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Mattel Inc. must post a $315 million bond while it appeals an Aug. 4 judgment in its copyright infringement and trade-secrets battle against Bratz doll manufacturer MGA Entertainment Inc. U.S. District Judge David Carter ruled on Aug. 16 that the unpredictability of economic conditions and Mattel’s own financial reports justified requiring a bond while the Barbie manufacturer appeals to the U.S. Court of Appeals for the 9th Circuit. Mattel will challenge a $310 million judgment that Carter issued following a jury’s $88.5 million verdict for MGA on April 21. Carter granted a temporary stay of the judgment pending the appeal. Mattel has until Aug. 23 to post the bond. “This ruling allows us to finally collect a portion of the damages inflicted by the ‘Toy Monster’ on MGA and its employees at the end of the appeal process without further delay,” Isaac Larian, chief executive officer of MGA, said in a prepared statement on Aug. 17. “After Mattel destroyed the only brand that challenged Barbie in 50 years and lost a jury verdict that found Mattel stealing from MGA, Mattel’s appeal and subsequent request to stay execution of judgment shows the continued arrogance of Mattel and its management team.” MGA, which is fighting its insurance companies and former lawyers in separate court battles, had asked that Mattel post a bond of $464.8 million — about 1.5 times the value of the judgment. Mattel spokeswoman Heather Wilson did not respond to a request for comment. A federal jury concluded that Mattel had stolen trade secrets from MGA by planting spies at industry trade shows. The jury rejected Mattel’s claim that MGA infringed on its copyright by hiring away a designer who took the Bratz doll concept with him, saying that Mattel did not own the rights to the first four models of the Bratz dolls or two newer versions. However, the jury gave Mattel $10,000, finding that MGA and Larian intentionally interfered with the contract between Mattel and the designer. Carter rejected Mattel’s argument that it need not post a bond while appealing the judgment, which includes the damages from the verdict — reduced to $85 million to correct a mathematical error by the jury — plus $85 million in exemplary damages, $107.9 million in attorney fees and $32 million in costs. “Mattel’s ability to satisfy a $309,887,177 judgment after a two or three year appeal is hardly clear,” he wrote, citing Mattel’s latest financial reports filed with the U.S. Securities & Exchange Commission. “Not only may new competitors and products adversely impact Mattel’s sales, but the entire market may shrink in difficult economic times, when access to credit is limited and consumers’ discretionary purchases of toy products may decline as well.” He noted risks including changing currency exchange rates, increases in the price of commodities and economic difficulties of Mattel’s customers. “These risk factors are not merely academic but particularly salient, given the unavailability of credit and recent dynamism in the toy industry.” In its July 15 quarterly report, Mattel reported net income of $80.5 million, up from $51.6 million during second quarter 2010. But Mattel also used $592 million in cash to pay off debt during the first half of 2011, compared to $103 million during the same period last year. Mattel had argued against posting a bond. But, in the alternative, if a bond was necessary, Mattel claimed it should only have to pay $315 million Carter accepted that figure, calculating that the additional $5 million would equal interest payments, attorney fees and costs MGA is expected to incur while fighting Mattel’s appeal. He said that MGA spent $1.7 million in attorney fees and $46,000 in costs on its successful appeal of a $100 million verdict against it in the first trial of the case in 2008. Amanda Bronstad can be contacted at [email protected].

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