After a series of headline-grabbing rulings in the ongoing legal drama between Jerry Siegel’s heirs and DC Comics regarding the copyright of the Superman story in Action Comics #1 (which, generally speaking, means the copyright on Superman), this most recent District Court ruling is relatively low key, although still quite important for both sides.
The issue at stake here was strictly a financial one. Siegel’s heirs, as owners of one-half of the Superman copyright, are entitled to half of the licensing money that DC Comics took in for the character from 1999 until today. Of course, though, the major Superman licensed film and television products, the film Superman Returns and the TV series Smallville, were both done through Warner Bros. Entertainment which, just like DC Comics, is a wholly owned subsidiary of Time Warner Inc.
Therefore, the Siegels argued that the licensing agreement between DC Comics and Warner Bros. Entertainment were for below market value and contained unfair terms, under the theory that the two corporate “siblings” basically struck a wink wink nudge nudge deal due to their corporate connection. If the District Court ruled that were the case, then the Court could determine a “fair” price and award the Siegels half of that figure. That could very reasonably be in the millions of dollars, making this an important case from a financial perspective.
The United State District Judge in the case, the Honorable Stephen G. Larson, heard testimony for ten days from both sides, and in the end, he ruled that both the Superman Returns deal and the Smallville deal were for “fair market value,” and that the Siegels were not entitled to any more money at the moment. However, Larson did hold that due to certain terms in the Superman film agreement, the Siegels could still have an actionable claim in the future.
A major point that you have to understand is that it is not the Court’s responsibility to determine if DC Comics got the best deal possible, but only that the deal was reasonable. In fact, Larson basically seemed to come down on the side of thinking that the licensing fee DC was paid for Superman Returns was on the low side of things, but he did not feel that it was unreasonably low. Larson specifically denied the Siegels’ claim that Superman should be treated like a major novel or a musical, as Larson agreed with the defendants that in the case of comic book licensing, the film company is licensing the characters, not the story (as noted by the many years that Warner Bros. Entertainment spent trying to come up with a workable script for a Superman film). When a film company licenses a novel, however, they’re basically getting a rough screenplay right from the beginning, and as such, popular novels and musicals are much more valuable. So even if Larson felt that the licensing fee was a bit on the low side, it was still a reasonable fee.
The Smallville television licensing agreement, on the other hand, was found to be quite typical, so Larson had little problem stating that that agreement was fair market value.
An issue where Larson did side a bit more with the Siegels was on the issue of the reversion rights for the property. Warner Bros. Entertainment has the exclusive rights to develop the Superman property for another film for basically the entire length of DC’s ownership of the Superman copyright. Therefore, the Siegels argued that this lack of a reversion clause (something like “if you don’t make a Superman movie by Year 20XX, then you lose the rights to the film”) has caused Warner Bros. Entertainment to drag its feet (after all, it is already on record that they took quite a long time to make Superman Returns), which resulted in the Siegels losing money. Larson was receptive to this argument, but was also receptive to the counter-argument that says it is far too speculative to presume that a sequel would have been made (or have begun production, at least) by this time, so that any damages to the Siegels’ financial interest was also too speculative. So he came upon the compromise stating that if Warner Bros. Entertainment has not begun filming a Superman film by 2011, then the Siegels could bring about an action for damages based on the lack of a reversion clause in the licensing agreement.
All in all, though, Larson basically held that DC Comics and Warner Bros. Entertainment did not undertake any unfair dealings, so the Siegels did not (for now) gain any extra money. It’s not exactly a sexy decision, but when you’re talking millions of possible dollars at play, it’s still an important one.
Brian Cronin has been a practicing attorney in New York since graduating from Fordham Law School in 2004.
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