Earlier this week, Character.AI filed for bankruptcy. This comes after the generative AI platform has faced multiple legal challenges over its chatbots. One of the legal challenges came from Disney, which sent a cease-and-desist order to the company telling it to not use its characters without permission. Recently, Character.AI’s former CEO, Karandeep Anand, was hired by Disney as its first Chief Technology Officer.

According to the bankruptcy filing, Disney will be a “stalking-horse” bidder. This is an initial prospective buyer. If things go as planned, Disney will purchase a nonexclusive perpetual license to some of the company’s intellectual property. Other bidders could attempt to challenge this, but Disney would have the right to counterbid. Disney’s opening bid is $20 million.

As filed this week, Character.AI is expecting to close the sale of all its assets by late November or early December. According to the court filing, the estimated assets and liabilities are $50 million to $100 million. This comes from Character Technologies, the U.S.-based owner of Character.AI.

During the transition period, Disney says it will help Character.AI. This will be done with staff that Disney hired from Character.AI. In the meantime, the platform’s services will continue. If the company does not find a buyer, it will shut down.

The bankruptcy came less than two weeks after its former CEO joined Disney. It doesn’t appear that Disney is looking to purchase the entire company, but rather just some of its intellectual property that it could use for its own AI initiatives. Recent memos from Disney executives have shown how AI is becoming increasingly important to the business model that is being built under new Disney CEO Josh D’Amaro.

What do you think about Disney bidding on these Character.AI assets? Share your thoughts and opinions in the comments below!