The battle over Bratz continues as a federal jury on Thursday handed down a partial verdict in the contentious lawsuit between Mattel and MGA Entertainment.

The jury found that the majority of the initial designs and drawings for MGA’s Bratz dolls were in fact created by designer Carter Bryant while he was employed by Mattel. And although the jury cited MGA CEO Isaac Larian for ‘intentionally interfering with the contractual duties owed by Bryant to Mattel’ and ‘aiding and abetting Bryant’s breach of his duty of loyalty’ there are still a number of issues to be decided in the next phase of the court battle. The main issue the jury will next try to resolve when the trial reconvenes is whether or not the actual Bratz dolls infringe any copyrights Mattel may own of Carter Bryant’s drawings.

As the saga continues, Mattel released its Q2 earnings report, which showed a sharp drop in revenue due to a declining demand for Barbie and higher manufacturing costs. However, the earnings still topped market projections.

Worldwide net sales for the El Segundo, California-based toy company rose 11% to US$1.11 billion, but worldwide gross sales for core brand Barbie took a 6% downturn. Operating income sat at US$30.6 million compared to US$36.8 million over the same period last year.

The company’s big gainer was gross sales for Other Girls Brands that jumped 27%, driven primarily by Disney’s High School Musical dolls. And worldwide gross sales for the Wheels category, which includes the perennial properties Hot Wheels, Matchbox and Tyco R/C brands, were up 32%, thanks in part to the addition of Speed Racer.

Worldwide gross sales for the Entertainment business that includes Radica and Games and Puzzles grew 14% in Q2, mostly attributable to products with tie-ins to major movie properties Batman: The Dark Knight, Speed Racer and Kung Fu Panda.