Marvel Worldwide, Inc. v. Kirby

Court grants in part a motion to dismiss counter-claims against Marvel and Disney in declaratory relief action relating to copyright termination notices covering comic books authored or co-authored by Jack Kirby including Spiderman, The Incredible Hulk, The X-Men, and The Fantastic Four.

Defendants are the heirs of Jack Kirby, an author or co-author of several successful comic book stories including Spiderman, The Incredible Hulk, The X-Men, and The Fantastic Four. In 2009, the Kirbys served copyright termination notices on Marvel, pursuant to 17 U.S.C. §304(c). Marvel filed suit against the Kirbys seeking a declaration that the Kirbys’ termination notices are invalid because the comic books were works made for hire in which Marvel owns the copyright. The Kirbys counter-claimed for (1) a declaration that the termination notices are valid, (2) a declaration of how future profits should be allocated, (3) conversion, (4) breach of contract, and (5) false designation of origin under the Lanham Act. The Kirbys also added Marvel Entertainment, Inc. and The Walt Disney Company as counter-claim defendants. Marvel and Disney moved to dismiss the counter-claims and to dismiss Marvel Entertainment and Disney as counter-claim defendants. The court granted in part and denied in part the motion to dismiss. The court denied the motion to dismiss the first counter-claim, granted the motion to dismiss the second, third, fourth, and fifth counter-claims, and denied the motion to dismiss Marvel Entertainment and Disney as counter-claim defendants.

Regarding the motion to dismiss the Kirbys’ first counter-claim – which seeks a declaration that the Kirbys’ termination notices are valid – Marvel argued that this claim is a mirror image of Marvel’s claim for a declaration that the Kirbys’ termination notices are invalid due to the work-for-hire status of the comic books. The court disagreed, explaining that a counter-claim is not redundant if it asserts an independent case or controversy that survives dismissal of the plaintiff’s claim (citing Second Circuit precedent). According to the court, if Marvel prevailed on its claim, the court could still find that the Kirbys’ termination notices are invalid for a reason other than the work-for-hire status of the comic books, and the Kirbys could still be sued on those other grounds. However, if the Kirbys prevailed on their claim – that the termination notices are valid – the termination notices could not be challenged again. Based on this reasoning, the court denied Marvel’s motion to dismiss the Kirbys’ first counter-claim.

The court granted Mavel’s motion to dismiss the Kirbys’ second counter-claim – which seeks a declaration determining how future profits from the exploitation of the comic books would be allocated among Marvel and the Kirby heirs – because it is not ripe for adjudication. The court stated that the ripeness doctrine prevents a court from entertaining claims based on contingent future events that may not occur as anticipated or at all. In this case, the court said that an accounting may never be necessary because (1) Marvel may prevail on its work-for-hire argument, (2) even if the Kirbys prevail on their argument that the termination notices are valid, Marvel may choose not to exploit any of the Kirby works in the future, and (3) the parties may reach an amicable settlement or agreement about profits from future exploitation of the works.

Regarding the Kirbys’ third and fourth counter-claims – for conversion and breach of contract, respectively, relating to Jack Kirby’s original artwork – the court held that both claims are barred by the statute of limitations. Under New York law, conversion is when a demand for the return of property is made and refused. The statute of limitations for a conversion claim is three years, and the three-year period begins to run when the defendant refuses to produce the property. To determine when a defendant refused to return property, courts look at the defendant’s words and actions. In this case, Jack Kirby first demanded that Marvel return his original artwork in 1982. In 1986, Jack Kirby repeated the demand. Marvel allegedly failed to return the artwork prior to Jack Kirby’s death in 1994. The court held that Marvel’s repeated failure to return the artwork between 1986 and 1994 “clearly demonstrates” a refusal to comply with Kirby’s demand. The court said a reasonable time for returning the work after the 1986 demand was made is one year. If the statute began running one year after Jack Kirby demanded the return of the artwork in 1986, the statute of limitations would have expired in 1990. The court thus dismissed the Kirbys’ conversion claim.

Regarding the breach of contract claim, the Kirbys alleged that Jack Kirby and Marvel entered into an agreement dated October 31, 1986, after Jack Kirby made his second demand for the return of the artwork, in which Marvel agreed to return the work. Although the parties disputed whether the 1986 agreement had been executed, or whether, as Marvel asserted, a 1987 agreement was the only executed agreement, the court held that for purposes of the motion to dismiss it would not go beyond the document relied on by the Kirbys’ in the complaint and found that Jack Kirby failed to file a breach of contract claim within the six-year statute of limitations for breach of contract claims. According to the court, the statute of limitations begins to toll when the breach occurs. Based on the language of the 1986 agreement, return of the artwork was due immediately, and therefore failure to return the work would have resulted in a breach “in or about November 1986 and the statute of limitations on a breach of contract claim expired in or about November 1992 – 18 years ago.”

The court also evaluated the Kirbys’ breach of contract claim under the assumption that there was no deadline in the 1986 contract for Marvel to return the artwork. Under New York contract law, when no time is specified in a contract, a court can imply a reasonable time for performance. The court said a reasonable time for Marvel to return the work was one year, which would mean the statute of limitations on the breach of contract claim would have begun on October 31, 1987 – over twenty years before the Kirbys’ counter-claim was filed in 2010.

The court also rejected the Kirbys’ argument that the statute of limitations for both the conversion and breach of contract claims should be equitably tolled due to Marvel’s alleged fraudulent concealment of the fact that it did not return the artwork. Fraudulent concealment will toll the statute of limitations if an otherwise time-barred plaintiff establishes three things: (1) there was in fact a wrongful concealment, (2) this concealment prevented the plaintiff’s discovery of the nature of the claim during the limitations period, and (3) the plaintiff exercised due diligence in pursuing discovery of the claim. The court held that the Kirbys failed to establish that equitable tolling should apply. Specifically, the court held that the Kirbys failed to show that Jack Kirby conducted any kind of due diligence to determine if Marvel was still in possession of his artwork. “The Kirbys’ failure to plead that [Jack] Kirby exercised any diligence at all during his lifetime precludes a finding that Marvel ‘prevented’ Kirby from discovering the nature of his claims.”

The court called it “deeply troubling” that in 2010 Marvel admitted to having in its possession at least 60 pages of original artwork by Jack Kirby (and offered to return 37 of them). However, the court said this discovery does not change the law of equitable tolling: it will not toll the statute of limitations unless Jack Kirby was prevented from learning about the breach of contract claim despite exercising due diligence. And the court concluded that the Kirbys failed to produce any evidence that Jack Kirby exercised due diligence with regard to his breach of contract claim and the artwork that was the subject of the 1986 agreement.

In the fifth counter-claim, the Kirbys argued that Marvel was liable for false designation of origin under the Lanham Act for failing to identify Jack Kirby as the author or co-author of the underlying works in the motion pictures The Incredible Hulk and X-Men Origins: Wolverine. The court granted Marvel’s motion to dismiss this claim, based on the reasoning in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003). In Dastar, the U.S. Supreme Court held that the phrase “origin of goods” in the Lanham Act refers to “the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept or communication embodied in those goods.” Marvel argued that the Kirbys’ Lanham Act claim for failure to provide credit in its films is foreclosed by Dastar and the court agreed, stating that the Kirbys’ claim was fundamentally one for failure to credit Kirby with the creation of the stories and characters upon which the two films were based.

Finally, the court denied the motion to dismiss the first counter-claim as against Disney – because it became the parent company to Marvel and is in a position to exploit Marvel’s assets – and as against Marvel Entertainment – because it is the successor-in-interest to Magazine Management, the company Jack Kirby assigned his copyrights to in 1972.