It was the Battle of dolly proportions, and Barbie has won. A U.S. District Court jury in Riverside, Calif., found toymaker Entertainment guilty of contract interference and copyright infringement when it hired doll designer Carter Bryant away from Mattel in 2000. The verdict could bring the world’s largest toymaker hundreds of millions of dollars in back royalties or outright ownership of the wildly successful Bratz line of dolls launched by MGA in 2001.

The July 17 decision represents a rare shot of good news for Mattel, which has suffered a major loss of market share for its flagship Barbie brand since the Bratz launch. Mattel has also been involved in a spate of toy recalls over the past year. “This is a victory for all the hard-working people at Mattel who come together to create many of the most beloved toys for children,” said Chairman and Chief Executive Officer Robert Eckert in a statement. “It is also a victory for all those who believe in fair play.”

Not so fast, says Isaac Larian, the Iranian-born entrepreneur who is the majority owner of MGA (BusinessWeek.com, 6/10/08), which is also based in suburban Los Angeles. Larian says he’ll have an opportunity to reveal new evidence the jury was barred from seeing in the first phase of the trial. In the second phase, which is to begin on July 23 and last about three weeks, the same jurors will be asked to determine damages. Larian has also vowed to appeal. “It’s not over yet,” Larian told BusinessWeek. “We own the name Bratz. There’s no way they are ever going to get it.”

On July 18, Mattel, based in El Segundo, Calif., reported that its earnings fell by nearly half, to $11.8 million, or 3 cents per share, in the second quarter. Barbie sales worldwide fell 6%. Still, the results beat analysts’ already pessimistic expectations. Linda Bolton Weiser, an analyst with Caris Research, estimates that Bratz generates $1.1 billion a year in sales and could add as much as $115 million a year in earnings to Mattel if the company was awarded all rights to Bratz sales and profits. Buoyed in part by the Bratz verdict, Mattel shares surged 12%, to $20 per share. There sure is a a lot of cash in the doll market.