Mattel has settled its lawsuit against ex-employee and Bratz inventor Carter Bryant, but its case against MGA Entertainment will proceed.
The firm said it would not disclose the terms of its settlement with Bryant.
In April 2004, Mattel sued Bryant seeking $35 million in royalties paid by MGA in connection with his work on Bratz dolls. A federal judge in California last month cleared the way for Barbie doll maker Mattel to go forward with its lawsuit.
Mattel said it plans to proceed with its copyright infringement lawsuit against MGA, due to start this month.
Sales of Barbie dolls have waned in recent years amid fierce competition from Bratz dolls, which burst onto the market in 2001. Mattel said last month the Bratz litigation was a factor in its $46.6 million first-quarter loss.
"Mattel has finally acknowledged that its suit against Carter Bryant was without merit," MGA said in a statement on Monday, adding that it looks forward to its chance to prove that Mattel's claims against it are equally baseless.