that it had, in fact, overpaid Kimble by more than $250,000. When Kimble brought a new lawsuit against Marvel in 2008, Marvel took the position that all its obligations under the Settlement Agreement would end in 2010, with the expiration of the patent.
Setting the Stage The stage was then set for a super-fight surrounding the snarled written agreement. The case was referred to a magistrate judge to decide whether the Settlement Agreement provided for royalties as long as Marvel received revenue for web-blaster toys— as Kimble maintained—or whether Marvel owed no web-blaster royalties after the patent expired. The magistrate judge added to the tangled legal web when he found that the 2001 Settlement Agreement meant something different from what either of the parties said it meant. The magistrate determined that the 2001 Settlement Agreement did not transfer the non-patent rights (for web-blaster toys that did not infringe the patent) derived from the 1990 oral agreement. But Kimble still would not receive royalties on the non-patent rights because they were indistinguishable from the royalties for the patent rights, according to the magistrate. The Arizona District Court adopted the magistrate’s recommendations. Meanwhile, Marvel asked a U.S. District Court in New York to declare that Kimble had no claim under the oral agreement. The New York Court transferred that case to Arizona. Thereafter, the parties agreed to dismiss the 2008 lawsuit. In the transferred action, now pending in Arizona, Kimble argued that the Settlement Agreement specifically ensured that if Marvel made a toy in the future, Kimble still would have the right to maintain that the new toy was not covered by the Settlement Agreement—either because it did not infringe the patent, or because it was not the toy that was litigated leading up to the Settlement Agreement. Whereas Marvel maintained that it owed Kimble no royalties on a new toy, such as the Ultimate Web Blaster toy, Kimble said that such new toys were exactly what Paragraph 9 was supposed to protect. But the Arizona District Court found that the 2001 Settlement Agreement ended all Kimble’s claims, including any claims under the 1990 oral agreement, and was unambiguous: “A contract provision is unambiguous where it has ‘a definite and precise meaning, unattended by danger of misconception in the purpose of the contract itself, and concerning which there is no reasonable basis for a difference of opinion.’… A contract is not ambiguous merely because the parties argue for different interpretations, nor where the interpretation urged by one party strains the contract language beyond its reasonable and ordinary meaning.”
74 • THE TOY BOOK
Web Blaster patent The District Court said that the “history of the 2001 Settlement Agreement reflects that the parties entered into the agreement to settle all issues, patent and contract, in order ‘to avoid the further expense and distraction of litigation.’… In other words, the Settlement Agreement covered Web Blaster toys, infringing or not—not any specifically identified Web Blaster toy.” Because the 2001 Settlement Agreement was unambiguous, the Court could decide what the Settlement Agreement meant—and the Court agreed with Marvel that Marvel did not owe Kimble anything. But in the recent decision in July, the U.S. Court of Appeals vigorously disagreed, finding that: “[T]he Settlement Agreement is ambiguous.” So Kimble still cannot demand royalties under the 2001 Settlement Agreement, because the patent has expired. (Kimble could appeal that decision, to add yet more tangles to this
DECEMBER/JANUARY 2014