Disney Pegs Cost of Logo Ruling at $40 Million

Walt Disney Co. told a federal judge Monday that it could cost the company more than $40 million to comply with a preliminary injunction ordering the entertainment giant to abandon the logo it uses to promote its Go Network of Internet properties, sources said.

The figure represents Disney’s estimate of the financial fallout it faces after losing the first round of a high-stakes trademark infringement suit filed last February by a Pasadena-based Internet start-up, GoTo.com Inc., which uses a similar logo.

Disney included the cost estimate in a document the company submitted under seal in U.S. District Court in Los Angeles on Monday. A source familiar with the document said Disney also requested a 60-day stay of the injunction, essentially asking the court not to enforce the order while Disney prepares an appeal.

Disney executives declined to comment on the filing, except to confirm that the company had requested a stay of the injunction. GoTo.com responded Monday with a filing of its own, urging the judge to deny Disney’s requests and saying that the company is exaggerating its potential losses.

“Disney’s request smacks of Chicken Little, the sky is falling,” said Pierce O’Donnell, an attorney representing GoTo.com in the case.

The legal wrangling centers on what has become a major marketing setback for Disney. On Friday, Judge Terry J. Hatter Jr. ordered the company to stop using a logo featuring the word “Go” inside a green traffic light because it too closely resembles a similar design used by GoTo.com, an Internet search engine.

Disney has spent millions of dollars building awareness around the Go Network by plastering the logo on almost every surface in the company’s empire, from Web pages to videocassette labels.

Even while Disney fought to block the injunction, the company began modifying its logo Monday. The company’s ABC television network and ESPN cable sports channel stopped using the traffic light symbol. Some of the company’s Web sites, including Family.com and ESPN.com, substituted a new logo that features green “Go.com” lettering inside a plain yellow border.

The injunction is in effect until trial, which is set to begin in the spring. And it does not preclude Disney from using the word “Go” or the Internet address https://www.go.com, which has become the company’s central address in cyberspace.

Nevertheless, the ruling marked a significant victory for GoTo.com, which claims it began using the traffic light logo in December 1997, about a year before Disney launched its Go Network of Web sites. GoTo.com’s stock surged on Monday, closing at $109 per share, up $17.78 on Nasdaq. Disney shares rose 81 cents to $25.88 on the New York Stock Exchange. GoTo.com’s sharp climb also may reflect a new television advertising campaign it unveiled Monday. But analysts said investors were mainly reacting to its courtroom victory over Disney.

Since GoTo.com filed its suit in February, it was clear that “whoever blinked was going to wind up with a pretty serious re-branding challenge,” said Lanny Baker, an analyst at Salomon Smith Barney in San Francisco. “Investors saw today that it looks like it will be Disney that blinks, not GoTo.com.”

GoTo.com submitted a $25,000 bond on Monday, required by the court as a condition of imposing the preliminary injunction. Sources said Disney asked the court to boost that amount to $20 million, a reflection of the compensation the company believes it might deserve if it complies with the order and later proves that it was wrongly imposed.

But O’Donnell said Disney’s costs are likely to be far lower than the company’s estimates because GoTo.com is willing to make a number of concessions. For instance, he said, it is not asking Disney to retrieve and destroy existing products that have the disputed logo, an effort that could cost tens of millions of dollars.

Goto.com has pursued a novel search engine strategy, allowing companies to pay to have their Web sites appear at the top of search results.

The company’s revenue in its latest quarter, which ended Sept. 30, was $8.4 million, more than double the amount, $3.6 million, reported in the previous quarter. The company still posted a net loss of $7.6 million in the September quarter.