Bratz dolls have taken market share from rival Barbie.
The maker of Barbie dolls, Mattel, has argued that it should own the rights to Barbie's younger rivals, the popular Bratz dolls range.
The toy giant argued at the start of a court case that the 10-inch characters were created by a former employee while he was still working for Mattel.
It wants competitor MGA Entertainment to stop selling Bratz products.
But MGA contends that Carter Bryant came up with the Bratz designs when not working for Mattel.
The smaller rival says Mr Bryant first had the idea in 1998, when he had been out of Mattel's employment for eight months, and that the dolls were developed by MGA engineers in late 2000 and 2001.
BRATZ: BUILDING A BRAND
June 2001: Bratz dolls launched
Main characters: Cloe, Yasmin, Sasha and Jade dressed in urban fashions
September 2004: Bratz outsell Barbie in the UK
September 2005: Bratz animated TV series airs
August 2007: Bratz online community launched
But in the opening day of evidence in California, an attorney for Mattel said Mr Bryant's sketches were done on Mattel notepaper and that he worked on the designs for a year while still working for the company.
"MGA didn't hire him straight away," said Mattel attorney John Quinn.
"They polished the fashion doll design using Mattel resources and Mattel personnel."
Earlier this month, Mattel dropped its claim against designer Carter Bryant for $35m in royalties he had been paid by MGA Entertainment for his work on the Bratz dolls.
MGA said Mattel's claims against it were "equally baseless" and said it intended to counter-sue for $1bn in damages at the end of the current court case.
Barbie has slipped in popularity since the launch of the Bratz franchise in 2001.
As well as dolls, the Bratz product range includes clothes for young girls, stationery and a feature-length movie featuring the characters.