Warners wins round in Superman litigation

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Warners wins round in Superman litigation

Wed Jul 08, 2009 @ 06:10PM PST

By Matthew Belloni

Supermancomic What if a judge tried to figure out how much Superman and all the major comic books were worth to the studios wanting to adapt them into movies? Sounds nuttier than the average Comic-Con passholder. But that's what Judge Stephen Larson essentially does in this fascinating decision issued today in the ongoing battle over the copyright to the Man of Steel.

We'll analyze the ruling in another post, but the gist is this: the heirs of Superman co-creator Jerry Siegel, who won a decision last year allowing them to take back control of half the Superman copyright, now must fight with DC Comics over what money is owed to them from exploitation of the character in movies like 2006's "Superman Returns" and the WB series "Smallville."

Since Warner Bros. and DC are corporate siblings under parent Time Warner, the Siegels and their attorney (longtime Warners nemesis Marc Toberoff) claimed that the license fees paid to DC by Warners for the right to make movies and TV shows didn't reflect the fair market value of the property. In short, did Warners do a sweetheart deal with DC that now shortchanges the Siegels as owners of an interest in the Superman copyright?

Judge Larson says no, meaning only DC Comics, not Warners, must account to the Siegels (according to the decision, the company earned $13.6 million from "Superman Returns). "There is insufficient evidence that the Superman film agreement between DC Comics and Warner Bros., whether judged by its direct economic terms or its indirect ones, was consummated at below its fair market value," he writes, reaching a similar conclusion over the deal for "Smallville."

At stake were millions in potential damages, though the ruling doesn't change the fact that DC must now account to the Siegels for a share of revenue from the Superman property.

Still, Warners is obviously happy with the ruling, sending us the following statement:

  • DC Comics and Warner Bros. Entertainment are very gratified by the court’s thorough and well-reasoned decision in this matter. The decision validates what DC and Warner Bros. have maintained from the beginning, which is that when they do business with each other, they always strive for – and achieve – fair market value in their transactions.  We are very pleased that the court found there was no merit to plaintiffs’ position that the Superman deals were unfair to DC Comics and, by extension, the plaintiffs.

Toberoff hasn't called us back yet (UPDATE BELOW), but he's probably not crying too much. He managed to wrest a portion of control away from a major studio over a property that could be extremely valuable (notwithstanding the underperformance of the 2006 film), and he represents the estate of Joe Shuster so his clients might control all the rights to Superman in the near future.

Now to the interesting part. In arriving at his assessment that the price Warners paid for Superman rights was fair, Larson conducted a 10-day trial, elicited testimony from top DC execs and even Warners topper Alan Horn. He looked at a bunch of other properties, including Iron Man, Tarzan and X-Men, and tried to figure out what prices were paid for comparable properties. If you care about comic books and want to see how much film studios value them as source material, check out the decision.

UPDATE: Toberoff just sent us a long statement:

  • The Court's earlier ruling in the case ensures that the Siegels already own half the copyright to original Superman story, published in Action Comics No.1, and entitles them to an accounting for Defendants' exploitation of Superman. This trial was only an interim step in the multifaceted accounting case which remains, in that it only concerned the secondary issue of whether DC Comics, or whether DC Comics and Warner Bros., would have to account to the Siegels.
  • To put this in further perspective, the entire accounting case pales in comparison to the fact that, in 2013, the Siegels, along with the estate of Joe Shuster, will own the entire original copyright to Superman, and neither DC Comics nor Warner Bros. will be able to exploit any new Superman works without a license from the Siegels and Shusters.
  • It must be noted that the Court found that Warner Bros. should have paid three to four times the amount actually paid for Superman film rights. Most importantly, the Court found it to be inequitable that DC transferred the film rights to Warner Bros., without the standard term providing for reversion for lack of ongoing exploitation. The Court pointedly ruled that if Warners does not start production on another Superman movie by 2011, the Siegels will be able to sue to recover their damages. 
  • The Siegels look forward to the remainder of the case, which will determine how much Defendants owe them for their exploitations of Superman.  

Larson set a Dec. 1 trial date for determining how much the Siegels are owed.

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The Hollywood Reporter
The Hollywood Reporter, Esq. blog focuses on how the entertainment and media industries are impacted and influenced by the law. It is edited by Matthew Belloni with contributions from veteran legal reporter Eriq Gardner and others. Before joining The Hollywood Reporter, Belloni was a lawyer at an entertainment litigation firm in Los Angeles. He writes a column for THR devoted to entertainment law. Gardner is a New York-based writer and legal journalist. Send tips or comments to Matthew.Belloni@thr.com

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