A U.S. appeals court denied MGA Entertainment Inc.’s request late Thursday to halt the transfer of its Bratz fashion doll to rival Mattel Inc.

The Van Nuys toymaker filed an emergency appeal in late May asking the Ninth Circuit Court of Appeals to stay an injunction granted by U.S. District Court Judge Stephen Larson. The injunction requires MGA to stop selling the Bratz dolls at the end of the 2009 holiday season, and then hand over portions of the Bratz intellectual property that will help Mattel prepare its own Bratz line for the Spring 2010 sales season.

In its appeal, MGA argued that a stay should be granted “because of the risk of irreparable harm to MGA and the public.” However, the appellate court said in its ruling that MGA did not “show a substantial likelihood of ultimate success on the merits.”

MGA and Mattel did not immediately return requests for comment.

A federal jury decided last year that a former Mattel doll designer created the Bratz name and characters for MGA while still working for Mattel. As a result of the litigation, control of the Bratz line was awarded to Mattel in addition to a $100 million damages award against MGA.

MGA is continuing to appeal the jury’s finding that Mattel owns the Bratz intellectual property and the multi-million dollar award. MGA has until July 10 to submit its arguments to the appellate court.

Meanwhile, MGA and Mattel are continuing to work toward a settlement in the five-year legal battle over the dolls. Both sides were required to provide a good-faith response to a settlement officer’s resolution proposal by Wednesday. Last week, Larson issued an order stating that progress was made at a settlement conference held June 1.

Legal observers have said that a settlement would likely involve a licensing deal allowing Mattel to own and profit from the Bratz intellectual property. The arrangement could allow MGA to continue to sell the dolls and related merchandise.