Barbie Bites Back

• Email
• Share
• Print

It stings to watch a rival succeed with a toy line that has gained at the expense of your flagship product. Now Mattel (NYSE: MAT) is doing something about it, getting litigious as it takes on MGA's popular Bratz line. Mattel may actually have a case here, considering that the Bratz creator was once an employee at Mattel, and supposedly concocted the big-eyed playthings during a gap in his employment at the toy giant.

Mattel isn't stopping there. It's also digging into other Mattel hires who went on to work for MGA, trying to determine whether they may have taken any Mattel company secrets with them.

For Mattel, it's worth a shot. No matter how hairy things get in the courtroom, the Barbie and Bratz audience of young girls is unlikely to have any interest in the proceedings. In other words, Mattel can demand and sling away without suffering any reputable harm in the eyes of its fans.

Even if the odds are long, the damages could be substantial if Mattel is able to prove that a contracted Mattel employee conceived the Bratz idea. Bratz supposedly generates more than $500 million a year in sales, and there's more to the line than just the dolls. The Bratz empire has expanded to include an animated television show, interactive video games, and even an accessory line that features actual diamond jewelry.

The timing of Mattel's action may feel peculiar, however. Last month, the toy maker posted its first quarterly gain in worldwide Barbie sales in more than three years. And even though Mattel is being dogged by a Polly Pocket recall -- at the worst possible time, too, with the holidays right around the corner -- both Mattel and Hasbro (NYSE: HAS) posted better-than-expected results last month. That is usually a good sign of a healthy holiday quarter.

Will the judicial system find Mattel to be a brat, or the rightful owner of Bratz? The implications are significant as we see this legal saga play itself out.

Hasbro is a recommendation for Motley Fool Stock Advisor subscribers. Mattel made the cut for Inside Value readers. Check out any of our newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has only sons, but he has bought Barbie and Bratz gifts for his nieces in the past. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.