Stan Lee Media, Inc. Loses Copyright Infringement Case Against Disney

Stan Lee’s comic book characters have been widely known for years and their notoriety has only increased in recent years with Disney’s active filmmaking ventures.

Stan Lee Media, Inc. (“SLMI”) filed a suit in US District Court of Colorado on October 9, 2012 claiming copyright infringement of various characters owned by SLMI. The company claimed $5.5 billion in damages for movies, media and merchandising featuring various characters including Iron Man, Spider Man, X-Men, and the Avengers, each of which appeared in movies from 2010-2012 netting large profits.

Stan Lee, the creator of hundreds of comic book characters, transferred his rights in his creations to Stan Lee Entertainment, Inc. in October 1998. The company later transferred its rights to Stan Lee Media, Inc. (a Delaware corporation) which subsequently transferred to Boulder Capital Opportunities, Inc. (renamed Stan Lee Media, Inc.). (While Mr. Lee was involved with the company at its inception, he has not been a part of Stan Lee Media, Inc. in over a decade. He has been a party to several rounds of litigation involving the company.)

In November 1998, only a few weeks after Lee’s agreement with Stan Lee Entertainment, Inc., he also made an agreement to transfer the rights in these characters to Marvel Enterprises, Inc. (Lee claimed that the plaintiff had materially breached their contract, giving him the ability to transfer the rights to another party). Marvel later transferred its rights to Disney, the defendant in this case.

Since 1998, Stan Lee Media Inc. has engaged in several lawsuits concerning the “1998 Agreement” and ownership of these characters in district courts in New York, California, and Colorado. All of these actions have been unsuccessful. Judge William J. Martinez, of the U.S. District of Colorado, again ruled against the plaintiff on September 5, 2013.

Disney made four main arguments in this case. It contended that the court did not have personal jurisdiction over Disney, the plaintiff was unable to prove ownership of the copyrights because it was barred from doing so based on issue preclusion (resulting from previous litigation), the plaintiff’s copyright infringement claim was barred by the statute of limitations, and the amended complaint submitted to the court failed to plead sufficient facts to state a claim for copyright infringement.

Judge Martinez specifically addressed the arguments concerning personal jurisdiction and issue preclusion and ultimately dismissed the case.

Stan Lee Media, Inc. attempted to argue that personal jurisdiction in Colorado existed because at least one of Disney’s subsidiaries is incorporated in the state. This is called the agency or alter ego theory because the named defendant is not actually incorporated in the state. The court did not take the time to fully discuss this issue because it eventually dismissed the case on other grounds, but it pointed out that holding or parent companies enjoy corporate existence that is separate from any subsidiaries.

Judge Martinez ruled that Stan Lee Media, Inc. was precluded from re-litigating this case, based upon the 1998 Agreement, due to the fact that it had already been litigated on several occasions. He cited previous cases from the Southern District of New York and Central District of California, each of which involved interpretation of the same 1998 Agreement and each of which ruled against the plaintiff. While the plaintiff argued that the issues in the previous cases were not identical to the issue presented in this case, the judge disagreed and thus the issue of ownership was precluded from being re-litigated.

Plaintiff cannot state a claim for copyright infringement without first having ownership of a valid copyright. In this case, Stan Lee Media, Inc. was unable to adequately prove ownership. In most cases, the plaintiff is allowed to amend the complaint at the judge’s discretion, but Judge Martinez called this proposition “futile” and refused to allow amendment.

Stan Lee Media, Inc. filed a Notice of Appeal in this case on Oct. 2, 2013.

For more information:

• Case 1:12-cv-02663-WJM-KMT
• Lee v. Marvel Enters., 765 F. Supp. 2d at 456
• Stan Lee Media, Inc. v. Lee, 2012 WL 4048871, at *7.
• Abadin v. Marvel Entertainment, Inc., 2010 WL 1257519, at *7.