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Ownership of Stan Lee's Co-Creator's rights to Marvel Creations
The matter of Stan Lee Media, Stan Lee and Marvel arises from the way that Stan Lee and Marvel have dealt with his namesake company Stan Lee Media, founded by Stan Lee in 1998 during his three month hiatus (August, Septemebr, October, 1998) from a succession of lifetime employment agreements with Marvel. In 1996, the first company Stan Lee founded, Marvel Comics, filed for Chapter 11 Bankruptcy protection. after a long and protracted battle between American business tycoons Ron Perelman and Carl Ichan for control of Marvel. When it emerged from bankruptcy protection, a Perelman linked company, Toy Biz, led by Isaac Perlmutter and Avi Arad. was successful in getting its Plan of Reorganization accepted so that it could acquire Marvel out of bankruptcy. In August, 1998, as part of its approved reorganization plan, Toy Biz' s Isaac Perlmutter and Avi Arad decided to use the ability of the bankruptcy court to void all executory contracts, to void Marvel's most expensive executory contract, and the only lifetime contract it had, a $1 million per year lifetime exclusive contract with its founder Stan Lee. To cut costs of the financially crippled company as it was emerging from Bankruptcy burdened with debts in the hundreds of millions of dollars, Marvel voided Stan Lee's $1 million a year contract. In September, 1998, Mr Perlmutter offered Stan Lee a new $500,000 per year, two year Employment contract to replace Stan's lifetime agreement on a take it or leave it basis. Because in his entire history of employment with Marvel and its predecessors Stan Lee had never challenged anything Marvel presented to him to compensate him for the creations that made Marvel successful, Mr Perlmutter expected that Stan would accept this take it or leave it offer. Stan always understood he was being paid a premium by Marvel as payment for his co-creator's rights, but never demanded a royalty of more than he was offered because of his alleigance to the company he founded and named.. Pelmutter's crass voiding of Lee's contract resulted in an unprecedented response by Lee. Lee suddenly understood that Marvel's voiding of his exclusive Employment Agreement, which was in large part based on his assignment and forebearance of any and all co-creator's rights Lee retained to his creations for Marvel over the years, caused all of his co-creator's ownership rights in Marvel's copyrights on his creations to suddenly revert to him free and clear of any limitations or encumbrances. Because Lee did not have a written contract with Marvel when he created his most valuable characters, between 1961-1968, and Stan had never executed any independent written assignments to Marvel of his creator's rights, and no such assignments had ever been recorded with the US Copyright office, the only valid assignment of those rights by Lee to Marvel was made as a part of the $1 million a year Employment contract Marvel entered into in the mid-1990's. When that Employment and Rights Assignment contract was voided, Lee was re-vested with, or restored in, all of his rights, whatever they might be, without any restrictions or limitations for the first time in his career. Them during the only period in his business life that Stan had no contractual relationship with Marvel, after Stan's contract was voided in August, 1998, through November 1, 1998 when he entered into a new contract with Marvel, while he was considering how to respond to Mr Perlmutter's offer of
$500,000 per year for two years, Lee was made aware that over the past 40 years, in over 100 countries where his writings and creations for Marvel were distributed, he had turned the name he created for himself, Stan Lee into a global brand of significant value to the emerging dot com boom that was desperate for branded content that had eluded the early stages of the internet's evolution. Stan's closest friend in Los Angeles, who had spent 1996-1998 attempting to help Stan liberate his brand from Marvel to work with one of the major media conglomerates, agreed to help him deal with Marvel's new ultimatum and to find and retain on a contingency fee basis, an IP lawyer who could negotiate a new contract with Marvel under the threat of Stan asserting for the first time his co-creator's rights. His friend found NY IP Lawyer Arthur Lieberman and negotiated a contingency fee agreement for Lee. Lee agreed with his friend that he could best capitalize on his "name brand" during the dot com boom by establishing for the first time in his career his own global entertainment company which would have as a global base of support three generations of fans around the world easily accessed for the first time using the internet. Lee could now build his own Disney like studio of creative writers and artists who grew up idolizing Stan and who could create a new genre of Super Hero characters and stories born on the internet for deployment on all other media. Just as Walt Disney began with a motion picture animation company to create character franchises that were exploited in all other media once they were popularized on the big screen, Stan decided to build his own Hollywood internet animation studio to create a new millenium stable of super heroes based on the unparalleled success he had with his Marvel creations. And Stan's company achieved critical success immediately as the premier Entertainment Portal on the internet in November, 2000. In order to capitalize his company, Stan agreed to give it everything he owned in the way of Intellectual Property he had created during his entire career, anything he had any legal or moral interest in or claim to, including any and all rights that reverted to him from Marvel- as of the day he signed the agreement on October 15, 1998.. Stan Lee Entertainment was born on October 13, 1998 when it was incorporated by Lee with his friend and as of October 15, 1998 . Stan Lee entered into a semi-exclusive lifetime employment agreement with his new company that included an assignment of everything he possibly owned as of October 15, 1998. This Employment and Rights Assignment Agreement was intended to provide Stan with his independent legacy from Marvel and riches that would support his Estate for some time to come. This Rights Assignment, signed a month before Stan entered into a new, non-exclusive lifetime employment agreement with Marvel on November 17, 1998, with an almost identical rights assignment provision that was warranted by Stan Lee to be the only such assignment he had ever made, is the basis of the allegation of the first fraud lee committed against Stan Lee Media.. This Rights Assignment entered into on October 17, 1998, and modified and re-ratified in October, 1999, became the Primary Asset of Stan Lee Media when it went public in July, 1999, and was referred to in that way in the SEC 10K 1999 Annual Report, filed on March 30, 2000. On page three of that SEC filing required of all NASDQ companies, the Rights Assignment was referred to under the heading, UNIQUE COMPANY ASSETS which were then described to include as the " primary asset of the company" this Agreement and the Re-Ratification of that agreement, which were both published as attachments 10.41 and 10.42. that public filing.
In a Time Magazine cover banner story Pow! Cybercomics, February 14, 2000 on Stan Lee Media, Stan was quoted as saying, "I know it sounds silly," he says, "But I hope to make Stan Lee Media so big and prosperous that we can eventually buy Marvel". Last week his company's stock hit an all time high, its market capitalization of $311.7 eclipsing Marvel's of $197 million. Stan Lee Media closed its doors in December, 2000, along with more than 250 other dot com public companies, during the NASDQ and dot com bubble collapse. The primary asset of the company, which was the basis for its raising more than $25 million from investors while it was publicly traded, suddenly was lost in all subsequent filings, contracts etc. On February 7, 2001, SLM filed for Chapter 11 Reorganization with the SLM management serving as Debtor in Possession. Stan Lee remained with the company until June, 2001, when he prepared to begin a new enterprise with his lawyer partner Arthur Lieberman. In November, 2002, Stan Lee sued Marvel to enforce the November 17, 1998 Agreement that had never been disclosed or published to anyone. In January, 2005, the court in Lee v Marvel entered a Summary Judgment awarding Stan 10% of all profits derived by Marvel on its TV and Movie productions. In April, 2005 Marvel entered into a confidential settlement with Stan which paid him approximately $15 million to settle his claims under the November, 1998 contract. The day after Marvel announced the settlement with Lee it announced a $500 million credit facility with Merrill Lynch to enable Marvel to establish its own production studio to produce its own movies. The credit facility included warranties by Marvel that they knew of no claims that existed in connection with any of the collatera- character franchisesThroughout this period Defendants knew or should have known that the rights upon which the Nov 1998 contract with Lee were based were owned by SLM, and when it was in bankruptcy Marvel knew it should have negotiated with the Estate and not Stan Lee to resolve the claims it knew existed, that were no longer owned by Lee, that had been hidden by defendants from shareholders and lenders.