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Hair-Pulling In The Dollhouse


Isaac Larian, founder of toymaker MGA Entertainment Inc. and father, so to speak, of the fabulously successful Bratz dolls, never passes up an opportunity to mock, provoke, or otherwise try to annoy his main rival: Mattel Inc. (MAT), maker of Barbie dolls. "Mattel can't even say our name," Larian says. "They call us 'our nearest competitor.' I'm thinking of changing our company name to MNC Entertainment -- Mattel's Nearest Competitor." Ask him about Mattel's recent sponsorship deals with teen celebrities, and he says: "I don't care if they sign the Olsen twins and call it Bulimic Barbie. Kids don't want to play with Barbies anymore."

Larian does have some bragging rights. The 51-year-old Iranian immigrant has done what no one else in the $20 billion toy industry has been able to: generate explosive growth in a tough category while also sending Barbie -- a 46-year-old American icon -- scampering to the salon for a makeover. Since their introduction in June, 2001, the Bratz dolls, with their big eyes and skimpy clothes, have grown into a billion-dollar franchise. Although Mattel has designed new, edgier dolls that are intended, as Bratz are, for older girls, Barbie sales have fallen, and the company's stock price has moved sideways.

Larian threw another stone at Barbie's Dream House on Apr. 13. He sued Mattel in federal court, accusing the world's largest toymaker of unfair competition, intellectual property infringement, and "serial copycatting." The suit claims Mattel's latest Barbie dolls mimic the look, themes, and packaging of Bratz. It also alleges that Mattel has threatened retailers and licensees with retribution if they do business with MGA and that Mattel tried to lock up the supply of doll hair. Suits such as this are difficult to win, says Shannon M. Hansen, an intellectual property attorney at Kirkland & Ellis LLP in Los Angeles, because the plaintiff has to prove that shoppers were confused and that its business suffered. But at the very least, Larian has succeeded -- again -- in exasperating Mattel. The company, which says it will vigorously defend itself, considers this suit retaliation for its own legal claim: that doll designer Carter Bryant came up with the idea for Bratz while still working at Mattel. Bryant's lawyer says that's not the case.

FIGHT CLUB

The legal skirmishes come at a time when both MGA and Mattel are facing competition for children's attention from computers and video games. Larian, who refuses to release financial information on his private company, will say only that sales increased 7% last year, far less than MGA's earlier triple-digit growth. Worldwide sales of Barbie, meanwhile, declined 15% in the first quarter. Barbie's turnaround "is still a work in progress," admits Timothy Kilpin, a Mattel senior vice-president for girls' marketing and design.

Mattel isn't the only industry biggie Larian has tussled with. He dueled George Lucas over rights to Star Wars handheld games and won. Two years ago, McDonald's Corp. (MCD) sued MGA after Larian challenged the company's design for Bratz Happy Meal dolls. That case was settled. More recently, Larian pulled out of the Toy Industry Assn., accusing it of favoring Mattel in its annual awards, which the trade group denies. Larian also filed a suit against Nordstrom Inc., (JWN) claiming it sold unlicensed Bratz shoes. Larian and his brother, Farhad, are even engaged in a dispute over the price Farhad received for his stake in MGA.

All of which raises the question: Is Larian the little kid standing up to the bullies in the playground, or has he become the biggest brat in Toyland? "There's no question that he has had phenomenal success," says Thomas P. Conley, president of the Toy Industry Assn. "But he has done it at terrific expense, in terms of people's relationships." Not true, says Larian: "I don't like to end up in court. But I will make sure we defend MGA's rights."

No one who knows Larian doubts his tenacity. After emigrating to Los Angeles at age 17 with $750 in his pocket, he found a job washing dishes at a diner and eventually earned a civil engineering degree from the California State University at Los Angeles. Just after college, Larian started the company that morphed into MGA. He imported consumer electronics and in 1987 scored big with a line of handheld games featuring characters licensed from Nintendo Corp. (NTDOY) Ten years later he sold his first doll, Singing Bouncing Baby.

These days Larian is taking Bratz everywhere Barbie is. MGA has some 350 licensees, making everything from Bratz Stylin' Cosmetix to Bratz Sporty Flair Bedding. Ideas for new products often spring from girls themselves, who make their opinions known in focus groups and on the MGA Web site. This year the company has introduced an $89 digital music player that's shaped like a lipstick and a camcorder/purse for $99. "I love the toy business because it has such sex appeal," Larian says. "It's like getting hooked on drugs." Don't think anybody at Mattel would put it quite that way.

By Christopher Palmeri in Los Angeles


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