Judge To Marvel: Pay Lee

Comic book legend Stan Lee could be in for a monster payday after a Manhattan judge ruled that Marvel Enterprises had unfairly deprived him of profits generated by "Spider-Man" and other characters ov

(The Hollywood Reporter) -- Comic book legend Stan Lee could be in for a monster payday after a Manhattan judge ruled that Marvel Enterprises had unfairly deprived him of profits generated by "Spider-Man" and other characters over the past seven years.

Lee's attorney Howard Graff said U.S. District Court Judge Robert Sweet's decision to enforce Lee's 10% profit participation could amount to tens of millions of dollars, as the court noted that the first "Spider-Man" movie alone has yielded more than $50 million to Marvel.

"The foundation of [Marvel] was based on characters he created, and to have to ultimately sue to enforce an agreement under which they were supposed to give him his fair share was very disturbing," Graff said. "We're certainly hoping that Marvel, after they recover from the sting of this decision, will determine that it's time to own up to its obligations to Mr. Lee."

Marvel has vowed to appeal the decision, which was disclosed by the parties Jan. 19.

Marvel downplayed the decision as only a partial victory for Lee because he was not entitled to a share of money that Marvel received from third-party licensees of movie-based merchandise. The court further declined to rule on Lee's claim that he deserved to share in profits from Marvel's joint venture with Sony over "Spider-Man" merchandise or from Marvel's international "The Incredible Hulk" movie merchandise licensing program with Universal Studios. Those issues still might require a jury trial, according to Marvel general counsel John Turitzin.

"We do not expect this decision to have an effect on our financial guidance for 2004, 2005 or our future prospects," Turitzin said in a statement.

That was an assessment shared by analysts at Thomas Weisel Partners, who said that Marvel likely had set aside a reserve to cover this case. Shares of the New York-based company, which owns the rights to more than 4,700 characters including those from "X-Men" and "Fantastic Four," fell 4.5% in trading to a close of 17.41.

Marvel hired Lee in 1939, and he has worked there nearly his entire adult life as an editor, art director, head writer and publisher.

The case, filed in November 2002, centered on two sentences of a Nov. 17, 1998, contract Lee and Marvel negotiated after Marvel emerged from bankruptcy.

Prior to the 1994 bankruptcy, Marvel granted Lee a 10% participation for gross receipts received under an arrangement with Danchuk Prods. The post-bankruptcy agreement guaranteed Lee "a participation equal to 10% of the profits derived during [his] life by Marvel [including subsidiaries and affiliates] from profits of any live-action or animated television or movie [including ancillary rights] productions utilizing Marvel characters."

According to Marvel, that meant a share of only those productions that afforded net profit participation, or what the company called "Hollywood accounting," because production and distribution costs are first subtracted.

Lee insisted he was entitled to a share of all profits, including gross proceeds and a share of merchandising profits -- something Marvel adamantly disputed.

In the end, Sweet looked no further than the dictionary for the definition of profits.

"In short, the first sentence of [the contract] is not ambiguous," Sweet said. "It provides that Lee is entitled to share in the results of Marvel's arrangements for movie and television productions involving Marvel characters..."

Sweet also rejected Marvel's claim that "ancillary rights" do not necessarily include merchandising. As a result, he said Lee was entitled to a share of those profits as well.

The ruling does not affect the $1 million annual salary that Lee continues to collect from Marvel under their 1998 agreement.

Lee is currently chairman and chief creative officer of POW! Entertainment Inc., where he continues to create new characters.


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