Editor’s Note:
A version of this story appears in the Dec. 8 edition of the Business Journal.
Thanks to Bratz dolls, Isaac Larian transformed MGA Entertainment Inc. from a small-time exporter of electronics into one of the largest private toy manufacturers in the world.
And he said he intends to keep Bratz, even if he has to go all the way to the U.S. Supreme Court. But experts say the fight is unlikely to get that far, so his best hope is to win on his upcoming appeal.
After a federal judge last week ordered Van Nuys-based MGA to turn over the rights to its powerhouse Bratz franchise to rival Mattel Inc. because of copyright infringement, the toy manufacturer’s best and perhaps only shot at survival now rests with the U.S. Ninth Circuit Court of Appeals.
If the Ninth Circuit does not overturn U.S. District Judge Stephen Larson’s order, Larian, chief executive of MGA, told the Business Journal he plans to go the Supreme Court.
But it’s highly unlikely the highest court would agree to hear a spat over the right to produce toy dolls, said Neil Netanel, a professor of copyright law at UCLA.
“Usually the Supreme Court will hear a case when there’s a split among circuit courts or it’s a very important issue,” Netanel said. “I would be very surprised if they thought this rose to that level.”
Larson’s order, which came down Wednesday, would strip MGA of its key product line, the Bratz dolls known for their hip, urban-influenced attitude, and turn it over to El Segundo-based Mattel, manufacturer of the more straight-laced Barbie doll franchise.
The order won’t be enforced until after the judge has ruled on post-trial motions at a hearing scheduled for Feb. 11. And while MGA appeals the decision, a process that could take at least a year, it could also ask the Ninth Circuit for a stay pending appeal.
Michelle Cooke, an intellectual property lawyer in the Los Angeles office of Steptoe & Johnson LLP, said the Ninth Circuit would be more likely to grant such a request if MGA can provide evidence the loss of the Bratz line would have a devastating impact on the company. That would then buy MGA more time to figure out the next move.
“If the appellate court refuses to suspend the injunction and MGA goes out of business in six month’s time and then they win the appeal, well it’s too late,” she said.
Billion-dollar dolls
Analysts estimated that the Bratz franchise accounts for at least half of MGA’s business. In 2005, when the craze over the trendy fashion dolls with almond-shaped eyes, hip clothes and faces adorned with eye shadow and lip gloss was at its peak, global sales of Bratz dolls and related products hit close to $2 billion.
That success catapulted Larian and MGA into the upper echelons of the toy manufacturing world and generated a wealth of spin-offs, including a feature film.
The possible reversal of fortune might force Larian to sell all or part of his company, said Jim Silver, an editor at Timetoplaymag.com and a toy industry analyst.
“This is a crushing blow to MGA, unless Isaac wins the appeal,” Silver said.”
Larien dismissed such talk in an e-mail to the Business Journal. “Being a private company, we don’t focus on what analysts speculate,” he wrote. In a statement issued after the decision, MGA expressed surprise at the scope of the judge’s order, which gives Mattel all molds, marketing material and items related to Bratz and applies to all versions of the Bratz franchise.
But Cooke said once the judge found the original design and concept of the Bratz dolls infringed on Mattel’s copyrights, his only logical choice was to issue a sweeping order that covers almost all aspects of the Bratz franchise.
“While it initially seems very broad, it’s the natural and only conclusion the court may have been able to reach,” said Cooke, who is not connected with the case.
A federal jury in Riverside earlier this year found that a Mattel designer came up with the Bratz name and characters while still at the company and improperly took the idea to MGA. The jury awarded Mattel $100 million in damages, and Mattel then filed for an injunction seeking to bar MGA from making any more Bratz dolls.
Wednesday’s ruling represents a windfall for Mattel, as Bratz was taking market share from the Barbie franchise. Mattel could pick up a product line that can generate at least $100 million in sales annually, said Chris Byrne, an independent toy consultant.
“There’s no reason for Mattel to walk away from Bratz,” Byrne said.
