Mattel v Bratz

Mattel is suing the maker of Brats (AMG) for violation of its Intellectual Property. Apparently, the guy who came up with the idea for Brats was working for Mattel at the time. So any IP that he came up with is the property of Mattel.

AMG is countering that they did most of the work and took all of the risk. They finalized the design, figured out how to manufacture the dolls, marketed the brand, invested in the inventory, etc.

Legally, AMG's argument is full of holes. IP law gives Mattel the right to prevent anyone from using the IP. But we can debate two implications.

First, should IP law have this result? AMG did put a lot of time, money, and their own IP into developing the Brats brand. Should this give them some kind of rights? The original idea of IP law is to promote the progress of science and the arts. What stance achieves this the best?

Second, what should the damages be? Should Mattel be able to recover all of the profits AMG shifted from Barbie (made by Mattel) to Brats? Or should the investments AMG made in developing Brats be give some kind of credit? The current law and precedent probably finds in favor of Mattel. But again, what SHOULD it be?