South Africa: Spider-Man: With Great Power Comes Great… Prosperity

Last Updated: 5 September 2019
Article by André Maré

Most Read Contributor in South Africa, October 2019

There has been much in the news about Spider-Man of late, and it is not just about his role in the whole hullabaloo surrounding the cosmic super-villain, Thanos, wiping out half the universe in a recent Avengers movie. Of more importance to us is the issue of commercialising the intellectual property rights in Spider-Man raised by the character's owners. Basically it comes down to this.

In 1988 Sony acquired the film rights to the Spider-Man character from Marvel Studios, a Disney-group company that owns the comic book rights to the character. In terms of this deal Sony retains the film rights as long as it releases a Spider-Man movie every five years. The 2014 film The Amazing Spider-Man 2 underperformed, and in 2015 Sony and Marvel Studios entered into what was regarded by the industry as a highly unusual agreement. The companies agreed that they would in future work together on Spider-Man films, and that Sony would pay a share of the profits to Marvel Studios. When Marvel Studios recently sought to increase its share of the profits for the next Spider-Man movie Sony said no.

Sony will subsequently go it alone for the next Spider-Man film, thus losing the services of a senior Marvel Studios executive who apparently played an important role in the production of the most recent Spider-Man film. That film, Spider-Man: Far From Home, was a great hit and was no doubt helped by the popular Spider-Man cameos in many of the latest Marvel universe movies. Spider-Man: Far From Home was the most lucrative film Sony has ever made and as a result of the film's performance Spider-Man is now one of the most successful superheroes in movie history. Despite the fact that the film took in over USD1-billion at the box office, this translated into a mere USD50-million for Disney. Which probably explains why Disney was looking for a better deal.

While acknowledging that this parting of the ways might make life difficult, Sony made it clear how it sees things when it issued this public statement: "We hope this might change in the future, but understand that the many new responsibilities that Disney has given him [the Marvel Studios executive]... do not allow time for him to work on IP they do not own."

In case you missed it, the critical words are: "IP they do not own". So where is the IP in Spider-Man?

I am not privy to any of the agreements between the companies, but the IP rights here would obviously relate to the use of the Spider-Man character. The rights would presumably be limited to use of the character in films, but they might well extend to all sorts of merchandise, given the considerable amount of merchandising that's associated with blockbuster films.

So what form does this IP take? There will certainly be copyright issues involved here. Not only in the likeness of Spider-Man and the film itself (cinematograph films are one of the major categories of works protected by copyright law) but also in the music used in the film.

The IP will certainly also involve trade marks. It is highly likely that there will be trade mark registrations in all the countries where the film will be shown. These registrations might be for a host of things: the name Spider-Man, likenesses, logos, catchphrases, sounds, motions, gestures... The registrations will cover a range of goods and services, entertainment services, naturally, but also all the goods for which merchandising is likely.

It would be extremely interesting to see how the agreement between Disney and Sony first defined and then split the use of the IP. It must also be incredibly difficult to police compliance.

There are valuable commercial lessons to be learned from the Spider-Man story. Intangible assets such as IP are usually more valuable than tangible assets, just ask the Googles and Facebooks of this world.

Entire books have been written about all the wonderful things you can do with IP assets. Compared to immovable assets, IP assets are relatively easy to transact with, either domestically or in multi-jurisdictional commercial arrangements. IP can be split into its compound elements and commercialised individually across different territories, fields of use or products. You can use IP directly, thus enjoying the exclusivity that it affords, or you can license the IP out to third parties (franchising is one of the more famous examples of this type of commercial arrangement). Among many other things, you can sell the IP to a third party, use it to optimise tax efficiencies, use it to found jurisdiction and even use the IP as security in transactions.

IP rights are quite simply business assets and, when used correctly, they should be significant revenue generators. IP is power. Spider-Man teaches us that with great power comes great responsibility, but great power can also create great prosperity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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