A federal court jury Thursday rejected Mattel Inc.'s copyright infringement claims involving MGA Entertainment's popular, billion-dollar line of Bratz dolls.
The jury found that Mattel does not own the idea for Bratz or any of the sketches that led to the doll and awarded Mattel no damages.
The complex, 28-page verdict was being read after the panel completed nearly two weeks of deliberations and a rancorous three-month trial.
MGA Chief Executive Officer Isaac Larian openly cried while listening to the multiple decisions in the copyright and trade secrets lawsuit pitting toy giant Mattel against upstart MGA.
Hundreds of millions of dollars in potential damages and the rights to a blockbuster toy were at stake in the complex case that has dragged on since 2004 and cost both sides millions of dollars in legal fees.
In its case, El Segundo-based Mattel alleged that doll designer Carter Bryant developed the dolls while working for Mattel in 1999 and secretly took the idea to MGA, which developed the first-generation fashion dolls while obscuring Bryant's involvement.
MGA denied the allegations and countersued, alleging the Barbie-maker engaged in corporate espionage and unfair business practices when it realized it couldn't compete against the smaller company's blockbuster toy.
MGA contended Mattel stole trade secrets, including information about future Bratz products, by sending spies with fake IDs to toy fairs so they could bolster Mattel products aimed at "tween" girls ages 9 to 11.
A jury awarded Mattel $100 million in 2008 and found that Bryant had developed the Bratz concept while with Mattel, but the verdict was overturned last year. In the appellate ruling, the court said some of the trial judge's decisions didn't take into account MGA's sweat equity in developing and expanding the Bratz line from Bryant's original ideas.
This time, jurors were asked to decide on claims by Mattel and MGA.
The panel found that MGA did not steal any trade secrets but did find that Mattel proved some items were trade secrets. The meaning of that was not immediately clear.
Mattel was found to have stolen some trade secrets from MGA, but it was unclear whether a statute-of-limitations issue might nullify that finding.
Jurors were also asked to consider punitive damages against both MGA and Mattel and decide whether Mattel had proven ownership of dozens of early Bratz-related sketches, drawings and the so-called "sculpts" that represent the first 3-D rendering of the toy.
Jurors also had to decide if Mattel had proven ownership of the idea for the name "Bratz" and the general concept of a multi-ethnic group of hip, urban dolls with oversized heads and feet, large eyes and lips, tiny noses and small bodies.
For MGA, the panel had to decide whether, in return, Mattel misappropriated MGA's trade secrets. The smaller company claimed Mattel stole 114 trade secrets from it over a seven-year period.
In the 2008 trial, a different judge relied on the jury's verdict to establish a trust for the Bratz trademarks and issued an injunction prohibiting MGA from producing or marketing almost every Bratz fashion doll and future dolls that were substantially similar.
The appeals court took exception to elements of those decisions, saying the outcome did not take into account the "value added by MGA's hard work and creativity" in developing the brand beyond Bryant's first sketches and the first-generation Bratz dolls, which debuted in Spain in 2001 to rave reviews.
Other than damages, a key issue in the retrial was how to interpret the language of an invention agreement that Bryant signed with Mattel in 1999.
Mattel argued during trial that the contract gave it ownership of all products invented during Bryant's employment at Mattel and also established Mattel's ownership of Bryant's ideas. Attorneys for Mattel also told jurors that the contract language covered Bryant's activities during his evenings and weekends.
Bryant has testified that he first came up with the idea for Bratz in 1998 while he was not employed by Mattel and then worked on the concept using his own equipment in his off hours once he started there.
MGA attorneys, however, said the contract doesn't refer to ideas and doesn't include work Bryant did at night or on weekends.
MGA's CEO Isaac Larian has said his company spent at least $150 million on legal fees in the legal fight and was forced to lay off 300 employees as a result of the litigation.
In its quarterly report last week, Mattel said it has had $18.2 million in costs related to the latest litigation with MGA.
Mattel claims $314 million to $544 million in lost profits. In closing arguments, Mattel attorney Bill Price cited the testimony of a Mattel expert who estimated the company lost $323.7 million in profits because of Bratz, while MGA has reaped $734.9 million in profits from the doll.
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