Stan Lee Media, Inc. v. The Walt Disney Co.

The U.S. Court of Appeals for the Tenth Circuit affirmed the district court’s dismissal of a copyright infringement complaint by an entity that has brought similar copyright ownership claims against famed comic book author Stan Lee, Marvel and its related entities in at least six different federal courts.  Stan Lee Media, Inc. v. The Walt Disney Co., Case No. 13-1407 (10th Cir., Dec. 23, 2014) (Tymkovich, J.).

In 1998, comic book author San Lee entered into a written employment agreement with his own company (and a predecessor to SLMI), Stan Lee Entertainment, Inc.  Under the written agreement, Lee assigned to his company all of his intellectual property rights in the characters he created while working at Marvel.  Lee had been employed by Marvel as the editor in chief of its comic book division for nearly 60 years, and in 1998, Lee continued to work part-time for Marvel.

In 2001, Lee repudiated the employment agreement with SLMI for material breach and reclaimed all of his intellectual property rights.  During this time, Marvel was using Lee’s characters and story lines to produce highly successful films and related merchandise.  These films, such as the Spider-Man, X-Men and Iron Man franchises, have grossed billions in revenue worldwide.  In 2007, SLMI began to assert ownership rights in Lee’s Marvel characters and started filing its various lawsuits in courts across the country.

Due to the numerous lawsuits filed by SLMI, most courts have found previous decisions to take precedence and bar relitigation of certain claims and issues.  Similarly, the 10th Circuit applied collateral estoppel with respect to the U.S. Court of Appeals for the Ninth Circuit’s prior (2014) rejection of SLMI’s copyright infringement complaint Stan Lee Media v. Lee and found that Disney (the named defendant based on its 2009 acquisition of Marvel’s parent company) met its burden of establishing all four elements of issue preclusion.

First, the Court found that issue before the 10th Circuit was substantively identical to the issue decided against SLMI in the 9th Circuit, namely, SLMI’s lack of ownership interest in the Marvel characters.  In particular, the earlier decision by the 9th Circuit found SLMI’s claims of copyright ownership to be “simply implausible” because SLMI never produced any content related to the comic book characters, did not attempt to license the characters and in the years between 1998 and 2007, while Marvel and other entities continually profited from the copyrighted characters, never once asserted or attempted to enforce its claimed ownership rights in those characters.

Second, the Court found that the prior 9th Circuit action was fully adjudicated on the merits, because the 9th Circuit’s dismissal for failure to plead a viable cause of action was deemed to be a judgment on the merits.

Third, SLMI conceded that it was a party in the prior 9th Circuit action.

Finally, the Court determined that SLMI had a full and fair opportunity to litigate the issue in the prior action.

Thus, because the 9th Circuit decision conclusively found that SLMI did not have a plausible claim of copyright ownership, SLMI was precluded from relitigating the same issue in the 10th Circuit.  With the issue of copyright ownership decided against SLMI, the Court held that SLMI’s claim of infringement necessarily failed as a matter of law, since a proper claim of copyright infringement first requires “ownership of a valid copyright.”