Two British sisters who claimed they lost up to £90million after their toy business was destroyed by a giant US rival have lost a court bid for a payout.

Sisters Hayley Michaelson and Lauren Cohen, together with their husbands, Marc Michaelson and Johnny Cohen, came up with their idea for a globe–shaped surprise collectible toy while on a family holiday together in 2014.

The 'Worldeez' toy – inspired by their own kids' love of 'unboxing' videos on YouTube and 'unwrapping' toys like Kinder Eggs – consisted of a globe which, when unwrapped, revealed gifts themed on individual countries around the world.

They secured start–up funding, online influencer support and planned to launch their product through high street toy giants, Smyths, Toys 'R' Us and The Entertainer, but claimed they ultimately failed after a 'campaign' by MGA Entertainment, the world's largest independent toy maker.

A judge in June last year found that the billion–dollar American company – which claimed similarities between Worldeez and their own LOL Surprise collectible – had waged a 'campaign' to exclude the rival product from the market.

It included threatening to withdraw their own highly popular LOL Surprise collectibles from Smyths, Toys 'R' Us and The Entertainer if they stocked Worldeez, and 'unjustified' threats of patent infringement.

But although MGA was found to have waged an 'exclusionary campaign' to keep Worldeez off major store shelves – an 'abuse' of its 'dominant position' in the market – Mrs Justice Bacon refused to award any damages, finding instead that Worldeez would have failed anyway.

The case was back in court last week, after Cabo – of which the sisters and their husbands are directors – appealed the decision not to award them compensation.

Their lawyers claimed that, if successful, the case could have ended up being sent back to the High Court for a new decision on potential multi–million–pound damages.

But top judges at the Court of Appeal in London have now thrown out the sisters' case.  

The sisters were both involved in the design of the toys, with Mr Michaelson involved, while also leading marketing efforts, and Mr Cohen involved in manufacturing and imports.

The two couples managed to secure investment and, while they were in control of design, the investors provided financial support, logistics and contacts within the toy industry.

Cabo’s barrister Stefan Kupper said: 'The final design of the 'hero' product was the globe, consisting of a pink spherical capsule covered in two layers of plastic wrapping', said the barrister.

'The sphere was divided into two compartments, one of which could be unlocked to reveal two blind bags each containing a Worldeez figurine as well as two small fact cards.'

Worldeez launched with 120 collectible figurines across eight countries and secured marketing support through YouTube influencer Tiana, while also negotiating a TV advertising deal with Nickelodeon.

However, MGA Entertainment allegedly threatened to withdraw its popular LOL Surprise toys from retailers stocking Worldeez, while claiming the rival product copied its designs and infringed its patents. 

As a result, The Entertainer cancelled its order, while Smyths and Toys ‘R’ Us never stocked the range.

Worldeez eventually launched in B&M, but sales declined and the business failed. 

The High Court subsequently ruled that MGA had used coercive tactics and abused its dominant market position in an unlawful campaign to keep Worldeez out of major UK retailers.

The judge refused Cabo's claim for compensation from MGA, finding that even without MGA's involvement, Cabo 'would not have traded profitably'.

'There is no doubt that Worldeez was in principle an appealing product which had an initially successful marketing campaign, particularly online,' she said.

'But it was competing in a crowded market for collectibles, and needed to be more than that to succeed.' 

Cabo argued that the judge was wrong to require the start-up to prove it would have been profitable before awarding compensation, saying this placed an unfair burden on a new business with no sales history. 

Its barrister argued that MGA’s unlawful actions had prevented Worldeez from securing major retail deals, stifling its growth and causing financial harm. 

He warned the ruling risked allowing large companies to crush smaller competitors without facing financial consequences.

But for MGA, barrister Victoria Wakefield KC said that, by its appeal, Cabo is now trying to open the gateway to an open–ended damages award, under which the court would have to take into account the small possibility that Worldeez would have been a huge success.

'By that, what MGA understands Cabo to mean is that, despite the court's clear finding that Cabo would not have been profitable in the counterfactual, the court should consider the chances that it would have been, for example, highly profitable in the counterfactual and apply those percentages to that level of damages – this is wrong in law,' she said.

She accused Cabo of initially going for a 'jackpot win' by claiming as much as £90million, but now putting forward a 'radically more conservative claim' by relying on arguments it did not put forward at trial.

'At no point did Cabo serve, or indeed rely upon, evidence in support of a claim that it would have been less loss–making,' she told the court.

And she disputed the claim that requiring Cabo to prove that Worldeez would have been profitable was wrong.

'Showing that Cabo would have been profitable in the counterfactual is not an 'impossible burden', as Cabo suggests,' she said.

'Rather, it is the baseline that it is – and should be – necessary to establish in order for the court to make the type of open–ended damages assessment to which Cabo contends it is entitled.'

At the end of a two–day hearing in London, Lord Justice Males, Lord Justice Popplewell and Lord Justice Phillips dismissed Cabo's appeal but said they wouldn't be giving their reasons for doing so until a later date.

• A previous version of this article included an image purportedly of Lauren and Johnny Cohen, which was supplied by a news agency. In fact, it showed an unrelated couple with similar names. The article has been amended to remove the wrong image, and we apologise for the error.