Spider-Man, Iron Man and Hulk Saved from Clutches of Copyright Suit

Abadin v. Marvel Entertainment Inc. got its final ZOW-POW! from a federal judge in New York who dismissed the action for copyright infringement and Lanham Act violations on a number of technical grounds, including no standing to sue. In a case that works as a “what not to do” checklist for plaintiff’s, it appears it’s safe to walk the streets again for Stan Lee.

Plaintiffs purchased Stan Lee Entertainment in 1999, which Stan Lee (the purported creator of many of the Marvel Comics characters) formed as a management company for his characters. In its lawsuit, Plaintiff claimed Stan Lee had transferred his most famous characters, including Spider-Man, Iron Man, Hulk, and the X-men (the “Characters”) to Stan Lee Entertainment prior to Plaintiff’s purchase of Stan Lee Entertainment. Plaintiff’s claim that Stan Lee Entertainment – and not Stan Lee himself – owned the Characters at the time that Stan Lee entered into an agreement to sell them to Marvel.

Defendant Marvel Entertainment and Stan Lee himself claimed that although Stan Lee had planned to transfer the Characters to Stan Lee Entertainment, the deal fell through, and instead Lee entered into an agreement in 1998 with Marvel – a year before Plaintiff’s purchased Stan Lee Entertainment – wherein Lee, as owner of the Characters, transferred the rights to the characters to Marvel.

In addition to finding that Plaintiffs were barred from their claims by the statute of limitations (“Plaintiffs cannot wait a decade to enforce their rights”), and further finding that procedurally, Plaintiff’s had failed to timely file its amended complaint (the 4th one), the Judge Crotty found that Plaintiffs did not have standing to sue because, a “plaintiff must have owned stock in the corporation throughout the course of the activities that constitute the primary basis of the complaint.” Since Plaintiffs did not purchase Stan Lee Entertainment until a year after the transfer to Marvel was complete, they did not have standing to sue.

Practice Note: Intellectual property due diligence at the outset of this deal might have avoided this suit altogether. Plaintiffs had a duty to carefully conduct the appropriate due diligence to determine what intellectual property was actually owned by the company they were purchasing and further, to request specific representations about what they were buying. In this case, a simple review of the PTO assignment database, freely accessible by the public reveals no fewer than 17 assignments of one SPIDER-MAN trademark, and Mavel’s involvement dating as far back as 1972.

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