the bar
Raising
When Is an Agreement Not an Agreement? A toy inventor goes head-to-head with Marvel for royalties he says he is owed—a claim Marvel adamently denies. by Howard N. Aronson
E
ven Spider-Man himself couldn’t untangle the legal web enmeshing Marvel Entertainment and the inventor of a spider web-shooting toy glove. It may take a jury—the second one in a very protracted legal contract—to decide what a written agreement between the parties actually determines.
The Making of a Legal Mess The Federal Court of Appeals in California recently ruled that an Arizona District Court was wrong when it decided the aforementioned agreement was unambiguous, reaching the opposite conclusion. Because it is the focus of years of costly litigation, this web-shooting glove toy litigation is a classic example of the need to spell out the business terms as clearly as possible in agreements, considering not only the facts that apply at the time, but also what may occur in the future. It all started 23 years ago, when lawyer and inventor Stephen Kimble filed a patent for a toy spider web-shooting glove, a roleplaying toy that kids use to mimic Marvel’s Spider-Man character by propelling foam string. With the glove, kids pretend to generate spider webs by shooting the foam out of their hands— just like Spidey. In 1990, Kimble took his invention to Toy Biz, the predecessor of Marvel Entertainment. As the Arizona District Court later explained, there was a verbal agreement whereby “Toy Biz agreed to not use the ideas disclosed by Kimble without first negotiating a reasonable royalty payment for their use.” Toy Biz subsequently made and sold a Web Blaster toy, the Court related. In 1997, Kimble sued Toy Biz for patent infringement and breach of contract based on the 1990 alleged oral agreement. The Court found against Kimble on the patent infringement
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claim, but Kimble prevailed at a trial on his claim for breach of the oral agreement. The Court award was for a 3.5 percent royalty payment based on the net product sales. Both sides appealed. Pending the outcome of the appeal, Marvel and Kimble negotiated a written Settlement Agreement that superseded the judgment of the Court. This 2001 Settlement Agreement provided for purchase of the patent and payment of royalties for toys that otherwise would have infringed the patent and also for the specific Web Blaster toy that was the focus of the lawsuit. The Settlement Agreement also included Paragraph 9, which reads: “Except for the obligations undertaken by Marvel in this Agreement and except for those obligations under the alleged verbal agreement that was the subject of the Action, the Patent Holders hereby release and discharge Marvel… from all… claims and demands whatsoever… from the beginning of the world to the date of this Agreement.” as well as Paragraph 12: “This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous arrangements or understandings with respect thereto.” The written agreement served until 2006, when Marvel licensed copyright and trademark rights for Marvel characters—including the toy web-shooting glove—to Hasbro. As the District Court explained, Hasbro refused to sign a sublicensing agreement with Marvel requiring Hasbro to pay Kimble royalties under the Settlement Agreement. Marvel did continue to pay royalties to Kimble, including royalties on its Web Blaster kits that included “extra value” items, until 2008. That was when Marvel informed Kimble that he was not entitled to royalties on the “extra value” items and
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