Four years ago, Mattel Inc. exhorted its executives to help save Barbie from a new doll clique called the Bratz, the Wall Street Journal reports.

"The House is on Fire!" said an internal presentation on the decline of its iconic Barbie doll franchise. Market share was dropping at a "chilling rate," the presentation said. Barbie needed to be more "aggressive, revolutionary, and ruthless."

That call to arms has led to a federal courthouse. In a lawsuit set for trial on Tuesday in Riverside, Calif., Mattel accuses MGA Entertainment Inc., the maker of Bratz, of essentially stealing the idea for the pouty-lipped dolls with the big heads. Mattel is trying to seize ownership of the Bratz line, which analysts estimate racks up annual sales of more than $500 million. MGA denies wrongdoing, and accuses Mattel in a separate suit of copying Bratz.

On Monday, the former Mattel designer who sold the Bratz concept to MGA, who was also a defendant in the lawsuit, agreed to a confidential settlement with his former employer. Mattel had accused the designer, Carter Bryant, of dreaming up the hit doll while on Mattel's payroll. Mattel didn't disclose the terms of the settlement, but said the agreement will bolster its case; MGA says its position isn't undermined. Mr. Bryant declined to comment.

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