Published: Jan 17, 2011 10:57 PM EST
Updated: Jan 17, 2011 7:58 PM EST

SANTA ANA, Calif. (AP) - It's Round 2 in the knockdown legal catfight between toy giant Mattel Inc. and bitter rival MGA Entertainment Inc. over the right to make and market Bratz dolls - the sassy, street-wise line that flew off the shelves when it was introduced and gave Barbie a run for her money.

Two years ago, a federal jury awarded Mattel $100 million and found that Bratz designer Carter Bryant had developed the concept for the Bratz dolls while working for Mattel. An appeals court later overturned the verdict and the case was sent back for a retrial.

Now, the archrivals are set to present opening statements Tuesday involving Mattel's original copyright infringement allegations along with MGA's counterclaim of unfair business practices and Mattel's accusation of theft of trade secrets by its competitor.

Jurors will also be asked to determine the scope of an invention agreement signed by Carter at Mattel before he went to work for MGA.

The array of complex legal issues facing jurors is sure to create fireworks during a trial that is critical to Mattel and MGA, said Jack Lerner, a professor at USC Gould School of Law who specializes in intellectual property and technology issues and has closely followed the case.

The run-up to the trial has been nasty, with MGA claiming in court papers that Mattel sent gumshoes to trade shows where MGA was displaying new products, and Mattel alleging MGA routinely poached top staffers and encouraged them to bring along secrets from the Barbie-maker's vaults.

MGA, a much smaller company, has spent more than $150 million on legal fees since Mattel first sued in 2004. MGA also has been forced to lay off more than 300 employees while defending the Bratz brand, which debuted in 2001 to rave reviews. Mattel has not disclosed its legal expenditures.

"This is going to be a knockdown, drag-out fight and it's going to go on for months," Lerner said. "The jury is going to be given a massive amount of questions to decide, each one of which could cost MGA. And it's higher stakes for MGA because Mattel is so much bigger of a company."

"If Mattel loses, they walk away. If MGA loses, there's all kinds of trouble," he said.

Mattel, based in El Segundo, sued MGA and toy designer Bryant seven years ago, alleging Bryant designed the popular Bratz doll line while still working for Mattel. Bryant settled with Mattel on the eve of trial for an undisclosed amount, but the toy giant continued to pursue its case against Los Angeles-based MGA.

In 2008, a federal jury in Riverside awarded Mattel $10 million for copyright infringement and up to $90 million for breach of contract after a lengthy trial.

However, the verdict was overturned by the U.S. 9th District Court of Appeal after the panel found the trial judge had incorrectly ruled that Mattel automatically owned Bryant's design under the terms of the invention agreement he signed with the company.

This time, the case is being overseen by U.S. District Judge David Carter in Santa Ana, and Carter has decided to try the trade secrets and unfair competition claims at the same time as the copyright questions. The issues had previously been split into separate trials.

Jurors will also decide the scope of the Mattel invention agreement, something that was decided by the judge in the first trial.

Mattel alleges that MGA stole trade secrets by recruiting three Mexican employees from the Barbie-maker to start a Mexican hub; poached a former Mattel marketing director whom the company accused of sharing confidential plans for the Bratz line; and encouraged and helped Mattel employees breach their confidentiality contracts.

MGA denies the allegations and accuses Mattel of trying to put it out of business because of its success with the Bratz dolls, whose pouty-lipped, hip-hop inspired vibe made them an instant hit among "tween" girls. The company has a 2011 line of Bratz dolls, spokeswoman Negar Treister said in an e-mailed statement.

"MGA always required its new hires to confirm in writing that they would not bring any information from prior employers, including Mattel," she said. "Not a single witness in the case ... has ever testified that anyone from MGA encouraged him to bring confidential information."

MGA has filed counterclaims alleging Mattel routinely engaged in unfair competition by threatening distributors and retailers for doing business with the smaller company. At one point, MGA alleges, Mattel even tried to buy up excess doll hair to push its rival out of the market. Mattel denies those allegations.

The inclusion of the trade secret and unfair competition issues along with the original copyright infringement claim at the retrial could prove embarrassing and risky for both companies, Lerner said.

"When a jury sits through a four-month trial, the jury makes an overall determination as to who's the good guy and who's the bad guy," he said. "There's plenty of mud that MGA is going to be able to throw around and there's plenty of mud that Mattel's going to be able to throw around."

 (Copyright 2011 by The Associated Press. All Rights Reserved.)