Pinocchio was just fine in the Shrek movies, and I imagine Eisner wasn't happy that Universal of all people used him (as, only a few years prior, Universal poached a bunch of imagineers and made The Lost Continent, which copied a lot of elements of 'Beastly Kingdom', the original name for Animal Kingdom), so it must have took a lot of lawyers saying "this is a bad idea" when Eisner surely suggested they sue over using Pinocchio.