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Post-1978 Agreement by Superman Creator Successors Exhausted Termination Rights

Friday, December 21, 2012
DC Comics v. Pacific Pictures Corp., C.D. Cal., No. 2:10-cv-03633-ODW-RZ, 10/17/12

  • Case Summary:A federal district court grants DC Comics summary judgment on the question of whether the successors of the original Superman artist can exercise termination rights, cancelling any prior assignments of rights to the publisher.

  • Key Takeaway:An agreement executed in 1992, well after the 1978 termination date, used sufficiently broad language to cancel and supersede the prior assignments, thus exhausting any termination rights.


By Anandashankar Mazumdar

The sister of the original Superman artist exhausted any termination rights she might have held by entering into an agreement in 1992 that superseded any pre-1978 assignments that might have been subject to termination under Section 304 of the Copyright Act, the U.S. District Court for the Central District of California ruled Oct. 17 (DC Comics v. Pacific Pictures Corp., C.D. Cal., No. 2:10-cv-03633-ODW-RZ, 10/17/12).

Granting summary judgment in favor of the comic book publisher, the court reached a decision that contrasted with the efforts of the original Superman writer, whose successors were able to obtain a ruling successfully terminating assignments.

Superman Creators Assign All Rights to Publisher
In 1932, Jerome Siegel (1914-1996) and Joseph Shuster (1914-1992) of Cleveland created the now famous superhero character Superman. In 1938, Siegel and Shuster assigned the “exclusive right to the use of the [Superman] characters and story” to the comic book publisher, whose successors in interest are Warner Bros. Entertainment Inc., Time Warner Inc., and DC Comics. Siegel and Shuster changed the format of the first Superman story from newspaper strip format to comic book format and it was published soon after in Action Comics No. 1.

Over the next decade, DC Comics paid Siegel and Shuster pursuant to works-made-for-hire contracts. They continued to provide Superman stories as well as new characters and stories to DC Comics but increasingly felt inadequately compensated. They also objected to the hiring away of artists from their Cleveland studio to be transferred to DC Comics headquarters in New York.

In 1947, Siegel and Shuster sued in New York state court, seeking to rescind their agreements with DC Comics and take back ownership of the Superman character. The court found that the 1938 assignment was valid and that DC Comics was the exclusive owner of all rights in Superman. For $94,000, Siegel and Shuster eventually entered into a stipulated judgment acknowledging that the 1938 assignment had assigned all rights in Superman to DC Comics.

When the original copyright term for Superman expired in the 1960s, Siegel and Shuster sued in federal court for the renewal rights, but the court found that the original assignment had also transferred the renewal rights to DC Comics.

In 1975, after publication of articles about Siegel and Shuster's financial difficulties, DC Comics (by then part of the Warner media conglomerate) agreed to give Siegel and Shuster $75,000 each as well as yearly payments of $80,000, and payments to surviving heirs, insurance coverage, and the right to credits on new Superman stories. In exchange, Siegel and Shuster conceded that all copyright interests related to Superman belonged to DC Comics.

Since then, DC Comics voluntary increased such payments and a total of $4 million had been paid by DC Comics to Siegel and Shuster and their families under the 1975 agreement.

Sister, Brother Renegotiate After Death
Shuster died in 1992 and his sister, Jean Peavy, the beneficiary of his estate, contacted DC Comics, which agreed to cover any debts left by Shuster and also agreed to increase payments to Shuster's brother, Frank Shuster, to $25,000 annually. Jean Peavy and Frank Shuster met with DC Comics president Paul Levitz and executed an agreement never to assert claims to rights in Superman.

Under the Copyright Act of 1976, 17 U.S.C. §304(c), a creator and his or her heirs have the right to terminate grants of rights made before 1978, regardless of the terms of such assignments.

In 1997, Siegel's widow Joanne Siegel and her daughter Laura Siegel Larson served notices of termination under that provision, effective in April 1999. The U.S. District Court for the Central District of California ruled that the Siegels had successfully terminated the assignments. Siegel v. Warner Bros. Entertainment Inc., No. CV-04-8400-SGL (RZx) (C.D. Cal. March 26, 2008) (65 PTD, 4/4/08).

In 1999, Congress enacted the Sonny Bono Copyright Term Extension Act, Pub. L. 105-298, 112 Stat. 2827, which amended 17 U.S.C. §304(d) to expand the termination right from just surviving spouses, children, and grandchildren to also include an “executor, administrator, personal representative, or trustee.”

Jean Peavy, who had regularly communicated with Paul Levitz throughout the 1990s and had reaffirmed her intent not to claim copyright interest in Superman, again expressed her intent to “honor” the 1992 agreement and asked for a “bonus.” Such bonus payments of $10,000 to $25,000 were made to Peavy from 1993-1996, in 1996, and from 1998-2001.

In 2003, Peavy's son, Mark Warren Peary (born Mark Warren Peavy) served a notice on DC Comics, seeking to terminate all the prior grants of rights. Peavy suffered a stroke in 2009, leaving it difficult for her to communicate.

DC Comics moved for partial summary judgment regarding the validity of the termination notice and the agreements cited by Toberoff.

Termination Rights Not Available
Judge Otis D. Wright II determined that the 1992 agreement was the currently operative agreement and that since it was executed after 1978, the Section 304 termination right did not apply.

The court said that the terms of the 1992 agreement were unambiguous, in that its text asserted that it “fully settles all claims … under any other agreement or otherwise.”

The court compared the instant facts to those in Milne v. Stephen Slesinger Inc., 430 F.3d 1036, 77 USPQ2d 1281 (9th Cir. 2005) (240 PTD, 12/15/05), which held that the renegotiation of a licensing contract regarding A. A. Milne's Winnie the Pooh stories was not subject to termination because of a 1983 agreement revoking all terminable pre-1978 transfers.

Similarly, Penguin Group (USA) Inc. v. Steinbeck, 537 F.3d 193, 37 USPQ2d 1611 (2d Cir. 2008) (161 PTD, 8/20/08), ruled that a 1994 contract superseded a terminable 1938 agreement, thus rendering ineffective a 2004 notice of termination by the family of author John Steinbeck III.

Classic Media Inc. v. Mewborn, 532 F.3d 1978, 87 USPQ2d 1321 (9th Cir. 2008) (137 PTD, 7/17/08), which granted termination rights to the daughter of the creator of Lassie, was distinguishable, the court said.

The key finding in Mewborn, the court said, was that the operable assignment had not revoked nor superseded any prior agreements.

“Such is not the case here,” the court said. “The broad and all-encompassing language of the 1992 Agreement unmistakably operates to supersede all prior grants.”

Furthermore, the court noted that at the time that they had executed that agreement, Jean Peavy and Frank Shuster were fully aware of the existence of termination rights, whereasMewborn expressed concern that the heir had been ignorant of her rights. The court noted that given this knowledge, Peavy and Shuster were able to negotiate additional compensation. The court said:

Jean Peavy, Joseph Shuster's sister and sole heir, entered into the 1992 Agreement (along with Frank) which renegotiated the terms of the parties' prior agreements to her and Frank's benefit. By taking advantage of this opportunity, she exhausted the single opportunity provided by statute to the Shuster heirs to revisit the terms of Shuster's original grants of his copyrights.

The court next rejected the argument that Section 304's use of the term “notwithstanding any agreement to the contrary” means that an heir may terminate regardless of the existence of any such agreement.

Steinbeck Reasoning Adopted
The court quoted extensively from Steinbeck in rejecting this argument. Essentially, the court said, the 1992 agreement was not an “an agreement to the contrary” on the basis that the second termination right did not exist until the 1999 amendment.

The relevant language from Steinbeck stated:

We do not read the phrase 'agreement to the contrary' so broadly that it would include any agreement that has the effect of eliminating a termination right. To do so would negate the effect of other provisions of the Copyright Act that explicitly contemplate the loss of termination rights.

DC Comics was represented by Cassandra L. Seto of O'Melveny & Myers, Los Angeles. The Shuster family was represented by David S. Harris of Toberoff & Associates, Malibu, Calif.

By Anandashankar Mazumdar


Opinion at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/DCcomics2012Oct17(1).pdf

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