In new pact, Slesingers to be cut from merchandising rights

Aiming to safeguard its $1 billion-a-year “Winnie the Pooh” franchise, Disney on Monday announced a new agreement with the heirs of A.A. Milne and E.H. Shepard, the book’s author and illustrator.

The move comes in the midst of a long-running litigation battle with the family of Stephen Slesinger, which owns the North American Pooh character rights, and licenses them to Disney. Attorneys for the family called the deal “a desperate ploy” Monday night, and said that it wouldn’t hold up.

According to a Disney spokesman, Clare Milne and Minette Hunt, Milne and Shepard’s granddaughters, gave notice to Disney and the Slesinger family that they are terminating the merchandising rights to the characters granted Slesinger and Disney, effective 2004. Separately, they have granted to Disney exclusive worldwide rights to merchandise the Pooh characters starting in 2004. Financial terms were not disclosed.

The heirs apparently exercised recapture rights under the 1998 Copyright Act, which allows authors and their heirs to terminate a license even if it appears to be perpetual. They can exercise these rights within certain window periods during the term of the copyright.

Bonnie Eskenazi, the Slesingers’ attorney, said “This is a desperate ploy by Disney to avoid paying the money they promised to pay the Slesingers under their 1983 agreement, an amount we estimate at somewhere between $500 million and $1 billion.”

Eskenazi also said Disney’s claim that the Pooh copyrights were in a window period during which they could be recaptured was simply bad lawyering.

“By making this claim, Disney is repudiating the 1983 agreement. The Milnes revoked and reconveyed Slesinger’s license under that agreement specifically to avoid a recapture problem. “

Disney maintains that the new deal will have no effect on the long-running Pooh litigation with the Slesinger family. The Slesingers obtained North American merchandising rights for Pooh from Milne in 1930. The Slesinger family has licensed its Pooh rights to Disney since the 1960s. In its litigation, the Slesingers claim they were cheated on royalty payments on certain categories of merchandise such as stuffed animals. They also claim they were never paid royalties on video and computer games. Their claim that they are owed hundreds of millions of dollars will go on regardless of whether the new Milne-Disney deal holds up, because it involves alleged underpayments in the past. Trial in the case is set to begin next year.

The Slesingers also have claimed that they are entitled to terminate their license with Disney as a remedy in their suit. However, if the Milne heirs terminate their license with the Slesingers, the threat that Disney will lose Pooh is moot.

It is unclear how the new deal with the Milnes jibes with reports 18 months ago that Disney paid $350 million to acquire the Milne-Shepard international Pooh rights until the copyright expires. Apparently, under the new deal, the two heirs will reacquire not only North American rights, but also international rights, and grant them to Disney.

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