SANTA ANA, California (Nichola Groom) - Mattel Inc, after waging a seven-year legal war against a tiny California company, swallowed a surprise defeat on Thursday after a U.S. jury decided that MGA Entertainment Inc is the rightful owner of the once-billion dollar line of pouty-lipped Bratz dolls.

The astonishing loss for the world's largest toy maker concluded a case that began in 2004, when MGA's line of 玩偶 was all the rage among teen and preteen girls. Mattel accused 面包车, 范 Nuys, California-based MGA of stealing its designs 由 hiring away a key employee.

Mattel CEO Robert Eckert sat stone-faced,...