DC Comics v. Pacific Pictures Corp., et al, US Dist. Ct., C.D. California (October 17, 2012).

Joseph Shuster was the first illustrator of the Superman comics.  In 1938, Shuster (and co-creator Jerome Siegel) assigned to DC the exclusive right to the use of the Superman characters and story.  Shuster passed away on July 30, 1992.  Shuster’s heir, Jean Peavy, and DC Comics, executed an agreement on October 2, 1992, under which DC would cover Shuster’s debts and pay Jean $25,000.00 a year for the rest of her life.  In exchange, Jean and Frank (Shuster’s brother) re-granted all of Shuster’s rights to DC and vowed never to assert a claim to such rights.

On November 7, 2003, Shuster’s heirs served DC Comics with a copyright termination notice purporting to recapture certain early Superman works, effective as of October 26, 2013 (pursuant to 17 U.S.C. 304(d)).  DC Comics brought a declaratory judgment action to secure its claimed interest in the works in May 2010.  DC Comics moved for summary judgment, contesting the validity of the termination notice.  Among other things, DC argued that the 1992 agreement bars the Shusters from pursuing termination—that the 1992 agreement superseded Shuster’s 1938 grant.

The 1992 agreement provided:

We [DC] ask you to confirm by your signatures below that this agreement fully settles all claims to any payments or other rights or remedies which you may haveunder any other agreement or otherwise, whether now or hereafter existing regarding any copyrights, trademarks, or other property right in any and all workcreated in whole or in part by your brother, Joseph Shuster, or any works basedthereon. In any event, you now grant to us any such rights and release us, ourlicensees and all others acting with our permission, and covenant not to assert anyclaim of right, by suit or otherwise, with respect to the above, now and forever.

Using the portions of the agreement italicized above, the California court applied New York law to determine that the 1992 agreement terminated and superseded the 1938 assignment.  “Like Defendants, the Court finds no ambiguity in the parties’ agreement.  Unlike Defendants, however, the Court finds that the 1992 agreement does in fact settle all prior agreements.”

Section 304(d) terminations are limited to agreements executed before January 1, 1978.  Accordingly, the 1992 agreement was not subject to termination under 304(d).

The court rejected an argument that the 1992 agreement constituted an “agreement to the contrary,” prohibited by Section 304(c)(5).  Following Second Circuit precedent, the court determined that the prohibition against “agreement[s] to the contrary” is not so broad that it would include any agreement that has the effect of eliminating a termination right.  Heirs do not have more than one opportunity, between them, to use termination rights to enhance their bargaining power or to exercise them.  See, e.g., Penguin Group (USA) Inc. v. Steinbeck, 537 F.3d 193, 204 (2nd Cir. 2008).

Since the agreement was signed in 1992, six (6) years prior to the addition of Section 304(d) by the Copyright Term Extension Act (CTEA), it could not be an “agreement to the contrary”, because termination rights under 304(d) did not yet exist.  In 1992, when Joseph Shuster passed away and his heirs entered into the 1992 agreement, neither the parties to the 1992 agreement, nor anyone else, held a termination right.  As of 1992, then, the agreement entered into by Jean and Frank did not deprive the Shuster heirs of any right they could have realized at the time.

The Court also rejected DC’s claim that the termination notice was deficient because it was not served by the person or persons who own and are entitled to exercise a total of more than one-half of an author’s termination interest.  Mark Peary (Shuster’s nephew) attempted to transfer all termination rights to another party prior to serving the termination notice on DC.  The Court pointed to Section 304(c)(6)(D), which states, “A further grant, or agreement to make a further grant, of any right covered by a terminated grant is valid only if it is made after the effective date of the termination” (emphasis added).  However, based on the same statute, the court invalidated various agreements entered into between Peary and other third parties prior to the effective date of termination.

This case is generally consistent with certain Second Circuit (Penguin Group (USA) Inc. v. Steinbeck, 537 F.3d 193 (2nd Cir. 2008) (the “Grapes of Wrath Case”) and  Ninth Circuit (Milne v. Stephen Slesinger, Inc., 430 F.3d 1036 (9th Cir. 2005) (the “Winnie the Pooh Case”) precedent which follows the rule that if parties to a grant otherwise subject to termination decide to revoke their earlier agreement which assigned the rights in the first place and re-grant the rights, the later is not an “agreement to the contrary” prohibited by Section 304(c)(5).

The opinion draws a distinction with another Ninth Circuit case, Classic Media, Inc. v. Mewborn, 532 F.3d 978 (9th Cir. 2008), (the “Lassie Case”).  In 1976, Lassie’s author’s daughter, Mewborn, assigned her share of Lassie rights to the publisher.  In 1978, she signed a second contract, which purported to assign additional copyrights.  In 1996, Mewborn served a termination notice of her 1976 grant.  The publisher sued, claiming that the 1978 agreement superseded the 1976 grant and could not be terminated.  Finding the Winnie the Pooh Case inapplicable, the Ninth circuit upheld the termination and rejected the publisher’s attempt to recharacterize the 1978 grant as a revocation and re-grant.

Unlike in the Lassie Case, in this Superman case there were no additional rights granted by the 1992 agreement.  Instead, the 1992 agreement dealt squarely with the same subject matter as the parties’ earlier agreements, settling and displacing all claims under any agreement or otherwise related to any and all works created in whole or in part by Joseph Shuster.