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Monday, April 21, 2003 11:04 PM EDT
Superior Court Denies Sony Motion to Seal Court Proceedings
A Los Angeles Superior Court Judge today denied a motion brought by Sony Pictures Entertainment to seal proceedings in a lawsuit brought by Marvel Characters, Inc., a subsidiary of Marvel Enterprises, Inc. concerning Marvel's most popular hero, Spider-Man. Judge Alexander Williams III ruled this afternoon that all aspects of Marvel's lawsuit will henceforth be entirely open to the press and to the public.
On February 25, 2003, Marvel filed, temporarily under seal, a twelve-count complaint against Sony. The lawsuit seeks more than $50 million in damages as well as rescission of the License Agreement between Marvel and Sony and an injunction against any further film or television production by Sony of Spider-Man beyond the current sequel, Spider-Man 2M, which is already in production. Marvel has asked to try its case to a jury.
The suit accuses Sony of fraud and of deliberately misleading Marvel by failing to disclose its intent to misappropriate Spider-Man for itself to the exclusion of Marvel. Marvel claims that Sony falsely represented that it offered Marvel unique and unparalleled merchandising opportunities -- unlike any other potential partner, but Sony never delivered on its false promises. The suit also charges Sony with material breaches of the parties' License Agreement and merchandising joint venture, and of wrongfully withholding millions of dollars it owed to Marvel, by using "Hollywood accounting" practices and refusing to provide critical financial information owed to Marvel.
"Sony's allegations that this dispute arose out of Marvel's allegedly improper accounting is completely false," Carole Handler, one of Marvel's attorneys, stated. "As Marvel's Complaint makes clear, Marvel is owed millions of dollars by Sony, and the reason for this lawsuit is Sony's appropriation of the Spider-Man character for itself. Marvel created the popularity that ensured Sony's box office success and that Marvel Studios contributed to that success."
Marvel also alleges that Sony engaged in restraints of trade to protect the interests of affiliates such as Sony Electronics and Sony Interactive. The suit also charges that Sony ignored contractual arrangements that protected Marvels' ongoing licensing by failing to market movie merchandise only during limited windows and by ignoring Marvel's "tie-breaker" rights when disagreements arose over merchandise licenses.
"We allege that Sony has hijacked Spider-Man to promote and merchandise other less popular characters," stated Ms. Handler. "Spider-Man is one of the brightest stars in the Marvel universe. Disregard of Marvel's intellectual property rights by a major studio cannot be condoned."
If the License Agreement between Sony and Marvel is cancelled, Sony will lose the right to make movies based on Spider-Man after Spider-Man 2. More important, Sony's opportunity to build a long-running film franchise for itself comparable to the James Bond films (Sony's unsuccessful attempt to acquire that franchise for itself from MGM was defeated in federal court in 1998) will be in jeopardy. The first Spider-Man grossed $821 million in worldwide box office receipts and, including its DVD sales, generated more than $1.3 billion in revenue.
Judge Williams deferred any ruling on Sony's motion to refer the dispute to a private judge within the auspices of the court system until more information was placed before the Court.
The right to make a movie based on the popular Spider-Man character and stories had been hotly contested in court for years before Sony and Marvel executed a License Agreement in 1999 giving Sony the motion picture and television rights to the character.
In the 1990's, six different studios went to court to claim those rights for themselves. One of those studios was Sony. In January, 1999, another Superior Court Judge, Aurelio Munoz, determined that the motion picture and television rights belonged to Marvel.
Marvel's legal representation in this case is led by Carole E. Handler and Pierce O'Donnell, O'Donnell & Shaeffer LLP, Los Angeles, California.
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