Disney found a way to buy Character.AI without buying its lawsuits

Disney has structured a deal to hire most of Character.AI’s staff and seek rights to much of its technology while leaving the startup responsible for its lawsuits and regulatory issues. The arrangement is being pursued through bankruptcy, which Character.AI says is intended to resolve claims and maximise value for shareholders.

Disney paid Character.AI $5.5 million in September and placed a refundable $2 million deposit, while hiring a majority of its employees, including former chief executive Karandeep Anand. Character.AI filed for Chapter 11 bankruptcy on 12 October; the court process will auction a perpetual, worldwide, non-exclusive licence to a broad range of its technology, excluding user data and its website. If Disney wins and the court approves, it will pay a further $12.5 million; another bidder may interview and offer jobs to up to 80 per cent of certain employees Disney hired.