Larson v. Warner Bros. Entertainment Inc.

District court grants summary judgment in favor of defendants in litigation by heirs of Superman co-creator to terminate grant of rights for Superboy and Superman advertisement works, finding that 2001 settlement agreement included those works and was not voidable under the Sonny Bono Copyright Term Extension Act.

This latest decision in the long-running litigation over the rights to the Superman properties involved the parties’ respective rights to Superboy and early Superman advertisements, and specifically whether a 2001 settlement agreement between the plaintiffs, the heirs of co-creator Jerome Siegel, and defendant DC Comics covered these works and whether it was voidable by the plaintiffs pursuant to the 1998 Sonny Bono Copyright Term Extension Act (CTEA). The district court granted defendants’ motion for summary judgment, finding that the settlement agreement did cover the works in question and that the CTEA did not render it voidable.

The court’s decision has its origins in a 1997 copyright termination notice served on defendant DC Comics by Siegel’s heirs, essentially purporting to terminate all of Siegel’s Superman-related creations, including the Superboy works and early Superman advertisements. The dispute that followed the 1997 termination notice culminated in a 2001 settlement agreement in which the plaintiffs agreed to receive (among other things) a $2 million advance, a $1 million non-recoverable signing bonus, and a guaranteed minimum payment of $500,000 per year for 10 years in return for the rights to the Superman properties. The parties subsequently were unable to reduce the settlement to a long-form agreement, however, and Siegel’s heirs attempted to repudiate the agreement, served additional termination (and all-encompassing) notices on DC Comics in 2002 and 2012, and commenced this litigation in which they disputed, among other issues, that the 2001 agreement was a valid and binding settlement agreement. On remand from the Ninth Circuit, the district court granted in part defendants’ motion for summary judgment, finding that the 2001 settlement was binding and enforceable. (Read our summary of the district court’s decision here.) The court then requested that the parties brief the issue of the scope of the agreement as it related to the Superboy works and the early Superman advertisements.

Defendants argued that the 2001 agreement constituted a revocation and re-grant of the Siegels’ copyright interests in the Superboy and Superman advertising works that precluded the Siegels’ later attempts, in 2002 and 2012, to serve termination notices for those works. In concluding that the 2001 agreement did encompass those works, the district court first noted that, by the 1976 Copyright Act, Congress gave new termination rights to creators and their heirs, and in the CTEA, Congress granted additional termination rights, but for pre-1978 copyright grants. The district court, following the Ninth Circuit’s holding in Milne ex rel. Coyne v. Stephen Slesinger, Inc. (2005) and noting the Second Circuit’s similar holding in Penguin Group (USA) Inc. v. Steinbeck (2008), found that the plaintiffs, by serving the termination notice in 1997 and then negotiating with defendants, achieved a much more favorable royalty rate for the Superman works. Noting that the 2001 settlement agreement followed the vesting, in 1999, of plaintiffs’ additional termination rights under the CTEA, the court concluded that, since plaintiffs used their termination rights to bargain for and achieve a more favorable agreement – the very result that the CTEA was intended to allow creators and their heirs to accomplish – the 2001 settlement did not constitute a voidable “agreement to the contrary” under the CTEA.

The court also found that the 2001 settlement agreement encompassed the Superboy works and Superman advertisements, particularly since these works were among those that were purportedly the subject of the 1997 termination notice. The court found it immaterial that courts later determined that the 1997 termination did not properly terminate the grants of rights over the Superboy works and Superman advertisements, since the 2001 settlement agreement was negotiated based on the parties’ presumption that the notice was effective as to those works, and this belief helped the plaintiffs reach a relatively favorable settlement agreement in 2001.