Another Round Opens in Fight Between MGA, Mattel

, The National Law Journal

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Bratz doll manufacturer MGA Entertainment Inc. has turned to state court to revive its legal battle against competitor Mattel Inc., filing a $1 billion trade secrets lawsuit on Monday.

The filing in Los Angeles County, Calif., Superior Court, was expected—MGA chief executive officer Isaac Larian promised the move last month after U.S. District Judge David Carter refused to let the company amend its federal lawsuit against Mattel over claims that the Barbie maker stole its trade secrets.

That ruling essentially put an end to the federal case that began a decade ago when Mattel sued one of its former doll designers, then at MGA, for copyright infringement. At the time, Larian said MGA would “pursue Mattel in state court for other wrongs they have done to MGA.”

“Rather than competing fairly in the marketplace, Mattel’s executives chose to engage in thievery, industrial espionage and fraud,” said Larian in a prepared statement on Monday. “It’s time Mattel pays for this reprehensible behavior and the damage it caused.”

Mattel spokesman Alan Hilowitz said in an emailed statement: “We are confident that the same stale claims brought in MGA’s lawsuit today are barred by the statute of limitations, and we look forward to the speedy and final resolution of this dispute.”

In 2011, a federal jury awarded MGA $88 million on claims that Mattel stole trade secrets by having employees show up undercover at trade fairs. Carter later increased the award to $310 million, including a corrected verdict of $85 million plus an additional $85 million in exemplary damages and $140 million in attorney fees and costs.

On Jan. 24, 2013, the U.S. Court of Appeals for the Ninth Circuit upheld the attorney fees but reversed the trade secrets portion of the judgment, concluding that Carter should not have allowed those claims into the copyright case automatically as “compulsory counterclaims.” MGA moved to amend its complaint in light of that ruling, but Carter refused the request in his Dec. 17 ruling.

Calling the Ninth Circuit’s decision a “technical procedural issue having nothing to do with the merits of the claims against Mattel,” the new complaint mimics the allegations in the federal case: That Mattel’s employees created a manual about how to steal trade secrets by making fake business cards and invoices and by video recording or photographing MGA’s private showrooms. Using that manual, Mattel’s employees allegedly stole MGA’s confidential information including price lists and advertising plans.

The suit seeks damages under California’s Uniform Trade Secrets Act.

Contact Amanda Bronstad at abronstad@alm.com.

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