Disney structured a deal to hire most of Character.AI’s staff. It also seeks a perpetual license to Character.AI’s IP, including trust and safety tech. Character.AI filed for bankruptcy to enable the transaction. The deal lets Disney avoid Character.AI’s legal liabilities. Character.AI faces lawsuits over chatbots allegedly harming minors. A coalition of 46 states is investigating the company. Disney paid $5.5M upfront and a $2M deposit. It will pay $12.5M more if it wins the IP auction. The auction allows other bidders to interview up to 80% of hired employees. States reserve the right to challenge the bankruptcy plan. Character.AI previously licensed tech to Google in a similar deal. Google was later sued alongside Character.AI over a teen’s death. Character.AI settled those lawsuits in principle earlier this year.
What changed
Character.AI operated independently with ongoing legal liabilities and staff.
What it unlocks
Disney gains perpetual license to Character.AI’s IP while avoiding its legal liabilities.
- $5.5M initial payment
- $2M refundable deposit
- $12.5M closing payment
- 46 states investigating
What you need to act on it
- Character.AI bankruptcy approval
- court-approved auction
- Disney selected as winning bidder
Sources