The real Pooh story

[AllisonG]

I know this is the rumor board but I asume it is the fact board also, so here it is:
Who can tell me the real facts about the Pooh problems?
I thought Disney bought Pooh years ago. Now if you buy something, why because you made money on it, would you owe the seller anything?
Just my confusion.
Thanks for any help.

 

[Sarangel]

A good question, and one that keeps a lot of lawyers employed...

As I understand the situation, Disney bought the rights to market Pooh in certain ways that were specified by the contract. The problem comes up (in its simplest terms) when Disney tries to market Pooh in ways not specified by the contract, i.e. using technology that wasn't invented at the time like VHS Tapes or Computer Games.

The Pooh people (rightfully in my fuzzy little brain) believe that they should receive some compensation for Disney's use of the bear in this way, and Disney contends that since the contract doesn't specify they get to use the bear without further compensation.

Again, this is the short version and I'm not a lawyer so I may be missing some points.

Sarangel

 

[Bstanley]

Not a bad synopsis, here's my $0.02 worth.

A gentleman by the name of Schlesinger purchased the 'North American merchandising rights' to the Winnie the Pooh characters from A.A. Milne in the nineteen thirties. When Disney decided to make a Pooh movie they signed a sub-license with Mrs. Schlesinger to pay royalties on any merchandise they sell ('Mr.' had died by then) as well as with the hospital in Great Britain which owns the rights for the rest of the world.

There are two 'disagreements' Mrs. Schlesinger (+ her children now) has with Disney.

1. Disney has not kept accurate records of the merchandise sold and/or may be deliberately concealing accurate records from the Schlesingers. It seems that starting quite some time ago Mrs. Schlesinger has been able to find Pooh merchandise for sale that she can't reconcile with the royalty records provided to her by Disney. Maybe it's Disney defrauding her or someone defrauding both of them... there is evidence that Disney has destroyed records of Pooh merchandise, both here in the US and at their overseas partners plants.

2. Disney does not agree with Mrs. Schlesinger that VHS tapes, DVDs, Computer games and other electronic 'stuff' are 'merchandise' under the original agreement... there is evidence that in the late 70s/early 80s a Disney VP was about to sign an new agreement with Mrs. Schlesinger agreeing that such electronic 'stuff' was indeed 'merchandise' - but the new agreement was never signed.

The total amount owed to the Schlesingers could be immense - and even worse because of the evidence tampering that Disney was involved in the Judge in the case has basically said that if the trial goes against Disney he would allow the Schlesingers to 'pull' the license that Disney has - ie NO MORE POOH!

Disney has fired back by getting the international copyright owners to start a legal battle to 'pull' the license from the Schlesingers!

Very messy - very ugly - and potentially very expensive.

 

[raidermatt]

Excellent summaries by Sarangel and Bstanley.

Just want to make sure you have gotten the answer to your specific question, Allison:

Now if you buy something, why because you made money on it, would you owe the seller anything?

The key is that Disney did not actually buy Pooh. They bought the rights to make and sell Pooh stuff. In exchange, they agreed to pay the Schlesingers a percentage of what they sell.

Assuming everyone lives up to their end of the contract, its a great deal for everyone. Disney gets to make oodles of money off of Pooh, who they didn't even have to create. The Schlesingers also make oodles of money without having to actually do anything. The don't have to manufacture stuffed Poohs, or build their own theme park, or produce cartoons.

Disney builds and profits from the Pooh name more than the Schlesingers ever could on their own, and consequently both parties make lots of money.

The problem is that the Schlesingers feel that Disney hasn't given them all of the money they are entitled to.

 

[Another Voice]

Okay, here’s the “last week on…” version.

Back around 1930 Stephen Slesinger purchased most of the North American rights for ‘Winnie the Pooh’ from author A.A. Milne. These rights included merchandise, movie rights, stage performances, other uses of the ‘Pooh’ character beyond the original four books, and right for what we would call “television” today.

Mr. Slesigner marketed his properties through the years including a child’s clothing line, recordings and nick-knacks. But he was always looking for a movie deal.

In 1961 they found one with Walt Disney Productions. The Slesigners licensed their rights to ‘Pooh’ to Disney; Disney made films and re-licensed the merchandising rights to Sears.

By 1966 the Slesingers were claiming that Disney and Sears were selling products without paying the proper royalties. After years of bickering, Disney paid the Slesigners $750,000 in catch-up payments and promised not to do it again.

Now this is where things go off because Disney really did do it again. They have admitted that it did to not pay royalties on some items and that not all of the sales of other items were properly recorded (leading to more short payments). The reasons they say this happened vary, but one of the court cases is to determine the amount of the back royalties. The initial ruling in the case was supposed to amount to about $200 million, but there’s a twist here that will show up later.

This issue came to light during the legal dealings with the other issue – new technology. Disney has long held that video tapes, DVD’s, computer games, Internet use and so on are not covered under the terms of any deal. Those contracts, signed from the 1920’s through the 1970’s, don’t list those methods because they didn’t exist at the time. All the other studios in Hollywood now interrupt the contracts as if they did (using a broader definition of the word “recording”). The Mouse has lost a long string of lawsuits over this very point including suits brought by singers Peggy Lee and most of the original Mouseketters.

The Slesigners filed their lawsuit over this issue 11 years ago. They claim that the then-head of Disney’s licensing group had promised they would receive royalties from video cassettes and other uses of Pooh.

Now when the other issue of unpaid royalties was discovered, the judge ordered Disney to preserve and hand over documentation of all sales of all Pooh related items. Instead, Disney destroyed thousands of those documents, including the infamous boxes marked “Winnie The Pooh – legal problems”. Disney did not reveal this destruction until eleven months after the fact, and only under subpoena from the judge. This has brought serious consequences down on Disney.

The key documents that were destroyed seem to back up the Slesinger claim that they were promised royalties on these “future” technologies. The judge has ruled that the Slesigners will be able to present their argument to the jury and that Disney deliberately destroyed evidence that supports the statements. Disney lost its appeal of this ruling just two months ago. Disney’s only counter argument to this key point will be that the vice president who made the promise was not authorized to do so

At the same time, the judge has ruled that Disney was also illegally influencing the court-appointed accountant who was trying to figure out how much Disney owed in royalties on the other stuff. The judge threw out the accountant’s finding, barred the accountant from dealing with the court and slammed into Disney again. It was generally considered that the original $200 million judgment was based on low-end estimates of Pooh sales. The judge is now allowing accountants hired by the Slesigners to come up with their own estimate as well. The estimated back-royalties are now expected to soar higher.

The judge has also ruled that if the jury finds that Disney breached its contract with the Slesigners that he can rule all of Slesigners rights revert back to them – meaning Disney can loose ‘Pooh’ in the U.S. and Canada.

In yet one more twist, Disney is trying a legal "end-run" around the Slesigners. Disney has purchased all the remaining non-North America rights to Pooh from the estate of A.A. Milne. They’re also trying a legal gambit where the surviving heirs can “reclaim” the rights originally sold to the Slesigners. Most observers feel this is no basis in the law and one of the heirs is so elderly that the British courts have ruled her unable to manage her own affairs.

The stakes for Disney in this are immense. The Pooh character is the backbone for Disney entire merchandising effort and generates several billion dollars a year. The loss of this revenue would be devastating; the thought that Warner Brothers, Dreamworks or Universal getting these rights is terrifying.

The trail about disputed royalties aspect of the case should start around March. The portion of the case about the non-disputed royalties is still waiting for the accountants to make a determination (the one that was thrown out took five years).

 

[eeyore74]

Interesting! Scary to think Pooh can leave us.

But what about Gopher? Wasn't he a Disney creation? Will it all change to:

The New Adventures of... Gopher ???

Just kidding on that remark, but I do wonder about it. I'd hate to lose Pooh and friends here.

 

[AllisonG]

Wow, how nice it is to have all of this information.
Thank you so much for all of your reply's.
Great to see some of the 'DIS' rumor royalty throw in their insight.
I can finally tell my Mom whats really going on. She just assumed the original sellers were just trying to jip Disney out of money they didn't deserve. Your informative words will help so much.
Thanks again!

 

[Chuck S]

This could add an interesting twist. Disney's renderings of the "Pooh" characters are not identical to the original. Have you seen any of the old Pooh artwork and original plush toys? Disney's colors are much more vivid and the lines are "cleaner". I wonder if Disney will try to claim that it artistic rendering added to Pooh's success and popularity?

 

[d-r]

The "Disney Pooh" is very different from the "Classic Pooh." Schlesinger's are trying to benefit from Disney's work in developing and promoting.

 

[EUROPA]

Originally posted by d-r
The "Disney Pooh" is very different from the "Classic Pooh." Schlesinger's are trying to benefit from Disney's work in developing and promoting.

...and that would be why they sold the rights to Disney in the first place to benefit from Disney's work. I'm sure they did not sell them so they could lose money or not benefit.

 

[Bob O]

No matter what happens Pooh wont be leaving!!! He may leave the disney company but will be picked up by somebody else who will still showcase him and his friends. It may be scary for disney as they tryed to screw the heirs out of money but Pooh will always be around!!

 

[FergieTCat]

Here's an article from Fortune:

http://www.fortune.com/fortune/articles/0,15114,404206,00.html

 

[larworth]

If this were a movie I'd probably walk out saying how unbelievable the plot was.

Here is more on the saga (see "Pooh Papers") AmRep

Dec. 26, 2002 -- The estranged husband of Beverly Hills Winnie the Pooh heiress Patricia Slesinger told The American Reporter today he has considered blocking a proposed $200 million settlement offered last week by the Walt Disney Co. in her long-running, billion-dollar royalty suit. That could force the complex case to trial early next year.

In a phone call to the paper on Christmas Day, printing executive David Bentson of Beverly Hills, who in a recent deposition said that he is planning to co-author a book about the case, told AR he is weary of being mistreated by his wife and would use community property rights under two marital agreements with Slesinger to block any settlement of the lawsuit, brought by her mother's branding firm, Stephen Slesinger Inc. of Tampa, Fla., in 1991. In a second conversation on Thursday, however, Bentson backed away from an assertion that he would definitely block the case

A $200 million settlement offer would be slightly higher than the $12 million the Disney sponsored accountants said they owed. What a surprise.

For Disney's sake I hope they can reach a settlement. If not I need to see if my cable company carries Court TV. This one should be a doozie (sp?).