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MAY
21
5 MOS

Does a Supreme Court Ruling Mean Disney Will Lose 'Spider-Man' Rights?

Once rejected for not suing soon enough, the company challenging Disney's hold on the character thinks it's no longer precluded from moving forward in court.

The Amazing Spider-Man 2 Garfield Lifting Car - H 2014
Sony Pictures
"The Amazing Spider-Man 2"

Earlier this week, the U.S. Supreme Court allowed the daughter of an author to sue over rights to the Martin Scorsese film Raging Bull. The film is undoubtedly a classic, but its continued commercial prospects are limited. Unlike, say, Spider-Man and the many comic creations of Stan Lee.

Now, the owners of Stan Lee Media Inc. -- the company that the comic book genius abandoned around the time it filed for bankruptcy in 2000 -- believe that the Supreme Court's Petrella decision has just boosted their chances at ripping rights to Spider-Man and other characters from Marvel's grip.

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Until now, SLMI has been legally hapless, as we've covered many times before. One judge after another has denied SLMI the opportunity to raise the argument that its assets were improperly raided during the bankruptcy process more than a decade ago.

Last year, SLMI came up with a new strategy. The same month that a Colorado judge dismissed its billion-dollar copyright infringement lawsuit against Disney, the Mouse House sued a small Pennsylvania theater company that was staging Broadway: Now & Forever, which included references to Disney-controlled properties like Mary Poppins, The Lion King and yes, Spider-Man.

Disney might not have had any idea at the time what it was in for. That Pennsylvania theater company soon worked out a deal with SLMI for Spider-Man rights, and SLMI filed an intervenor complaint (read here) against Disney to defend the validity of its license.

A core part of Disney's subsequent argument to "end once and for all SLMI's vexatious and repeatedly rejected claims of ownership over the Marvel Characters" was the legal doctrine of res judicata -- a matter already decided.

Disney traced SLMI's earliest attempt to object to the the transfer of intellectual property to a derivative action brought by SLMI shareholders in 2009 against Marvel Entertainment. That case (Abadin I) was said by Disney to have produced a decision on its merits the following year. As Disney explained, "Judge Crotty granted Marvel Entertainment’s motion to dismiss, holding that SLMI’s claims of copyright ownership were barred by the statute of limitations and the doctrines of laches and estoppel."

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To steal the explanation by one legal observer, laches is legalese for "you slept on your rights." SLMI might believe that it was robbed, but it didn't get its house in order soon enough to sue over it. And judges thereafter accepted this ... until now?

Flash forward to what Supreme Court Justice Ruth Bader Ginsburg had to say on Monday in the Raging Bull case: "Laches, we hold, cannot be invoked to preclude adjudication of a claim for damages brought within the three-year window," she wrote, also addressing that the window includes continued injuries from continued distribution.

SLMI now believes that the 2010 decision that rejected its attempt to reclaim Spider-Man and later was cited by other judges has become toothless for various reasons, including that the law has now been interpreted differently and this new Pennsylvania case addresses more recent conduct.

"Disney’s res judicata argument relies on a March 2010 ruling from a New York district court that dismissed a copyright infringement claim as time-barred," SLMI general counsel Michael Wolk tells The Hollywood Reporter. "But two days ago the Supreme Court ruled that a copyright claim seeking relief based on conduct taking place within three years before a lawsuit is filed is not the 'same' as an older copyright claim seeking relief based on older conduct taking place more than three years ago."

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On May 15, attorneys for both Disney and SLMI were in court to argue whether SLMI should have the opportunity to go forward with its contention of being the real owner of Spider-Man. The oral hearing happened before the Supreme Court ruling, but now that it's come down, SLMI's lawyers have submitted a letter drawing the judge's attention to it. Disney hasn't yet responded to our request for comment, but has told the judge that the Supreme Court decision has "no bearing" on the case.

The ramifications of the Supreme Court's Petrella opinion are being widely discussed among copyright practitioners -- coming up in all sorts of ways like a potential lawsuit against Led Zeppelin over "Stairway to Heaven" -- but rather surprisingly, it's a dispute that involves one of the most lucrative properties in entertainment where the Supreme Court ruling might first make its mark. That's not to say that SLMI will prevail. The struggling company, being funded with some hedge fund money, will still need to overcome an epic losing streak in court to continue, and even then, would have to prove the viability of a '98 agreement with Stan Lee . But it's worth following.

Email: Eriq.Gardner@THR.com
Twitter: @eriqgardner