In a filing with the Securities and Exchange Commission dated November 6, Marvel announced that Chairman Stan Lee was contemplating a lawsuit against Marvel if he fails to receive 10% of the profits derived by the company from movies and TV programs using the characters that he helped to create.  During a recently broadcast 60 Minutes segment on Marvel and the Movies (see 'Sixty Minutes II Does Comics'), when asked how he felt about the hundreds of millions of dollars earned by his characters in Hollywood and whether he was 'getting screwed' out of his rightful share, Lee replied, 'I try not to think about it.'  Marvel, which pays Lee over a million dollars a year, stated in its filing to the SEC, 'If Mr. Lee commences suit, the Company intends to vigorously defend such action.'

 

Lee's suit against Marvel would apparently be based on his contract with the company and not on the issue of 'creator's rights.'  Lee's contract with Marvel, which is also on file with the SEC, includes a paragraph in the 'Expenses/Fringe Benefits' section that appears to be at the heart of any potential legal dispute.  It states, 'You shall be paid participation equal to 10% of the profits derived during your life by Marvel (including subsidiaries and affiliates) from the profits of any live action or animated television or movie productions utilizing Marvel characters.'  This sounds great for Stan, but the contract's next sentence adds in a good measure of ambiguity by stating, 'This (profit) participation is not to be derived from the fee charged by Marvel for the licensing of the product or of the characters for merchandise or otherwise.'  This language raises a couple of issues likely to be at the heart of any litigation.  First, what portions of the profits, if any, that Marvel makes from its movies and TV shows are not part of the licensing fees and hence subject to the terms governing Stan Lee's 10% share.   And second, what are 'profits,' since there's no definition or method of calculating the number.  As generations of Hollywood accountants have shown, even movies that seemed to make a lot of money somehow managed to lose money when profit participation was calculated. 

 

Marvel is unlikely to experience serious damage by being forced to pay Lee the profit participation however it's calculated; the company is projected to make $21 to $24 million this year (see 'Marvel's Q3 Blows Away Expectations'), and the number Lee's 10% is of would presumably be considerably less than that.  But more importantly, Lee is an extremely effective spokesman for Marvel, and it's probably best for the industry that this dispute be settled amicably so there's no tarnish on the Marvel movie juggernaut that is helping to move increasing amounts of Marvel product through pop culture stores.