U.S. court throws out Bratz ruling favoring Mattel

A federal appeals court on Thursday said Mattel Inc was wrongly granted ownership of the Bratz doll franchise, a decision that could lead to a new trial in the long-running case.

The 9th U.S. Circuit Court of Appeals in San Francisco threw out a district court judge’s injunction prohibiting rival toymaker MGA Entertainment from producing or marketing Bratz female fashion dolls, and dolls substantially similar to Mattel’s copyrighted Bratz works.

It also said the judge erred in imposing a constructive trust on trademarks, including “Bratz” and “Jade,” that essentially transferred the Bratz trademark portfolio to Mattel.

The Ninth Circuit was considering whether U.S. District Judge Stephen Larson went too far in awarding MGA’s Bratz doll franchise to Mattel, after MGA lost a copyright infringement trial to its rival in 2008.

Writing for a unanimous appeals court panel, Chief Judge Alex Kozinski returned the case to the district court.

He said that because several of the errors appeared in instructions to the jury that considered the case, “it’s likely that a significant portion -- if not all -- of the jury verdict and damage award should be vacated, and the entire case will probably need to be retried.”

Mattel, MGA and lawyers for both companies were not immediately available for comment.

In afternoon trading, Mattel shares were up 1.8 percent to $21.03 on the Nasdaq, underperforming gains of over 2 percent in the broader market.