updated 4/9/2007 7:33:18 PM ET 2007-04-09T23:33:18

The two sides in the long-running royalty dispute over the Winnie the Pooh characters have ended settlement talks, ensuring that complicated federal copyright litigation will continue.

The Walt Disney Co., which generates about $1 billion in annual revenue from the sale of Pooh products, informed a federal magistrate last month that it would not participate in settlement talks with the family that owns the licensing rights to the characters.

“We suggested to the magistrate that having a settlement conference at this time would not be meaningful,” said attorney Daniel Petrocelli, who is representing Disney in the dispute. “There’s really nothing to settle.”

Attorneys representing Stephen Slesinger Inc., the company that owns the rights to Pooh, said they would pursue federal action against Disney, including asking for $2 billion in damages.

“We will be proceeding in the federal court asking for money damages and asking that all the rights licensed to Disney by our clients be terminated,” Slesinger attorney Barry Slotnick said Monday.

Slesinger has claimed Disney owes it billion of dollars in royalties from the sale of Pooh videos, DVDs, computer software and other electronic products not specifically covered under deals with Disney but promised to Slesinger by Disney representatives.

The heirs of Stephen Slesinger filed a state lawsuit in 1991. That case was dismissed by a Superior Court judge in 2004 and is on appeal.

The dispute moved to U.S. District Court after the heirs of Pooh’s creators attempted to wrest the copyright back from the Slesingers and assign it permanently to Disney.

Earlier this year, Judge Florence-Marie Cooper ruled that the heirs of author A.A. Milne and illustrator E.H. Shepard could not revoke the copyrights from the Slesingers.

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