Disney forces Character.AI to let it go, removes copyrighted characters after legal threat

Disney has sent a cease-and-desist letter to Character.AI, an AI chatbot platform, demanding the removal of numerous Disney-owned characters and accusing the startup of “blatantly infringing” on Disney’s copyrights. The legal action highlights growing tensions between entertainment giants and AI companies over unauthorized use of intellectual property, particularly as AI platforms increasingly feature user-generated content based on popular characters.

What you should know: Character.AI complied with Disney’s demands by removing all cited characters from its platform following the September 18 legal notice.

• The affected characters spanned Disney’s entire portfolio, including Anna and Elsa from “Frozen,” Marvel heroes like Spider-Man and Iron Man, and Star Wars characters such as Darth Vader and Yoda.
• Disney’s lawyers accused Character.AI of training its AI “without authorization on Disney’s copyrighted works” and creating “immersive versions of Disney’s famous and beloved characters.”

The big picture: Disney’s aggressive legal stance reflects broader industry concerns about AI companies potentially profiting from copyrighted content without permission or compensation to rights holders.

• The entertainment giant has already filed lawsuits against AI companies Midjourney and Chinese firm MiniMax, alongside NBCUniversal and Warner Bros. Discovery.
• These actions signal that major studios are drawing firm boundaries around how their intellectual property can be used in AI applications.

What they’re saying: Disney’s cease-and-desist letter expressed particular concern about potential harm to children and brand reputation.

• “Character.ai’s infringing chatbots are known, in some cases, to be sexually exploitive and otherwise harmful and dangerous to children, offending Disney’s consumers and extraordinarily damaging Disney’s reputation and goodwill,” the letter stated.
• A Character.AI spokesperson defended the platform as user-generated creativity: “All of the Characters on our service are generated by users — it’s an incredible outpouring of creativity. Some of those characters are original creations, and some are inspired by existing characters that people love. It’s like fan fiction, but in an interactive form.”

Who else is involved: Character.AI has significant backing from major tech players, complicating the intellectual property dispute.

• Google entered into a $2.7 billion licensing deal with Character.AI in 2024 and hired the company’s CEO Noam Shazeer as VP of engineering for its Gemini AI division.
• The Menlo Park-based company raised $150 million in 2023 led by Andreessen Horowitz, a prominent venture capital firm, achieving a $1 billion valuation.

Why this matters: The dispute underscores the complex legal landscape emerging around AI-generated content and user creativity versus intellectual property rights.

• Character.AI expressed interest in partnering with rights holders, stating their goal is to “give IP owners the tools to create controlled, engaging and revenue-generating experiences from deep fandom for their characters.”
• This case could set precedents for how AI platforms handle user-generated content based on copyrighted characters across the entertainment industry.