<b><i>Online Extra</b></i> Circuit Dubious About Claim to Stan Lee's Characters

The U.S. Court of Appeals for the Ninth Circuit recently dealt a powerful punch to a lawyer whose client, a company founded by comic book legend Stan Lee, claimed to own the rights to Lee's iconic characters. During oral arguments, a panel of three appellate judges appeared skeptical about reviving a case brought by Stan Lee Media Inc., which has filed a barrage of lawsuits over the rights to characters that include Spider-Man, The Incredible Hulk, the X-Men, Iron Man and Thor, subjects of some of Hollywood's most profitable movies.

Although the case at issue was dismissed under the doctrine of res judicata , which precludes bringing claims that already have been decided, the panel raised a much more basic question: Why didn't Stan Lee Media list its valuable comic book rights as assets when it filed for bankruptcy in 2001?

In 1998, Lee founded Stan Lee Entertainment Inc., the predecessor to Stan Lee Media. Stan Lee Media claimed that Lee signed a 1998 agreement assigning all “past and future intellectual property rights” to the Colorado company. But a month later, Lee allegedly turned over those rights to his longtime employer, Marvel Enterprises Inc., now owned by The Walt Disney Co.

Stan Lee Media filed several lawsuits to get back those rights, most of which have been unsuccessful. The case before the Ninth Circuit targeted Lee himself and his new companies, POW! Entertainment Inc. and QED Productions LLC. Stan Lee Media Inc. v. Stan Lee, 12-56733.

In court, Stan Lee Media attorney Robert Kohn said the reason the assets were never listed in the company's Chapter 11 filing was because Lee was the instigator of the bankruptcy. The case was dismissed in 2006 after Stan Lee Media couldn't pay the trustee's fees, said Kohn, of the Kohn Law Group in Santa Monica, CA.

Lee's attorney, Ira Brad Matetsky, a partner at Ganfer & Shore in New York, argued the rights weren't part of the agreement in the first place. He said his client never intended to give Stan Lee Media the rights to the characters he developed at Marvel ' only the new ones he created, which are “nice enough characters but not valuable and never took off.”

Central District of California Judge Stephen Wilson had dismissed Stan Lee Media's case in 2012: He concluded that U.S. Judge Paul Crotty of the Southern District of New York had dismissed the same claims in a case brought derivatively by shareholders of Stan Lee Media, including its president, Jos' Abadin. Abadin v. Marvel Entertainment Inc. , 09 Civ. 0715 (S.D.N.Y. 2010).

But Kohn argued that ruling violated Stan Lee Media's due process rights because Crotty also found that the shareholders lacked standing to sue on its behalf. Stan Lee Media, which had elected a new board after the lawsuit was filed, wasn't even a party in the case. “In my view, that breaks privity,” Kohn said.

Matetsky disagreed. Crotty found that the plaintiffs lacked standing because they weren't shareholders when Lee allegedly transferred the rights to Marvel ' not because they weren't shareholders of Stan Lee Media, Matetsky said. “We are talking about the same people.”

Amanda Bronstad is a Staff Reporter for The National Law Journal, an ALM sibling of Entertainment Law & Finance.

The U.S. Court of Appeals for the Ninth Circuit recently dealt a powerful punch to a lawyer whose client, a company founded by comic book legend Stan Lee, claimed to own the rights to Lee's iconic characters. During oral arguments, a panel of three appellate judges appeared skeptical about reviving a case brought by Stan Lee Media Inc., which has filed a barrage of lawsuits over the rights to characters that include Spider-Man, The Incredible Hulk, the X-Men, Iron Man and Thor, subjects of some of Hollywood's most profitable movies.

Although the case at issue was dismissed under the doctrine of res judicata , which precludes bringing claims that already have been decided, the panel raised a much more basic question: Why didn't Stan Lee Media list its valuable comic book rights as assets when it filed for bankruptcy in 2001?

In 1998, Lee founded Stan Lee Entertainment Inc., the predecessor to Stan Lee Media. Stan Lee Media claimed that Lee signed a 1998 agreement assigning all “past and future intellectual property rights” to the Colorado company. But a month later, Lee allegedly turned over those rights to his longtime employer, Marvel Enterprises Inc., now owned by The Walt Disney Co.

Stan Lee Media filed several lawsuits to get back those rights, most of which have been unsuccessful. The case before the Ninth Circuit targeted Lee himself and his new companies, POW! Entertainment Inc. and QED Productions LLC. Stan Lee Media Inc. v. Stan Lee, 12-56733.

In court, Stan Lee Media attorney Robert Kohn said the reason the assets were never listed in the company's Chapter 11 filing was because Lee was the instigator of the bankruptcy. The case was dismissed in 2006 after Stan Lee Media couldn't pay the trustee's fees, said Kohn, of the Kohn Law Group in Santa Monica, CA.

Lee's attorney, Ira Brad Matetsky, a partner at Ganfer & Shore in New York, argued the rights weren't part of the agreement in the first place. He said his client never intended to give Stan Lee Media the rights to the characters he developed at Marvel ' only the new ones he created, which are “nice enough characters but not valuable and never took off.”

Central District of California Judge Stephen Wilson had dismissed Stan Lee Media's case in 2012: He concluded that U.S. Judge Paul Crotty of the Southern District of New York had dismissed the same claims in a case brought derivatively by shareholders of Stan Lee Media, including its president, Jos' Abadin. Abadin v. Marvel Entertainment Inc. , 09 Civ. 0715 (S.D.N.Y. 2010).

But Kohn argued that ruling violated Stan Lee Media's due process rights because Crotty also found that the shareholders lacked standing to sue on its behalf. Stan Lee Media, which had elected a new board after the lawsuit was filed, wasn't even a party in the case. “In my view, that breaks privity,” Kohn said.

Matetsky disagreed. Crotty found that the plaintiffs lacked standing because they weren't shareholders when Lee allegedly transferred the rights to Marvel ' not because they weren't shareholders of Stan Lee Media, Matetsky said. “We are talking about the same people.”

Amanda Bronstad is a Staff Reporter for The National Law Journal, an ALM sibling of Entertainment Law & Finance.