Disney Apologizes, Receives Limited Rights to Muppets

Mickey Mouse ate a big serving of crow Tuesday as Walt Disney Co. settled its copyright dispute with the heirs of Muppets creator Jim Henson by apologizing to Henson’s family and buying a license for a pair of Muppets attractions at Disney World in Florida.

The vitriolic custody fight for such Muppet characters as Kermit the Frog and Miss Piggy flared into the open two weeks ago when Henson Associates Inc. filed a trademark and copyright infringement suit against Disney.

Henson Associates had charged Disney with the “outright theft of Jim Henson’s legacy” for, among other things, using the Muppets in a Disney World stage show and advertising without obtaining a license.

Disney, in a counterclaim and answer filed last week, contended that it had “an implied license” to use the popular characters because Henson Associates had allowed Disney to pour $90 million into the development of the stage show and a Muppets 3-D movie.

Both lawsuits were dismissed as part of the settlement, and Disney said it plans to open the 3-D film by Memorial Day.

“Our copyright and trademark rights have been acknowledged,” said Brian Henson, president of Henson Associates, in a statement released jointly by the two companies. “As a result, we have granted the Walt Disney Co. a license to show the two attractions at Walt Disney World.”

The license’s terms are far less favorable to Disney than the Burbank-based entertainment giant had sought during the lengthy negotiations that preceded Henson’s lawsuit.

Disney, according to Henson’s complaint, had demanded an exclusive 10- to 12-year license for the Muppet characters in the stage show and movie, as well as exclusive use of the Muppets trademark in theme parks throughout the world.

What Disney got was an exclusive 18-month license for theme parks east of the Mississippi. Disney also has an option to renew the license for 3 1/2 more years, which includes a second 18-month period of exclusivity.

The license does not include such Sesame Street characters as Big Bird and Ernie, which are controlled by the nonprofit Children’s Television Workshop.

Neither side would disclose the financial terms of the license.

“Henson is free to negotiate a license for the Muppets to appear immediately in theme parks west of the Mississippi, including in California,” said a source close to the negotiations. In other words, Miss Piggy and Kermit could soon be dancing at Disney archrival MCA’s Universal Studios theme park in California.

As part of the settlement negotiations, Henson Associates demanded and received an unusual public apology from Disney.

The specific language in the jointly issued press release reads: “With deep regret for what a Disney spokesman described as a serious misunderstanding, and apologies to the Henson family and their company for any harm that may have been caused, the Walt Disney Co. requested a license to permit it to exhibit ‘Kermit the Frog Presents: MuppetVision 3-D’ and ‘Here Come the Muppets’ at the Disney-MGM Studios Theme Park in Florida.”

It isn’t clear from the language whether Disney was apologizing for its unlicensed use of the Muppets or for its portrayal of Henson’s five children as greedy heirs trying to capitalize on their father’s legacy. A Disney spokesman declined to elaborate.

Said a source close to Henson: “The public apology was important because what they were doing was wrong. . . . Disney was being a bully, and they got it shoved up their nose.”

Disney apparently agreed to the rapid settlement after its attorneys realized that the company’s claim of an “implied license” was untenable. Ironically, Disney is known for assiduously protecting its own trademarks and copyrights and files about 200 lawsuits and regulatory actions a year to do so.

In August, 1989, Disney, in what its officials hailed as “a business association made in family entertainment heaven,” signed a letter of intent to acquire Henson Associates and the rights to Kermit and Miss Piggy for a reported $150 million.

The deal foundered after Jim Henson died last May at the age of 53. Henson Associates and Disney then attempted to negotiate a license, but the talks went nowhere until Henson Associates filed its suit describing Disney’s alleged hardball tactics.

THE DISNEY-HENSON SETTLEMENT Henson’s suit and Disney’s countersuit are dismissed.

Disney expresses “deep regret” and apologizes to the Henson family.

Disney obtains a license granting it exclusive use of certain Muppet characters at theme parks east of the Mississippi for 18 months.

Disney obtains an option to renew the license for an additional 3 1/2 years, with exclusive East Coast use for the first 18 months of the option period.

Disney will open a “MuppetVision 3-D” attraction at Disney World in Florida by Memorial Day.