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Mark Lennihan/AP

Without Bratz Dolls, Can MGA Entertainment Survive?

December 05, 2008 03:45 PM
by Sarah Amandolare
Having lost a huge court battle to Mattel over Bratz dolls, MGA Entertainment faces an uphill battle of appeals, but can the company survive without Bratz?

Putting Creativity to the Test

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The conclusion of a four-year courtroom battle stemming from the lawsuit filed by Barbie manufacturer Mattel against Bratz manufacturer MGA Entertainment has resulted in a decisive victory for Mattel, prompting questions over the future of MGA.

MGA Entertainment has been ordered to stop making Bratz dolls immediately, but Bratz will remain on store shelves until the end of the holiday season, according to The Associated Press. The question remains whether MGA Entertainment can survive without Bratz, “clearly their major product line,” Mattel attorney Michael Zeller said to AP.

MGA produces various other toys, including a line of Marvel comics-based items and a popular line of stuffed animals called Rescue Pets. MGA is also affiliated with the well-loved Little Tikes brand of toys. But Bratz dolls have been one of the company’s most successful and lucrative ventures. The MGA Entertainment Web site shows the company’s award-winning toys; eight out of 10 are Bratz products. And according to the AP, MGA has made almost $778 million from the Bratz line.

MGA chief executive Issac Larian has said his company would appeal the ruling, according to the Los Angeles Times. Larian told the LA Times he was “just shocked” by the ruling, but still confident that his company “will come out on top in the end.” When asked if the end of Bratz would mean the end of MGA, Larian said, “I don’t even want to think about that right now.” MGA is based in Van Nuys, Calif., and has more than 1,500 staffers.

Larian, an Iranian immigrant, was named 2007 Entrepreneur of the Year, an annual award sponsored by accounting firm Ernst & Young. Judges praised Larian’s “open-door policy” of welcoming ideas from all employees as a key to his success, according to an article published on America.gov.

One example of Larian’s commitment to utilizing staff creativity involved a 2002 intern’s suggestion, which resulted in an award-winning Bratz accessory, according to America.gov. To move forward and prosper without Bratz, it seems MGA Entertainment will need more of this approach to business.

Background: MGA v. Mattel

In December 2006, Barbie manufacturer Mattel filed a lawsuit accusing MGA Entertainment “of stealing its ‘intellectual infrastructure’ including company secrets, business plans and 25 members of its staff” in creating a line of dolls called Bratz. In the suit, Mattel suggested it owned the rights to Bratz dolls, “because they were conceived by one of its own designers who then defected to MGA in 2000,” reported U.K. newspaper The Daily Telegraph.

In August 2008, MGA Entertainment issued a report on “Fact vs. Fiction” regarding the company’s ongoing trial with Mattel. In the report, MGA asserts that the failure of Mattel’s line of Flavaz, a Bratz-like doll, indicates that “the creativity that MGA’s employees applied to the Bratz brand” made the dolls a successful venture, not the concept of the doll, alone.

Related Topic: When corporate employees defect

A 2003 article in The New York Times focused on corporate managers who strike out on their own in similar fields, becoming competitors of their former employers. Legal specialists urge corporate defectors to “proceed with extreme vigilance.”

RHR International senior consultant Gene Morrissy told The New York Times that he had seen an increasing number of “corporate employees leaving their jobs to start their own businesses for a host of reasons.” But the problem, Morrissy said, is that entrepreneurs often take the “ready, fire, aim” approach, without thinking “through the legal implications.”

Furthermore, hard economic times often cause companies to get “tougher on copycat former staff members,” the Times reported.

Reference: Toys Guide

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