core Barbie-Bratz battle. However, MGA was allowed to keep an award of $138 million to cover some of its legal costs, which Larian believes total about $200 million. Which brings us to the present. Once again, MGA is pursuing its corporate espionage claims against Mattel, obviously believing it has more than a fair chance to win, since a jury bought them the first time around. And this time Larian has upped the ante. While MGA was initially awarded $170 million, the Los Angeles Superior Court lawsuit seeks $1 billion from its rival – even though as one analyst told the paper very little has changed in the case. I guess all those zeroes would light up anyone’s eyes, but the way Larian describes it to our reporter, you get the sense that it’s a matter of honor for him. Larian didn’t set foot on U.S. soil until he was 17 and epitomizes the immigrant success story. To be accused of building his most popular toy line by stealing some other company’s intellectual property clearly sticks in his craw. He sees it as nothing more than corporate bullying that is contrary to what makes this country great. “It is absolutely worth it to preserve the American Dream for future immigrants, my children and grandchildren,” he told our reporter. Let’s take him as his word about the legal battle that became almost a personal battle between Larian and Robert Eckert, Mattel’s CEO when it all started. Larian also feels spurned. He says he never heard back after trying to settle all claims by reaching out to Bryan Stockton, appointed Eckert’s successor in January 2012. Still, the U.S. court system is highly unpredictable. After all, I’m sure Mattel never imagined the legal fight it started a decade ago would amount to nothing but a headache, bad publicity and sky-high legal fees. Like I said, Larian should know as much as anyone the quirky nature of the U.S. justice system. It’s probably time for him to take his toys and just go home. Laurence Darmiento is editor of the Business Journal. He can be reached at editor@sfvbj.com.

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