RIVERSIDE, Calif./NEW YORK – Mattel Inc may win control of the $1 billion-plus Bratz franchise in a copyright infringement case, but the toy giant would still face a battle over damages and may have to start from scratch to make the dolls on its own.

Since last Friday, a California jury has been deliberating the case after an almost seven-week trial, in which Mattel is fighting rival MGA Entertainment Inc for ownership of the multiethnic, hip-hop-inspired fashion dolls, which have snared substantial market share from Mattel's Barbie since Bratz launched in 2001.

Barbie's sales troubles have extended into the first quarter of 2008 – domestic sales fell 12 percent, while worldwide sales were flat with the earlier year.

The pouty-lipped Bratz, on the other hand, have been such a hit that MGA is launching a new Bratz line in August, which Chief Executive Isaac Larian expects will rake in retail sales of up to $200 million by the end of the year.

Mattel contends in its lawsuit that it owns Bratz because franchise creator Carter Bryant was working for Mattel as a Barbie designer when he came up with the idea for Bratz.

Bryant reached a confidential settlement with Mattel before the jury trial began in late May in Riverside, California. However, MGA and Bryant contend he invented Bratz during an eight-month hiatus from Mattel in 1998.

Winning ownership of the drawings could allow Mattel to pocket one-time damages and cut down Barbie's fiercest rival, but it may not give it rights to the Bratz name or design if the company wants to keep selling the franchise.

“I don't think Mattel has got much of a chance of getting (the Bratz name) no matter what,” trademark attorney Fred Hathaway of Buchanan Ingersoll & Rooney in Alexandria, Virginia, said. “In pretty much any outcome, even the best outcome for Mattel, they are going to have to call the doll something else.”

Mattel tried launching its own urban chic doll, Flavas, to compete with Bratz in 2003, but discontinued the line soon after, saying it did not meet expectations.

Even if Mattel ends up owning every drawing at issue in the case, hefty damages are still not a given – it has to convince the jury in a separate damages phase of trial that it also has rights to MGA doll designs that differ from Bryant's drawings.

MGA attorneys say they will argue that federal copyright law requires Mattel to show that each of the drawings it wins is ”virtually identical” to a particular Bratz doll.

MGA believes that since it has changed the Bratz face and clothing designs every year since the franchise's debut, Mattel could claim damages only from 2001 – a year the doll line earned just $26 million, MGA said.

But Mattel is eyeing a much higher figure, based on estimates that MGA earned as much as $500 million a year on Bratz sales and licensing, plus damage to the company's profits from declining Barbie sales, according to court documents.

“I suppose (Mattel's) best outcome could be a complete (return) of all profits that have been earned on the Bratz dolls,” said Cydney Tune, copyright attorney at Pillsbury Winthrop Shaw Pittman. “All of the profits (MGA) made and the amount by which Mattel has been harmed.

“You could put up your Barbie sales and ... show that when the Bratz came on, Barbie started to diminish and continued to go down. Those would be your most likely elements of damages,” Tune said.

On Wednesday, the jury sent a question to the judge and lawyers in the case that suggests it has not awarded all of the drawings to either Mattel or MGA.

If the jury finds that Bryant made the original drawings when he was not under contract to Mattel, then Mattel could end up collecting little or nothing in the damages phase of trial.

But if MGA ends up on the losing side, it would be a crippling blow to the family owned company, analysts said.

“Either way you look at it, Mattel would continue (on), but in an extreme case against MGA... Bratz is such a critical piece of their business that you could say that effectively MGA would hand over the keys to Mattel,” said Timothy Conder, an analyst with Wachovia Capital Markets.

Mattel, which reports its quarterly results Friday, could see a bounce in its share price, should it prevail in the first phase of trial, even with an unclear picture of damages.

“The stock would undergo a tremendous re-valuation upwards. Any legal verdict that gives Mattel anything, I believe, will be construed positively by the market,” said Wedbush Morgan Securities analyst Chris White.

Stern Agee analyst Margaret Whitfield cautioned, however, that a final resolution could be far off, with either company likely to appeal.

“You can't take it to the bank just yet,” Whitfield said.

(Reporting by Aarthi Sivaraman in New York and Gina Keating in Riverside, California, editing by Phil Berlowitz)