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OCT
17
2 YEARS

Warner Bros. Wins Big Court Ruling in Fight Over Superman

Superman
Timothy A. Clay/AFP/Getty Images

Warner Bros. has won a blockbuster victory that could entitle it to maintain its copyright stake in Superman.

On Wednesday, a federal judge in California granted the studio's motion for summary judgment on the question of whether a 1992 agreement with Jean Peavy, the sister of Superman co-creator Joe Shuster, precludes the estate's attempt to terminate a copyright grant. The decision by U.S. District Court Judge Otis Wright comes four years after another federal judge in California confirmed the validity of a termination notice from the estate of the other co-creator, Jerry Siegel. The termination attempts have threatened Warners' hold on its lucrative Superman franchise.

Here's the full ruling.

The judge ruled "that the 1992 Agreement, which represented the Shuster heirs’ opportunity to renegotiate the prior grants of Joe Shuster’s copyrights, superseded and replaced all prior grants of the Superman copyrights. The 1992 Agreement thus represents the parties’ operative agreement and, as a post-1978 grant, it is not subject to termination."

Because Warner Bros. is in the middle of production on next summer's big-budget Man of Steel, directed by Zack Snyder and produced by Christopher Nolan, the studio likely will take tremendous comfort in the latest ruling. It comes after years of nasty litigation with Marc Toberoff, the attorney for the estates.

"The order for the most part is the tentative order issued over six weeks ago before oral argument. We respectfully disagree with its factual and legal conclusions, and it is surprising given that the Judge appeared to emphatically agree with our position at the summary judgment hearing," Toberoff says in a statement to The Hollywood Reporter.

Warners had no comment on the ruling.

Superman was first created in comic form in the 1930s. Shuster drew the character in the early editions of the Action Comics that initially told the Man of Steel's story.

During the later portions of Shuster's life, he struggled to make a living, taking a job as a deliveryman at one point to pay the bills.

Starting in the 1970s, DC Comics (now a subsidiary of Warner Bros.) began making payments to Shuster and Siegel. According to court papers, the co-creators were paid $4 million over the years under a 1975 agreement.

When Shuster died in 1992, Peavy filed an affidavit saying that she was the successor and sole heir to his property.  Shuster's will also apparently named Jean's son, Mark Warren Peavy. Nevertheless, after filing her affidavit, Peavy wrote to DC and asked the company to pay her brother's final debts and expenses. DC agreed and also increased survivor benefits, but the company's then-executive vp Paul Levitz admonished, "This agreement would represent the author/heir's last and final deal with DC and would fully resolve any past, present, or future claims against DC."

At the time, Jean said she understood. The following year, she wrote a letter saying she would "stick to our bargain" and not attempt "to reclaim the Superman copyright."

But about a decade later, the Siegels and Shusters engaged Toberoff in an attempt to do just that.

The estates' primary weapon was the so-called "termination rights" in U.S. copyright law. Congress lengthened the copyright term in 1976 but, as an olive branch to artists who had created works at the early stage of their careers but handed their rights over without much bargaining power, gave artists another bite of the apple by allowing them to enjoy the benefits of the latter stages of a copyright term by terminating a copyright grant. As the copyright term has been extended even further in the years since, so too has the power of these termination rights.

But executing a termination notice isn't easy because artists need to adhere to a strict protocol, including sending out precise "termination notices" during a short few-year window. Terminations also have been subject to other limitations including when an artist and studio make what's known as an "agreement to the contrary," negating the termination powers.

Despite the odds, the Siegels tasted success in 2008 when a federal judge ruled they successfully had recaptured copyrights to some -- but not all -- of Superman’s defining characteristics, such as his costume, Clark Kent identity and his origin story, as described in the first editions of Action Comics. The scope of the ruling now is under appeal at the 9th Circuit, with arguments being heard soon.

But the Shusters aren't so lucky.

Wright first indicated that he was leaning toward rejecting the termination based on the 1992 agreement in a tentative decision issued during the summer. But at a hearing in September, Toberoff argued that it didn't make sense that in 1992, Warners would be replacing all of their previous contracts dating back to 1938 with the Shuster estate and throwing away the chain of title on Superman that the studio has relied upon for so many years. Toberoff also asserted that if this was the intention, it would have been spelled out in the contract to avoid any ambiguity.

The argument was enough for Wright to take time in reconsideration, but ultimately he decided to apply the law of New York, where the 1992 agreement was signed. For guidance on whether the Shusters' termination rights had been waived, the judge looked to an important 2008 decision involving the estate of John Steinbeck, where the 2nd District Court of Appeals found that an agreement made by the author's widow in 1994 superseded older contracts and eliminated a termination right. He also looked at a 2008 decision involving the Lassie franchise where a 1978 grant was determined by the 9th Circuit not to have waived a termination right.

The line of Wright's ruling that probably will trigger an appeal is the one that reads, "The broad and all-encompassing language of the 1992 Agreement unmistakably operates to supersede all prior grants."

According to the judge, Peavy's 1992 agreement deals with the same subject matter as the parties' earlier agreements, settling and displacing all claims. He says that the Shuster heirs were aware of the termination rights "when they bargained for and entered into the 1992 Agreement" and can't claim ignorance. This set the case apart from what happened in the Lassie litigation, according to the ruling.

Thus, Wright has determined that the Shuster heirs won't be able to terminate their share of the Superman copyright.

The litigation has been intensely fought, with the studio bringing out its top legal gun, Daniel Petrocelli at O'Melveny & Myers, to handle this important case. Warners continues to assert claims that Toberoff has tortiously interfered with its deals with the estates by, among other things, getting the Siegels to back away from a settlement in 2001. Recently, Warners asked for terminating sanctions arising from alleged efforts by Toberoff to hide pertinent information in the case.

Despite the studio victory, the parties figure to be in court for many years to come. Up first is the 9th Circuit hearing in the Siegel case, and an appeal likely is down the road.

In the meantime, the result of Wednesday's decision will mean that Warners can continue to exploit Superman however it likes, including in Man of Steel next summer. That said, it will need to account for profits to other copyright holders such as the Siegels, providing plenty of new ground for yet more litigation. Far from being settled, the legal fight will continue like a comic book. Stay tuned for the next edition.

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner