This is a tale as old as time. An intellectual property creator creates intellectual property. During his lifetime, he contractually gives his intellectual property to Third Party A. He then takes it back from Third Party A, claiming that Third Party A breached the contract. He later assigns his intellectual property to Third Party B. The intellectual property creator then sadly dies, and his estate sues Third Party B to regain the intellectual property under Third Party A’s contract. Third Party B says no, and litigation ensues, resulting in victory for Third Party B and a $1 million verdict against the estate. A Disney movie in the making – but now let’s get into the details.
On December 6, 2021, the 9th Circuit reversed a $1 million award which was held against the daughter of comic book legend Stan Lee, back in June of 2020 by the United States District Court for the Central District of California. Stan Lee’s daughter, Joan Celia (“J.C.”) Lee, filed the original suit against POW! Entertainment, Inc. (“POW”) and ten unnamed John Does (“Does”) on September 26, 2019, and then an amended complaint on February 14, 2020, seeking (among other things):
- Rescission – that is, cancellation or revocation – of agreements assigning Stan Lee’s intellectual property to POW and the Does, that were entered between Stan Lee and POW and the Does;
- A declaration – that is, a written statement submitted to the Court in which the signer swears under penalty of perjury that the contents therein are true – that neither POW nor the Does have any rights to Stan Lee’s Intellectual Property, name, likeness, or identity;
- A permanent injunction – that is a court order requiring a person or entity to cease a specific action – prohibiting POW and the Does from using Stan Lee’s identity, name, image, or likeness; and
- Certain monetary damages.
Essentially, J.C. Lee wanted her father’s intellectual property back – from Spiderman and the X-Men to his own image – and she wanted it back with some money on top. She contended that a 1998 Agreement between Stan Lee and Stan Lee Entertainment, Inc. (“SLEI”) assigned full and complete title to his name, likeness, and creator rights to SLEI in perpetuity, and therefore she was entitled to all the relief she was now seeking. The issue? Stan Lee, himself, terminated the 1998 Agreement in 2001 for breach and then formed POW! Entertainment, Inc. – aka the company J.C. Lee sued – and transferred ownership of his creator rights and rights to his name and likeness to POW. A fact that POW kindly noted in their March 4, 2020 motion to dismiss, and again in their May 11, 2020 motion for sanctions. To make matters worse for J.C. Lee, numerous courts had already handled litigations over the 1998 Agreement and held that the 1998 Agreement had been terminated and was therefore not enforceable.
In June of 2020, the United States District Court for the Central District of California ruled in favor of POW and the Does, holding that J.C. Lee’s complaint should be dismissed with prejudice because all her claims were barred by res judicata – that is, precluded because her claims were raised or could have been raised in the multiple prior actions brought over the 1998 Agreement. In ruling on the motion to dismiss, the Court also took up POW’s motion for sanctions under Rule 11 – that is, a punishment against an attorney or party. Here, the Court found that sanctions were appropriate because J.C. Lee’s claims were frivolous and filed for an improper purpose because the claims were barred by res judicata (a fact which her attorneys should have been aware of). Accordingly, the Court sanctioned both J.C. Lee (the party) and her attorneys in the amount of $1 million ($750K to be paid by J.C. Lee and $250K to be paid by her attorneys) to be paid to the Central District of California.
Following this decision, J.C. Lee and her attorneys appealed both the dismissal and the finding of sanctions to the 9th Circuit. In the end, the 9th Circuit agreed that J.C. Lee’s complaint should be dismissed but overruled the district court’s finding of sanctions holding that “the record did not support a finding that Lee’s filing was clearly frivolous, legally unreasonable, or brought for an improper purpose.”
Conclusion: POW keeps Stan Lee’s intellectual property, and J.C. Lee keeps her $1 million.
