Disney to Pay GoTo.com $21.5 Million

Walt Disney Co. agreed Thursday to pay $21.5 million and change the logo for its Go.com Internet portal to settle a 15-month-old trademark infringement suit with Web search engine firm GoTo.com, one of the largest trademark awards ever.

While the dollar figure is not a large amount for a media behemoth such as Disney, it is a huge sum for GoTo.com, a 2 1/2-year-old Pasadena firm that lost $30.5 million on revenue of $17.2 million in its most recent fiscal quarter. The windfall will allow GoTo.com to avoid raising any more money from investors until it becomes profitable, said Jeffrey Brewer, the company’s chairman.

The settlement ends an improbable David-versus-Goliath story worthy of a Disney movie. GoTo.com was a start-up firm with 75 employees when it filed suit against Disney, a global concern that earned $1.3 billion in annual revenue on $23 billion in sales last year.

Still, U.S. District Judge Terry Hatter agreed with GoTo.com that Disney’s Go.com’s logo, a green traffic light with the letters “Go” in white, was confusingly similar to GoTo.com’s own logo, a green traffic light with the letters “GoTo” in white.

Hatter ordered Disney in November to stop using its logo, but the entertainment giant appealed. Then in January the U.S. 9th Circuit Court of Appeals also ordered Disney to stop using the logo.

Disney balked, claiming it would cost $40 million to remove the logo from myriad television commercials, movie trailers, CD cases and print advertisements. In March, Hatter told Disney he would consider holding the company in criminal contempt if it did not comply with his ruling.

“Disney has a culture of corporate arrogance, and they probably thought GoTo was just a pimple on the Disney machine,” said Patrick Keane, an analyst with Jupiter Communications in New York.

The $21.5-million award is $3.2 million shy of the record $24.7-million settlement Quaker Oats Co. was ordered to pay Sands, Taylor & Wood Co. in 1990 for violating its “Thirst-Aid” trademark.

Disney had high hopes for its Go.com portal when it launched in January 1999. When GoTo.com first approached Disney about its trademark concerns, Disney expressed interest in buying the logo outright, according to people familiar with the situation. GoTo.com, which had been using the logo since December 1997, wasn’t interested.

Then the Go.com portal foundered, forcing Disney to announce in January that it would retool the site to focus on recreation, entertainment and leisure. The relaunch is still in the works, but analysts are skeptical that the revised business will do any better.

As part of the settlement, Disney agreed not to revive the challenged logo and to stop using Go.com’s replacement logo, which features “Go.com” in green and white letters with a yellow arrow. Disney also dropped a counterclaim against GoTo.com.

Go.com spokeswoman Michelle Bergman said Disney was designing a new logo anyway as part of the site’s relaunch.

GoTo.com employees were “thrilled” to put the case behind them, Brewer said.

Analysts have also become more upbeat about GoTo.com, with some predicting that the company will become profitable in early 2002.

Before the settlement was announced, Disney shares gained 50 cents to close at $39.81 on the New York Stock Exchange on Thursday, and its Go.com tracking stock lost 56 cents to close at $12.44. Shares of GoTo.com rose 69 cents to close at $15.13 in Nasdaq trading.