Mattel, MGA argue in damages phase of Bratz trial

By Syantani Chatterjee

RIVERSIDE, Calif (Reuters) - Mattel Inc MAT.N and MGA Entertainment Inc on Wednesday laid out widely diverging valuations of the Bratz doll franchise in the damages phase of a U.S. copyright infringement trial that could have major implication for both toymakers.

The jury in Riverside, California, last week found that former Mattel designer Carter Bryant made scores of concept drawings and sculpts for Bratz while he was employed by Mattel. The jury awarded rights to those works to Mattel.

The panel, which could not decide which company owns four original drawings of the Bratz characters, must now determine whether Mattel's drawings are "substantially similar" to dolls developed by MGA, and if so, how much of the estimated $3 billion in profits MGA should have to give to Mattel.

While Mattel's attorneys tried to convince the 10-member jury that the giant toymaker deserved all profits from Bratz and related accessories, company Chairman and Chief Executive Bob Eckert appeared to try to manage expectations.

"Regardless of the amount of damages award against MGA and its CEO in this phase of the trial, this has been a moral victory for Mattel employees worldwide," Eckert said in a statement handed out to reporters at the trial.

A big damages award could compensate for sagging sales of Mattel's iconic Barbie doll, whose U.S. sales slipped 21 percent last quarter in the face of competition from Bratz, and could also prove a crippling blow to family-owned MGA.

NOT JUST A DOLL

Mattel attorney Bill Price advised the jury during his opening statement to consider basic features -- such as the dolls' stance, clothing, eyes and other facial features -- rather than colors or accessories in finding whether the dolls infringe on the original drawings that Mattel owns.

"The question is whether a consumer says these are substantially similar," he told the jury.

But MGA attorney Thomas Nolan rejoined that the company's doll designers had changed Bratz substantially from the concept drawings, which "don't say nearly enough about how to make dolls that sell."

MGA went on to create more than 30 different characters and play themes, fashions and accessories that had nothing to do with Carter Bryant or other Mattel employees, Nolan said.

The dolls might look similar to Carter Bryant's drawings "on a blink test" but MGA built not just a doll but a successful brand, Nolan said.

Price said MGA should turn over to Mattel all profits it made from the dolls since 2001 -- an estimated $987 million -- and should also pay punitive damages based on the estimated $1.9 billion net worth of MGA Chief Executive Isaac Larian.

MGA believes that no damages are appropriate, and if it is forced to give Bratz profits to Mattel, the amount should be limited to its first-year profits of $4.3 million, Nolan said.

In a worst-case scenario, MGA should pay no more than $422.2 million, which subtracts the value-added products and branding devised solely by MGA, Nolan said.

Testimony in the damages phase was expected to last two weeks.

(Writing by Gina Keating; Editing by Gary Hill)