Character.AI Files for Bankruptcy Protection ... Disney Moves to Secure AI Character IP
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U.S. startup Character.AI filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the District of Delaware on the 12th (local time).
Character.AI will proceed with an asset sale under court supervision and plans to keep its chatbot service running during the sale period.
Disney offered USD 20 million to secure a non-exclusive, perpetual license to some of Character.AI's IP and is the first bidder in the sale process.
U.S. startup Character.AI has filed for bankruptcy protection amid financial difficulties, Forbes and Reuters reported. Character.AI, known for its AI character conversational chatbot service and once a closely watched AI startup, filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the District of Delaware on the 12th (local time).
Character.AI plans to proceed with an asset sale under court supervision. In the process, The Walt Disney Company is seeking to secure usage rights to some of Character.AI's IP and offered USD 20 million. As generative AI services have grown, copyright and user safety issues have come to the fore, and this case is cited as an example of how those issues can affect a company's survival and IP transactions.
However, the bankruptcy filing does not mean the service will shut down immediately. Character.AI says it will keep its chatbot service running while the sale process moves forward.
Disney offered USD 20 million to secure a non-exclusive, perpetual license to some of Character.AI's IP. There is no time limit on use, and because the deal is non-exclusive, the same IP rights can be granted to other companies as well. Disney is the first bidder in the sale process, and the terms it proposed serve as a benchmark for comparing the offers of other potential acquirers. Other companies may bid by offering terms more favorable than Disney's.
Character.AI expects the sale process to be completed by late November or early December. However, if no buyer proposes to keep the service operating, the chatbot service could be discontinued.
Character.AI has operated a service that allows free conversation with AI chatbots set up as fictional people and famous characters. But as the service grew, legal issues involving the safety of underage users and legal issues over inappropriate AI responses surfaced.
Last year, after the families of children who died by suicide or attempted suicide following conversations with Character.AI chatbots filed multiple lawsuits against the company, it initially responded by arguing that the chatbot replies could be protected as free speech under the First Amendment to the U.S. Constitution. Later in October of the same year, it announced a policy banning continued topic-unrestricted chatbot conversations for users under 18, and in January this year it agreed to settle multiple lawsuits filed by families of underage users who claimed harm.
Questions were then raised about false medical credentials. In May, the government of Pennsylvania filed a lawsuit against Character.AI, alleging that some chatbots pretended to be licensed medical professionals in the state and presented fake Pennsylvania license numbers. This underscores concerns that AI chatbots can give users a false sense of trust in sensitive areas such as medical care and counseling, beyond entertainment services.
CEO Colin Adams said Character.AI had faced major legal, regulatory, and operational difficulties over the past year. The company's board reviewed several options and concluded that a court-supervised asset sale would maximize value for stakeholders.
The relationship between Disney and Character.AI began with a copyright dispute over character use. Disney sent a letter last September demanding that Character.AI stop the unauthorized use of its copyrighted characters and remove those characters from the service.
The characters in question included Elsa from "Frozen," Moana, Peter Parker from "Spider-Man," and Darth Vader from "Star Wars." Character.AI's AI responses were generated in ways that reflected each character's setting and background, and that approach sparked copyright infringement controversy. Character.AI removed those characters from the service after Disney's request.
The relationship between the two companies entered a new phase with personnel changes. On September 18, Disney announced that it would hire former Character.AI CEO Karandeep Anand for the newly created CTO position, and Karandeep Anand will take office on October 2. Several members of Character.AI's technical team are also expected to join Disney, continuing the shift in the relationship between the two companies.
Source: IT DAILY · Jo Min-soo
Original: https://www.itdaily.kr/news/articleView.html?idxno=242180
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Source: IT DAILY
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