No honey yet for Walt Disney as it fights on in battle of the $6bn bear

Media giant accused of shredding vital documents in bitter dispute over rights to Winnie the Pooh
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The battle over the rights to the Winnie the Pooh characters is about to be rejoined, with a succession of high-profile legal actions heading back to court.

At stake is the hugely lucrative market in Pooh characters on screen and Pooh cuddly toys, videos and other merchandise, controlled by Walt Disney, America's second-largest media company.

Disney is coy about how valuable the licence is, but Winnie the Pooh, created in the 1920s by the English writer A A Milne, is an undoubted honeypot. It is the studio's most profitable character, far more lucrative than its home-grown cartoon characters Mickey and Minnie Mouse, Donald Duck and Pluto put together. Estimates put the franchise income at between $3bn (£1.6bn) and $6bn a year, nearly a fifth of Disney's annual revenue of $32bn.

Pooh's contribution to Disney's bottom line gained extra importance last week with the downgrading of the company to "sector underperformer" by the New York analyst Jason Helfstein of CIBC World Markets. Visitor numbers at its theme parks have been disappointing, and Disney now has fewer television shows in syndication. Its shares slumped 4.1 per cent on the news.

At issue in the unresolved Pooh court actions is the ownership of the rights to the characters from the Hundred Acre Woods. Two weeks ago, the US Supreme Court declined to offer an opinion on an attempt by Milne's granddaughter, Clare, backed by Disney, to take back the rights granted by Milne to his American agent, Stephen Slesinger, in 1930. The rights are now owned by Slesinger's widow, Shirley, and daughter, Pati.

The aim of Ms Milne, who suffers from cerebral palsy, was to strike a new rights deal with Disney that would have benefited a charity for the disabled. The Disney-Milne argument was that a copyright extension provided by a change in the law had allowed the terms of the original agreement to be renegotiated. This was in spite of a deal agreed in 1983 by Ms Milne's father, the hero of the Pooh books, Christopher Robin Milne.

The Supreme Court's inaction has dealt a severe blow to Ms Milne's case. "To be quite frank, I do not see any further steps," said Michael Coyne, her solicitor. "As far as Clare Milne is concerned, it is over."

But it is not the end of the matter. The dispute has been referred back to the Ninth Circuit Court, in California, which must now decide unanswered issues. Chief among them is whether Minette Hunt, the granddaughter of the original Pooh artist, EH Shepard, can mount a similar Supreme Court action against the Slesingers.

Ms Hunt's London lawyers, Denton Wilde Sapte, were unavailable for comment but Mr Coyne said they would have to act quickly. "The Slesinger lawyers will want to tidy everything up as fast as they can," he said.

A further unresolved dispute between the Slesingers and Disney is also awaiting a hearing in the California state appeals court. It concerns the Slesingers' multi-million dollar claim that Disney has failed to provide accurate accounts and has cheated them out of Pooh merchandise income.

Although the court threw their case out in the light of their "willingness to tamper with, and even corrupt, the litigation process", the Slesingers claim similar bad behaviour by Disney. They accuse the company of shredding documents that would have allowed them to prove they were being short-changed.

The importance of the Pooh revenue to Disney's profitability and the tenacity of the company's lawyers are likely to ensure that the legal battles will continue far into the future, according to the Slesingers' lawyer, Steven Sherr. "We are in a wait-and-see mode," he said. "What happens next is anybody's guess."