KB Toys seeks court approval on compromise with Disney

WASHINGTON – Toy retailer KB Toys Inc. is asking the bankruptcy court overseeing its Chapter 11 case to approve a compromise with Walt Disney Co. that will avoid a protracted court fight between the two companies.

According to court papers submitted Monday to the U.S. Bankruptcy Court in Wilmington, Del., KB will pay $365,776 to Disney and will stop sales of Disney-themed dolls.

In exchange, Disney agrees not to sue KB for infringing on the entertainment giant’s intellectual property.

A hearing on KB’s request has been scheduled for Sept. 27 in Wilmington. Objections are due Sept. 14, according to court papers obtained Wednesday by Dow Jones Newswires.

According to court papers filed on KB’s behalf, the compromise stems from a November 2003 agreement that gave KB the right to manufacture and sell Disney-themed dolls through February 2004. In return, KB was required to pay Disney 50 percent of the net. KB was also required to pay Disney for costs related to a promotion program involving both companies, court papers said.

In addition to ending sales of any Disney-themed dolls, KB agreed to destroy some 6,500 dolls.

KB said the compromise with Disney gives the two parties immediate closure of their dispute and avoids the risks connected with litigation.

Pittsfield, Mass.-based KB Toys filed for Chapter 11 protection Jan. 14 after dismal holiday sales. The company had assets of $507 million and liabilities of $461 million as of Jan. 3.