Spider Man, Iron Man, The Incredible Hulk, Thor, The X-Men, The Fantastic Four, and most of The Avengers are among the best known comic book characters of all time. All were created by the comic book genius Stan Lee. Motion pictures starring these characters released within the past three years have generated box office receipts in excess of $3 billion.
A lawsuit filed this month by Stan Lee Media, Inc. (“SLMI”) alleges that “The Walt Disney Company has represented to the public that it, in fact, owns the copyright to these characters as well as to hundreds of other characters created by Stan Lee” but “[t]hose representations made to the public by The Walt Disney Company are false.” According to the suit, “Stan Lee Media, Inc. owns the copyrights to Stan Lee’s creations” and “is entitled to the billions of dollars of profits that have been kept by Defendant Disney.”
Stan Lee assigns copyright interests to Stan Lee Media’s predecessor
Stan Lee was employed for more than four decades by Marvel and its predecessors. During his tenure with Marvel, Lee created or co-created hundreds of characters including iconic characters such as Spider–Man, Iron Man, the Fantastic Four and the X–Men.
On October of 1998, Lee helped form Stan Lee Entertainment, Inc., the predecessor to SLMI. Also in October of 1998, Lee entered into an agreement which provided that Lee would serve as Chairman and Creative Officer of SLMI for life in return for a salary, stock options and other compensation. Pursuant to the Employment Agreement, Lee also agreed to “assign, convey and grant to [SLMI] forever, all right, title and interest I may have or control, now or in the future” in certain copyrights and trademarks.
SLMI alleges that by signing the Employment Agreement, Lee assigned all copyrights and trademarks associated with all characters and comic books that he authored, including the iconic characters that he created during his tenure at Marvel.
Stan Lee assigns copyright interest to Disney’s predecessor.
According to the recent lawsuit, in November 1998, Mr. Lee signed a written agreement with Marvel Enterprises, Inc. in which he purportedly assigned to Marvel the rights to the characters. SLMI alleges that when this later agreement was signed, “Lee no longer owned those rights since they had been assigned to [SLMI] previously.” Thus, the suit alleges, “the Marvel agreement actually assigned nothing.”
In prior litigation, Mr. Lee contended that the copyrights that he assigned to Marvel were different from those that he assigned to Stan Lee Media.
A decade of litigation over the characters
There have been numerous lawsuits in at least three states over the last decade regarding the right to control and profit from the Stan Lee characters.
In one of the prior suits, Abadin v. Marvel Entertainment, Inc., the plaintiffs were shareholders of stock in Stan Lee Media, Inc. (“SLMI”). Much like the recently-filed suit, the plaintiffs in Abadin alleged that SLMI owns the intellectual property rights to dozens of Marvel comic book characters that Lee created or co-created and asserted eight claims for relief including trademark and copyright infringement, breach of fiduciary duty, and breach of contract. The defendants were Marvel and several of its affiliates and officers, Lee, Lee’s wife and daughter, and Lee’s attorney.
The court in Abadin granted the defendants’ motion to dismiss the suit. The court held that the plaintiffs did not have standing to bring the claims asserted because they had not owned shares in the relevant corporation back when the acts and transactions in question allegedly took place.
However, the court in Abadin also dismissed the plaintiff’s claims on the merits. Abadin v. Marvel Entertainment, Inc., No. 09 Civ. 715, 2010 WL 1257519 (S.D.N.Y. March 31, 2010). For example:
- Count I of the Complaint asserted a claim for copyright infringement, based on the allegation that Lee had assigned his ownership of comic book characters to SLMI in the Employment Agreement of 1998. The Court held the copyright claim was time-barred and was barred under the doctrines of laches and estoppel. In reaching this conclusion, Judge Crotty observed that Lee had repudiated the SLE/Lee Employment Agreement in January 2001 and that any objection SLMI might assert to the termination was long since time-barred. He also found that “Lee has been using his own characters since at least 1999. Plaintiffs cannot wait a decade to enforce their rights.”
- Count II asserted a Lanham Act claim against Lee and Marvel. This too was dismissed as time-barred, because Defendants’ alleged violations of SLMI’s rights had continued, openly and notoriously, since October or November 1998 and the applicable statute of limitations is six years.
- Count III asserted that Lee had breached the SLE/Lee Employment Agreement. The statute of limitations on this claim began to run in January 2001, when Lee gave notice that he was terminating the agreement, and had expired long before this action was filed in 2009.
There were also several related actions filed in the federal courts of California. These “Related Cases” were ultimately consolidated before the United States District Court for the Central District of California. Then, on August 23, 2012, that court granted a Motion to Dismiss the Related Cases by according res judicata effect to Judge Crotty’s rulings in the Abadin case. In essence, the California court held that the claims have already been litigated and decided. SLMI has appealed that ruling to the United States Court of Appeals for the Ninth Circuit.
Is the new case barred by the prior rulings?
The defendants in the recently-filed case will likely argue that this case should be dismissed because all claims arising out of this subject matter had already been resolved in Abadin. Anticipating this argument, the new lawsuit alleges that “Disney was not a party to the Related Cases or [Abadin]” and “SLMI’s copyright infringement claims in this lawsuit against Disney are base upon Disney’s independently actionable conduct taking place subsequent to April 2009.” SLMI’s suit alleged the claims are not barred by limitations because “Disney’s infringements as alleged herein have occurred within three years prior to the commencement of this lawsuit.” Therefore, the suit alleges, “SLMI is entitled to proceed with this copyright infringement lawsuit against Disney, based upon Disney’s independently actionable conduct which occurred after April 2009, regardless of the outcome of SLMI’s appeal to the Ninth Circuit in the [Related Cases].” We will keep an eye on the case and let you know how things turn out.
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