Nov. 5 (Bloomberg) -- The heirs of Superman creators Jerome Siegel and Joseph Shuster took their 15-year-old fight with Time Warner Inc.’s DC Comics unit to reclaim the rights to the comic book hero before a federal appeals court.
A U.S. Court of Appeals panel today heard arguments in Pasadena, California, over whether Siegel’s daughter can terminate the rights agreement dating back to 1938, when DC’s predecessor, Detective Comics, published the first Superman story in Action Comics. The panel also heard arguments in a lawsuit by DC Comics against Shuster’s heirs and their lawyer.
“Superman is probably the second most valuable character of Warner Bros. behind Batman,” said Jeremiah Reynolds, an entertainment lawyer with Kinsella Weitzman Iser Kump & Aldisert LLP in Santa Monica, California, who isn’t involved in the case. “Any litigation where a studio is fighting over one of its most valuable assets will be of great interest to the entertainment industry.”
The first Superman movie Warner Bros. released in 1978 initiated the era of big-budget superhero pictures and brought in about $300 million worldwide in ticket sales, according to Box Office Mojo LLP, a compiler of box-office numbers. The film now ranks No. 29 on Box Office Mojo’s list of most successful superhero movies by domestic ticket sales.
The best-selling movie on the list is “Marvel’s The Avengers,” released this year by Walt Disney Co.’s Buena Vista unit, which brought in $623 million in domestic ticket sales and $1.5 billion worldwide, according to Box Office Mojo.
DC Comics licenses the Superman rights to Warner Bros., also a unit of New York-based Time Warner. Daniel Petrocelli, a lawyer for the company, said at today’s hearing that Laura Siegel Larson, Siegel’s daughter, can’t terminate the 1938 copyright agreement because she and her late mother made a new agreement with DC Comics in 2006 that they are now trying to renege on.
Petrocelli asked the appellate panel to reverse a trial-court judge’s 2008 ruling that, as a matter of law, DC Comics and the Siegels didn’t have a binding agreement in 2001 that could be enforced because the parties never executed a “long-term” contract that detailed all the terms.
“At the very minimum we believe we’re entitled to a trial” over whether the parties had an agreement, Petrocelli said. “This has the potential to dispose of the entire dispute.”
If it is proven there’s a valid contract that can be enforced, Siegel’s daughter would immediately receive a $20 million payment in exchange for her father’s share in some of the earliest Superman stories, Petrocelli said.
DC Comics argues the Siegels wanted to get out of the agreement because they were approached by a different lawyer, Marc Toberoff, who promised them more money as part of a plan to get the rights from both the Siegel and Shuster heirs.
Toberoff said at today’s hearing that there never was an agreement because Warner Bros. lawyers changed the terms of what was only a deal in principle in 2001. Toberoff asked the panel to upheld U.S. District Judge Stephen Larson’s decision that this wasn’t a matter for a jury to decide.
The judges questioned Toberoff’s claim it was right for a judge, not a jury, to decide that an Oct. 19, 2006, acceptance letter by the Siegels’ previous lawyer was made invalid by Warner Bros.’ subsequent changes in a reply letter to what royalties the Siegels would get.
“If there’s a legitimate offer on the 16th and the acceptance on the 19th, does it really matter what happens afterward?” U.S. Circuit Judge Sidney Thomas asked Toberoff. “This suggests there’s probably a genuine issue of material fact.”
DC Comics is also challenging Larson’s ruling that Siegel’s heirs could terminate his half of the copyrights for the first Superman story published in 1938 and some other earlier works because these weren’t produced on a “work-for-hire” basis, which would have given controlling rights to the party commissioning the work and paying the artists.
Larson ruled that the later Superman stories were work for hire and that the Siegels couldn’t recapture any copyrights in those. Laura Siegel Larson appealed that ruling.
The heirs to the creators argue the stories weren’t work-for-hire because Siegel, the writer, and Shuster, the cartoon artist, produced the first story independently of DC Comics and the later ones, when they had a contract with DC Comics, on a speculative basis. That left them with the creative control and financial risk, the heirs said in court filings.
“Siegel and Shuster were self-employed, with their own expanding comic production business, the American Artists League, which supplied and sold finished comic book stories that Detective purchased for publication and finished Superman comic strips that McClure Newspaper Syndicate distributed to newspapers,” Laura Siegel Larson said in court papers.
A year after Siegel’s death in 1996, his widow and daughter sought to end DC Comics’ rights to Superman under the 1976 U.S. Copyright Act that gave original authors and certain heirs the right to recapture their original copyrights 56 years from the date they first signed them over.
After the 2001 agreement fell through, the Siegels sued DC Comics and Warner Bros. for a court ruling that they had successfully terminated Jerome Siegel’s grant of his rights to DC Comics in 1938.
The judge concluded that while DC Comics retained the copyright to some black and white promotional announcements published before the first Superman story, the crusader’s storyline, including his name, his Clark Kent alter ego, his origins, his mission and his heroic abilities, was no longer within the comic book company’s sole possession to exploit.
DC Comics “may continue to exploit the image of a person with extraordinary strength who wears a black and white leotard and cape,” the judge said.
He said what the company really wanted was “the entire storyline from Action Comics Vol. 1, Superman’s distinctive blue leotard, complete with its inverted triangular crest across the chest with a red ‘S’ on a yellow background, a red cape and boots, and his superhuman ability to leap tall buildings, repel bullets, and run faster than a locomotive.”
Siegel and Shuster met working on their high school newspaper in Cleveland. Their first Superman character in a 1933 short story was a villain instead of a hero. Siegel rewrote the character the next year as a superhero from outer space who assumes the persona of mild-mannered newspaper reporter Clark Kent to blend in with everyday society.
Even if the appeals court rules in Laura Siegel Larson’s favor and affirms that she has successfully recaptured Siegel’s half of the copyright, she still may have to settle with DC Comics because any effort to market or exploit the Superman character without DC Comics will result in more lawsuits, Reynolds said.
“It’s a recipe for litigation,” Reynolds said in a phone interview. “It’s hard to imagine the Siegels will be able to do anything without DC Comics.”
While the Siegels succeeded in the lower court in recapturing their interest in Superman, the Shusters lost their battle with DC Comics over their half of the copyright. Because DC Comics and Warner Bros. retained that half, they are free under U.S. copyright law to exploit those rights by making another Superman movie due out next year, as long as they account for the profits owed to the Siegel heirs.
U.S. District Judge Otis D. Wright II, who inherited the Superman cases after Larson went into private practice, ruled last month that the Shuster heirs forfeited their rights in a 1992 agreement with DC Comics that boosted a survivor payment for the late artist’s brother and sister from $5,000 to $25,000.
Wright said that the Shuster heirs, having locked themselves into the 1992 contract, couldn’t rely on the 1976 copyright re-capture law because it applies only to agreements made before 1978.
The 20-year-old agreement “exhausted the single opportunity provided by the statute to the Shuster heirs to revisit the terms of Shuster’s original grants of his copyright,” Wright said in his ruling.
While Wright’s decision on that ruling wasn’t before the appeals court today, the three-judge panel took under submission Toberoff’s appeal of Wright’s earlier ruling that DC Comics can sue him for interfering with DC Comics 1992 agreement with Shuster’s heirs, who he also represents.
In 2010, DC Comics sued Toberoff, of Malibu, California, and the Shuster estate, claiming the lawyer “orchestrated a web of collusive agreements concerning the Superman rights.”
“By these agreements, Toberoff purported to secure a majority of and controlling financial stake in copyright interests in Superman assertedly held by the Siegel and Shuster heirs and preclude the heirs from freely entering into new agreements with DC Comics,” the company said in its complaint.
DC Comics alleges Toberoff induced the Shusters to repudiate their 1992 deal and enter into in a fifty-fifty joint venture with his company, Pacific Pictures Corp., that would own their rights if they got them back.
Toberoff, who referred to himself in a court filing as “a well-known artists’ rights attorney,” said in his appeal that the lower court should have dismissed the interference claim, as well as the company’s allegation that his agreements with the Siegels and Shusters for a stake in their rights to Superman are void.
The cases are Larson v. Warner Bros., 11-55863, and DC Comics v. Pacific Pictures Corp., 11-56934, U.S. Court of Appeals for the Ninth Circuit (Pasadena, California).
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