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MGA Comments on IFI Lawsuit

MGA Entertainment's Statement in Response to Innovation First Lawsuit

VAN NUYS, Calif., Oct. 6, 2010 -- MGA Entertainment, Inc. learned yesterday through press reports that Innovation First has filed a lawsuit against MGA in Texas based on alleged intellectual property rights in IFI's HEXBUG Nano. The lawsuit was filed despite IFI's sworn testimony last month to a federal judge in Los Angeles admitting that MGA's Legend of Nara Battling Bug collection "is substantially different" from the HEXBUG Nano and IFI did not have any infringement claims against MGA's Nara Bug. This new suit appears to be a marketing ploy by IFI intended to mislead customers. IFI still has not served MGA with its purported suit.

Earlier this year, based on statements by IFI to certain customers of MGA, MGA filed a complaint against IFI in federal court in Los Angeles asking for a declaration from the court that IFI has no intellectual property rights in the HEXBUG Nano and that the Nara Bug does not infringe any rights of IFI. In asking for a dismissal of the case, IFI informed MGA and the Court that it had no claims against MGA because "the outward appearance of the current 'Legend of Nara Battling Bugs' toys from MGA... is substantially different from the outward appearance of the HEXBUG Nano, so that the trade dress and copyright laws do not appear to be implicated." IFI also assured the Court that no dispute existed between IFI and MGA because "the current facts and circumstances do not create a real or reasonable apprehension that MGA faces the threat of liability to either IFI or IF Labs." IFI likewise admitted to the Court that it does not have any patents covering any aspect of the HEXBUG Nano.

As IFI assured the court in Los Angeles, the parties' products are "substantially different" in design and appearance, and "IFI and IF Labs have indicated, repeatedly, that they have no plans to sue MGA" for infringement. IFI's Texas lawsuit contradicts these clear representations by IFI to the court and MGA and, based on the earlier representations and the plain differences in the products, MGA will seek a prompt dismissal of IFI's specious suit.

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