Mattel's Bratz Lawsuit Rejected by Federal Jury

EL SEGUNDO, Calif. ( TheStreet) -- Mattel ( MAT) is losing the battle against privately-held MGA Entertainment over the rights to the popular Bratz dolls.

Mattel alleged copyright infringement claims against privately-held MGA Entertainment over the Bratz Dolls -- which debuted in 2001, and have sold at least $3.3 billion worth of products, generating more than $292 million in profits -- but a federal court jury rejected Mattel's allegations.

The jury awarded Mattel no damages, finding that it did not successfully prove that it owned the idea, nor any of the sketches that led to the development of the Bratz line of dolls.

MGA also did not steal trade secrets, the jury found.

In a Santa Ana, Calif., court Thursday, MGA CEO Isaac Larian "openly cried," according to reports, as the 28-page verdict was read.

The claims alleged that Bratz designer Carter Bryant conceived of the Bratz doll idea while working at Mattel, and later implemented it when working for MGA.

A federal jury awarded Mattel $100 million two years ago, finding that Bryant did develop the Bratz idea while working for Mattel, but the verdict was overturned and the case sent back for a retrial.

Earlier this month Mattel beat quarterly top-line expectations despite a 33% profit decline as Barbie sales spiked 14% .

Barbie sales had weakened in recent years, and Mattel had argued in court that it was, in part, because of the rising popularity of Bratz.

Rival Hasbro ( HAS) missed top- and bottom-line first-quarter expectations as costs rose and demand for its toys and games weakened in the period following the holiday shopping season.

Hasbro, the maker of Nerf toys, Monopoly board games and, as of this year, the licensor for Sesame Street, attributed its weaker performance to increased spending on product development, investments in emerging markets, and new initiatives related to the children's television network The Hub, which it launched last fall as a joint venture with Discovery Communications ( DISCA).

Toy sales are expected to strengthen in 2011 as toymakers bet on new plush toys, digital updates to old classics and the return of an iconic relationship.

-- Written by Miriam Marcus Reimer in New York.

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