Mattel filed the lawsuit in U.S. District Court in Riverside against MGA, which began marketing the hugely popular Bratz line of sassy urban dolls in 2001. Mattel has claimed it owned the rights to the Bratz line because its creator, Carter Bryant, came up with the concept while working for El Segundo-based Mattel.
Analysts estimate Bratz has made MGA more than $500 million a year.
The jury also ruled that MGA and its CEO Isaac Larian were liable for converting Mattel property for their own use and intentionally interfering with the contractual duties owed by Bryant to Mattel.
"MGA and Isaac Larian took what did not belong to them," John Quinn, a lawyer for Mattel, said during a conference call detailing the verdict.
Larian said in a prepared statement that MGA will prevail in the upcoming damages phase of the case or possibly in the 9th U.S. Circuit Court of Appeals.
"This is because it is undisputed that MGA -- not Carter Bryant -- independently created the Bratz dolls," Larian said. "Carter Bryant did not have anything to do with the many Bratz-related products we created, such as Bratz Babyz, Lil' Bratz and Bratz Kidz."
The statement pointed out that jurors must still decide if Mattel owns any copyrights involving Bryant's drawings. If so, the jury must rule on whether the dolls infringe on those copyrights.
Bryant reached a confidential settlement with Mattel on the eve of the trial and the company dropped its lawsuit against him.
The timing of Bryant's creation was key in Mattel's suit.
Mattel attorneys argued that Bryant worked for the company between September 1995 and April 1998 and then returned for a second stint at Mattel between January 1999 and October 2000.
He signed an agreement that gave Mattel the right to anything he designed while employed there, the lawyers argued.
In a summary of the case, Mattel said MGA began showing Bratz prototypes a month after Bryant left Mattel and began selling the hugely popular dolls in toy stores five months later.
But Bryant testified during the six-week trial that the sketches he showed MGA in 2000 were transferred from originals he made in the summer of 1998 -- between his two employment stints with Mattel -- that were inspired as he watched kids walking from school, Steve Madden shoe ads in Seventeen magazine, and the cover of the Dixie Chicks album "Chicks With Attitude."
Sales of Barbie doll -- once a near rite-of-passage of American girlhood -- have slid since Bratz came on the scene. Domestic Barbie sales were down 15 percent in 2007 and 12 percent in the first quarter of 2008, while international sales increased 6 percent in 2008 as opposed to 12 percent the previous year. Los Angeles-based MGA has countersued, saying Mattel changed the design of its own "My Scene" dolls to more closely resemble the Bratz line and used its leverage with retailers to stifle competition.
The news of the verdict came after the close of regular-session trading on Wall Street, but Mattel's shares shot up $1.22, or 6.7 percent, to $19.50 in after-hours dealings Thursday.
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