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IP/Entertainment Case Law Updates

Larson v. Warner Bros. Entertainment, Inc.

District court grants partial summary judgment in favor of defendants DC Comics and related entities, finding that a 2001 agreement in which plaintiffs, heirs to Superman co-creator Jerry Siegel, settled their dispute with defendants, remains enforceable and operated to transfer plaintiffs’ rights in Superman to defendants.

Plaintiffs Laura Siegel Larson and Joanne Siegel are the heirs to Jerry Siegel who, along with Joseph Shuster, created the comic book hero Superman in 1933 and sold the rights to Superman to the predecessor of DC Comics. In 1997, after Jerry Siegel’s death, plaintiffs served defendants with a termination notice to recapture their copyright interests in Superman. In October 2001, after four years of negotiations, plaintiffs’ former attorney, Kevin Marks, negotiated a deal with Warner Brothers’ former counsel, John Schulman, to transfer plaintiffs’ rights in Superman to DC Comics in exchange for substantial consideration. On October 19, 2001, Marks sent a letter to Schulman memorializing the terms of the settlement, and the parties proceeded to negotiate the terms of a long-form agreement. In May 2002, plaintiff Joanne Siegel sent a letter to defendants rejecting a February 2002 draft of the long-form agreement prepared by Schulman and asserting that the parties had no deal. Plaintiffs notified Marks in September 2002 that they were ending negotiations with DC Comics and terminated Marks as their lawyer.

In 2004, plaintiffs sued DC Comics and its parent company, Time Warner, Inc., and others, seeking a declaration that plaintiffs had recaptured their copyright interests in Superman. Defendants counterclaimed for breach of the October 19, 2001, agreement and for a judicial declaration that the agreement transferred or required plaintiffs to transfer their rights in Superman to DC Comics. In March 2008, the trial court granted partial summary judgment for the plaintiffs, finding that Marks’ October 2001 letter was not an enforceable contract.

On appeal, the Ninth Circuit reversed, finding that the October 19, 2001, letter from Marks to Schulman created an enforceable agreement. (Read our summary of the Ninth Circuit’s decision here.) The appellate court remanded the case to the district court for a determination on defendants’ counterclaims for breach of contract and declaratory relief. On remand, defendants moved for summary judgment asserting that the Ninth Circuit’s decision ended the matter and seeking a judicial declaration that plaintiffs’ rights in Superman had been transferred to DC Comics.

The district court granted summary judgment for the defendants, finding that the October 19, 2001, agreement continued to be effective. Plaintiffs argued that their May 2002 correspondence with defendants and their September 2002 letter to their attorney constituted rescission of the October 19, 2001, contract or established that defendants had abandoned, breached or acquiesced in plaintiffs’ rescission of the contract. The court disagreed, finding that while plaintiffs’ letters denied the existence of a contract, they did not rescind or allege a breach of the contract. The court also found that defendants had not abandoned their rights in, or acquiesced in the rescission of, the October 2001 contract, because they continued to assert their rights under that contract through more than eight years of litigation.

The court also held that plaintiffs’ breach of contract and rescission defenses were not properly before the court, because plaintiffs failed to raise these defenses earlier in the litigation, and plaintiffs were not entitled to raise these arguments for the first time after appeal. Because the October 19, 2001, agreement remained enforceable and transferred plaintiffs’ rights in Superman to defendants, the court granted summary judgment for defendants on their counterclaim.

The court also ordered additional briefing as to the effect of the Ninth Circuit’s decision on the rights to other properties, including Superboy and certain early Superman advertisements.

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