New twist in billion-dollar Bratz fight

The billion-dollar Bratz dolls franchise should never have been handed over to arch-rival Mattel, owner of Barbie, an appeals court ruled, adding yet another twist to the longest-running legal drama in toyland.

Mattel and the developers of Bratz, MGA Entertainment, have been fighting over the toys like children at nursery since 2005, when it was alleged that 39-year-old Carter Bryant created the street-smart characters and the Bratz name while he was under contract as a Barbie designer at Mattel.

Last night, a San Francisco appeals court decided the case, which included a $100m jury verdict in 2008 for Mattel, may require a new trial.

"It is not equitable to transfer this billion-dollar brand – the value of which is overwhelmingly the result of MGA's legitimate efforts – because it may have started with two misappropriated names," appeals court judge Alex Kozinski wrote. The judge added: "Unlike the relatively demure Barbie, the urban, multi-ethnic and trendy Bratz dolls have attitude. America thrives on competition; Barbie will too."

The California court heard how, in the pursuit of truth, Mattel sought forensic analysis of the earliest sketches of the Bratz characters. The jury found for Mattel and decided that MGA's chief executive, Isaac Larian, had interfered with Mattel's contractual relationship with Mr Bryant and that both he and his company were liable for "conversion", a term for industrial theft.

But last year, MGA blocked an injunction that would have forced it to recall all Bratz dolls as it appealed.