You're viewing Docket Item 103 from the case Archie Comic Publications, Inc. v. Penders. View the full docket and case details.

Download this document:




Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 1 of 41



UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK


ARCHIE COMIC PUBLICATIONS, INC.,

Plaintiff,

vs.

KENNETH W. PENDERS, II,
a/k/a KEN PENDERS

Defendant.





Case No.: 10-CV-8858 (RMB)

Judge: Hon. Richard M. Berman


PRE-TRIAL ORDER [PROPOSED]





Plaintiff/Counterclaim Defendant, Archie Comic Publications, Inc. (“Plaintiff” or “ACP”),

and Defendant/Counterclaim Plaintiff Ken Penders (“Defendant” or “Penders”), by and through

their attorneys, respectfully submit the following proposed pretrial order pursuant to the

Individual Practices of the Hon. Richard M. Berman and Fed. R. Civ. Proc. 26(a)(3).

I.

TRIAL COUNSEL

a. Plaintiffs/Counterclaim Defendant:


Matthew C. Wagner ([email protected])
Scott Harrington ([email protected])
Jonathan Longobardi ([email protected])
DISERIO MARTIN O’CONNOR & CASTIGLIONI, LLP
50 Main Street, Suite 1000
White Plains, NY 10606
(914) 684-0090 Tel
(914) 684-0590 Fax


b. Defendant/Counterclaimant:

Phillip J. Daman ([email protected])
Andre St. Laurent ([email protected])
Daman L.L.C.
17383 Sunset Boulevard, Suite A340
Pacific Palisades, California 90272



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 2 of 41



Tel. (310) 431-9628
Fax. (462) 645-0754


II.

SUBJECT MATTER JURISDICTION

This Court has original jurisdiction over this action under 28 U.S.C. §1331 as it involves

claims arising under the Declaratory Judgment Act, 28 U.S.C. § 2201. This Court has

supplemental jurisdiction over the asserted common law claims pursuant to 28 U.S.C. §1367(a),

because such claims are so related to those claims under which the Court has jurisdiction that

they form part of the same case and controversy under Article III of the United States

Constitution.

Alternatively, this Court has jurisdiction over this dispute pursuant to 28 U.S.C. § 1332(a)(1),

as the Parties are presently citizens of different States, and the amount in controversy exceeds

the sum or value of $75,000 exclusive of interest and costs.

III.

BRIEF SUMMARY OF THE PARTIES' CLAIMS AND DEFENSES TO BE TRIED

a. Plaintiff’s Claims

ACP alleges as follows:

ACP was founded in 1939 by Maurice Coyne, Louis Silberkleit, and John L. Goldwater

and has grown into one of the most successful, longest running brands in the history of the

comic industry. ACP is best known for its series of comics featuring the fictional characters

created by its founders: Archie Andrews, Betty Cooper, Veronica Lodge, Reggie Mantle and

Jughead Jones. ACP’s comic enterprise has developed robustly over the years and now includes

many additional characters and comics outside of the characters first created some eighty years

ago.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 3 of 41



In 1992, ACP entered into a licensing relationship with Sega of America, Inc. (“Sega”), to

produce, among other things, comic books which feature Sega’s immensely popular character

SONIC THE HEDGEHOG, and all related ancillary characters, such as KNUCKLES THE ECHIDNA

(“Sonic Comic Book Series”). ACP’s relationship with Sega continues to this day, and now

includes digital distribution rights.

From 1993 to 2005, Penders worked for ACP as an independent contractor and

developed for ACP, stories, scripts, artwork, and other original creative expressions fixed in

tangible form (individually a “Work” and collectively “Works”) as contributions to the Sega

Comic Book Series. Penders was paid in full for his work.

The relationship between Penders and ACP was memorialized in written agreements,

executed in 1996. In multiple December 2008 emails, Penders admitted he executed a “work-

for-hire agreement” with ACP. In fact he executed two agreements: Revised Newsstand Comic

Independent Contractor’s Agreement (“Contractor’s Agreement”); and ACP Licensed Comic

Books Independent Contractor’s Agreement (“Licensed Comic Books IC Agreement”) (the

Contractor’s Agreement and the Licensed Comic Books IC Agreement collectively referred to as

the “ACP-Penders Agreements”).1

As the ACP-Penders Agreements make clear, all Works supplied by Penders to ACP were

commissioned by ACP from Penders as works-made-for-hire (as that term is used in the

Copyright Act). In the alternative, and to the extent that any Work fails to qualify as a work-

made-for-hire under the U.S. Copyright Act, Penders agreed in the ACP-Penders Agreements to

assign, and did assign, all right, title and interest in and to each Work and all of the Works to


1 The ACP-Penders Agreements are attached to the Complaint (D.E. 1) as Exhibits A and B.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 4 of 41



ACP. The ACP-Penders Agreements also obligated Penders to execute any documents needed

to confirm that any specific Work and all of the Works are works-made-for-hire and/or to

effectuate the assignment of his rights, if any, to ACP, in order for ACP to obtain copyright,

trademark or patent protection for any of the Works.

All Works supplied by Penders to ACP were governed by the ACP-Penders Agreements.

Paragraph 5 of the Contractor’s Agreement provides for a fixed sum of compensation for each

assignment and clearly states that Penders would not be entitled to any additional

compensation, including for reprints. Penders was paid in full by ACP for each of the Works at

the time of delivery, many years ago.

Beginning in about January 2009, a full fifteen years after he penned his first

contributions to the Sonic Comic Book Series and contrary to the ACP-Penders Agreements,

which contain signatures and dates that match numerous other documents signed by Penders,

he began filing numerous applications with the U.S. Copyright Office to register each of the

Works he supplied to ACP in his own name personally and claimed ownership of each of the

Works, listing himself as the “Author” and “Copyright Claimant” for each of the Works. Penders

filed at least one-hundred-seventy-one (171) copyright registrations with the U.S. Copyright

Office between 2009 and 2010.

In July 2010, Penders, through his lawyer, then accused ACP of infringing his copyrights.

ACP sent Penders copies of the ACP-Penders Agreements, and demanded he cease and desist

from his actions in violations of the agreements. After written correspondence was exchanged

for several months, Penders continued his charge of infringement and threats of filing a lawsuit.

It became clear that unless ACP acquiesced to Penders demands, that he would file suit against



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 5 of 41



ACP. ACP feared they would be unfairly sued for copyright infringement. Accordingly, ACP filed

this action on November 25, 2010, seeking cancellation of the registrations, declaratory

judgment and remedies for breach of contract and tortious interference.

The asserted registrations were registered more than five years after first publication of

the subject work. None of the asserted registrations may be considered to be prima facie

evidence of the validity of the copyright and the facts stated in the certificates. 17 USC 410(c).

None of the asserted registrations include a statement that the subject work was made for hire,

as required by 17 USC 409(4), and each was registered more than three (3) months after first

publication of the subject work (17 USC 412). Each of asserted registrations are for Works

supplied by Penders to ACP from as early as 1993, seventeen (17) years ago; in all the years

since that time until 2010, Penders never claimed any ownership in any of the works, or sought

copyright registration, or made any demands upon ACP for any further compensation for use

and exploitation of any of the Works. Penders was not entitled to any ownership interest in

any of the Works, or to any additional compensation for use and exploitation of any of the

Works, and he knew this plainly at the time the Works were delivered to ACP and when he

accepted payment from ACP in exchange for the Works.

Specifically, ACP’s complaint alleges five claims for relief against Penders:

Claim 1 is for Declaratory Judgment that the ACP-Penders Agreements are valid and

enforceable, and that ACP does not infringe the Works or registrations asserted by Penders in

his threats of suit and accusations against ACP. This claim arises under the Declaratory

Judgment Act, 28 U.S.C. § 2201.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 6 of 41



Claim 2 is for Declaratory Judgment, again arising under 28 U.S.C. § 2201, that the

asserted registration should be canceled, and other relief consistent with the terms of the ACP-

Penders Agreements. Penders’ acts and conduct were in derogation of the contractual terms of

the ACP-Penders Agreements, and he made false statements in the applications, claiming to

have written transfer agreements with co-authors, when in fact he did not. The registrations

are therefore invalid and should be canceled. “*W+hen a court is convinced that a registration

should be canceled, it should hold the registration invalid, and order the holder of the

certificate to request the Copyright Office to cancel the registration. Such an action does not

require an affirmative action by the Copyright Office. If the holder of the certificate fails to

request cancellation by the Copyright Office, that party may be held in contempt.” 5 Patry on

Copyright § 17:108.

Claims 3 and 4 are for breach of the Contractor’s Agreement and Licensed Comic Books

IC Agreement (the ACP-Penders Agreements) under New York law. The ACP-Penders

Agreements both grant to ACP all right, title and interest in any Works supplied by Penders to

ACP as a work-made-for-hire, or in the alternative, to the extent any Work fails to qualify as a

work-made-for-hire, Penders agreed to, and did, assign all right, title and interest in each Work

to ACP under the terms of that agreement. By virtue of the acts and conduct described above,

Penders has materially breached the ACP-Penders Agreements. Penders’ claims of ownership,

authorship, or of any copyright right in the Works, applications for and maintenance of the

copyright registrations constitute material breaches of his obligations. Penders has used or

reproduced the Works, prepared works which are substantially similar to the Works, and

parodied the Works. These are all in breach of the agreements.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 7 of 41



Furthermore, any compensation for reprints under the ACP-Penders Agreements are to

be paid at ACP’s sole discretion, and Penders’ demand for information from ACP relating to

reprints of the Works and any ancillary products based on the Works is a violation of the terms

of the agreements.

ACP has requested Penders to cease all acts and conduct in derogation of the ACP-

Penders Agreements, and take such actions which he is required to do, but Penders has refused

to do so. ACP has no adequate remedy at law to redress Penders’ continued breaches. On this

basis, ACP requests relief in the form of damages for breach of the ACP-Penders Agreements

(respectively in Claims 3 and 4) and specific performance from Penders in compliance with the

terms thereof.

Claim 5 was for intentional interference with contractual relations, namely Sega. Since

the time discovery closed in this matter, Sega and ACP have renewed their agreement. ACP has

therefore agreed to withdraw this claim.

b. Defendant’s Defenses

The basic premise of Defendant’s defense is that he retains ownership of the copyright

and associated rights to all of the Works and that he, not ACP, is the true, rightful and legal

owner of the copyrights at issue in this matter. Both the Newsstand and Licensed Comic Book

Agreements fail in whole or pertinent part because:

(1) The documents do not meet the basic standards of offer, acceptance, consideration

and mutual assent of the parties required for contract formation

(2) The documents purport to control subject matter which is beyond the scope of the

“work for hire” exception as defined by the Copyright Act, 17 U.S.C. § 101



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 8 of 41



(3) The documents fail to comply with the requirements necessary to validly create a

“work for hire contract” to the extent retroactive, “blanket assignments” lack specificity, are

ambiguous and are unenforceable;

(4) The documents fail to comply with requirements necessary to create a valid

assignment.

Lastly, and again assuming arguendo that these two contracts Plaintiff ACP are deemed

valid and enforceable, Penders maintains that he is still the rightful copyright owner of a large

subset of the work he submitted to ACP to the extent such work:

(1) Pre dates the purported dates of execution on these agreements (all work from

1993- 1996 work) and/or ;

(2) He was never paid for this subset of the work he produced.

Penders further maintains that any arguable copyright ACP may have are cancellable under

section 203 of the Copyright Act.

The Revised Newsstand Independent Contractor’s Agreement and the ACP Licensed Comic

Books Independent Contractor’s Agreement are Not Authentic.



Archie is relying on the two above-noted documents, the validity and enforceability of

these documents are disputed for a number of reasons.

Penders Never Signed the Documents

First, these documents are not authentic as they were never executed by Penders.

Despite ACP’s current argument and the language of the proffered documents, it was not

common practice at ACP during this time to require Penders nor any other of the SONIC

Freelancers to sign such documents. In fact, several of Penders’ witnesses are similarly



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 9 of 41



situated freelance employees who worked on SONIC, and will state, like Penders, that they all

worked as freelancers without contracts for many years, and overlapping with the time that

Penders worked on Sonic.

Despite its assertions that the above referenced independent contractor’s documents

are genuine, ACP has been unable to produce any original copies of the either contract.

Initially, Penders contacted Justin Gabrie, his editor at the time the documents were allegedly

executed, who stated in writing that he had sent no such documents to either Penders or any

other freelancer submitting work to the Sonic titles at the time. Gabrie also went on to state

that he had approached the publishers of ACP regarding the placement of work-for hire

language on the vouchers and back of the checks which freelancers routinely signed, but was

rebuffed by the publishers as being an unnecessary action required on their part. Furthermore,

Penders repeatedly followed up on this by reaching out to ACP’s Co-President, Mr. Gorelick, in

December 2008 to ascertain whether any such documents existed and in an effort to clarify the

scope of any purported rights ACP may have claimed to his submissions and library of work.

Mr. Gorelick initially ignored Penders’ requests for information, but ultimately acknowledged

that no such documents existed. Penders then proceeded to file his copyright registrations to

protect his interests. Although the Copyright Office notified ACP of the pending registration

and solicited any response or object as it is statutorily required to do, ACP did not respond or

otherwise indicate any objection to Penders’ copyright registrations, and the Copyright Office

registered the copyrights.

Accordingly, Penders maintains that ACP-Penders documents are forgeries or, if actually

signed, signed under false pretenses and the documents are therefore not authentic and



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 10 of 41



provide no authority. Penders further maintains that, even assuming arguendo that the

purported ACP-Penders documents are genuine, they are not valid, binding or otherwise

enforceable work-for hire or assignment agreements and therefore they cannot be used by

ACP to claim copyright ownership in the work Mr. Penders produced.

Although ACP has produced numerous Revised Newsstand Agreements that were

entered into between ACP and creators who worked on Archie character books, no evidence

has been produced showing that any of Penders or his contemporary Sonic Creators signed

either the Revised Newsstand Agreements or the ACP Licensed Comic Book Agreement. Nor

has ACP produced any evidence documenting any requests on their part with any creator of

comic books or related artwork regarding the transfer to ACP of any such creator’s rights to a

specific work at any time during the entire period Penders was submitting his works to ACP.

In addition, after consultation with numerous creators and editors who worked on the

Sonic comic book series or related books (the “Sonic Titles”), the evidence shows that Archie

did not utilize any standard operating procedure when it came to the creators working on the

Sonic Titles during the 1990s. Specifically, Penders has not yet found a creator who worked on

the Sonic Titles prior to 1997 who had been required to sign an Independent Contractor’s

Agreement or a Licensed Comic Books Independent Contractor’s Agreement. Penders also

located a number of other creators who worked either on Archie-core titles or other licensed

properties who had never signed any agreements with ACP. One such creator, Elliot S! Maggin,

has been described to this court as having no connection whatsoever with ACP by ACP

President Michael Pellerito (See Pellerito Declaration, filed with the court on March 3, 2011),

and yet his name is prominently featured on the first issue cover in bold lettering on an Archie



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 11 of 41



title. Thus, the assertion by Archie that it obtained signed agreements from Penders, but never

sought nor obtained similar agreements from the remaining creators, is again highly suspect,

and enhances the questionable nature of those documents.

Documents Did Not Exist Prior to July 2010

Finally, and as alluded to above, Penders had in the past repeatedly requested copies

from Archie of any and all contracts or agreements that he might have signed during his many

years as a freelancer for Archie. These requests were made more than 2 years ago, and on

more than one occasion, and each time Archie informed Penders that no agreements or

contracts between Archie and Mr. Penders existed.

Only after Archie received Penders’ July 2, 2010 letter were these documents allegedly

discovered in Archie’s files. The sudden appearance of these “lost” documents is thus highly

suspicious. Further, Archie’s repeated refusal to allow inspection of the original documents not

only seriously brings into question their authenticity, but has also prevented Penders from

taking actions to document the forgery (though the burden to show the validity of the

document rests with ACP as proponent of the document).

The Independent Contractor Agreement and the Licensed Comic Books Independent

Contractor’s Agreement are Not Valid Contracts.

Even if authentic, it is clear that the documents produced are not valid, legally binding

and enforceable work-for-hire contracts or assignments, for the reasons set forth below

Comic Books Not Within Work for Hire Category

Although work for hire agreements are used in any number of industries, including the

comic book industry, comic books in general do not fall within any of the statutory categories of



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 12 of 41



works eligible for consideration. For example, Knuckles the Dark Legion #1 is a single 22 page

story with a single creative team; it is neither a compilation nor a collective work, nor does it fit

within any of the other 7 categories of qualifying works. These documents, therefore, do not

constituted valid work for hire agreements even if they are deemed to be authentic.

Documents Lack Sufficient Particularity

Even assuming arguendo that certain of the works are found to qualify for one of the 7

enumerated categories, they fail with respect to the writing requirement. Specifically, the

statute states that a “work made for hire” is “a work specially ordered or commissioned” and

requires that “the parties expressly agree in a written instrument signed by them that the work

shall be considered a work made for hire.” The documents produced by Archie, however, fail to

identify the specific works (or even comic book series) which are expected to be the subject of

work made for hire status.

Between 1993 and 2005, Penders worked on more than one Archie comic book title,

and created works involving a variety of different characters, including Archie Andrews,

Jughead, Betty and Sabrina, as well as non-Archie Andrews-related characters such as The

Jaguar. In addition to the SONIC and KNUCKLES series, Penders also worked as a freelancer on

other Archie comic books based on licensed properties, such as NIGHT INTO DREAMS and

PRINCESS SALLY. However, the documents provided make no reference to any specific title(s)

or property(s), and do not identify any specific work (or works) that were specially ordered or

commissioned by Archie.







Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 13 of 41



Documents are Subsequent to Penders’ Creation

As noted above, one of the requirements for a work to qualify as a “work made for hire”

is that there be a written agreement between the parties stating that any eligible work is

considered a work made for hire. Under controlling 2nd Circuit law, such agreement must be

reached prior to creation of the work in question; one cannot require a work to become “work

made for hire” retroactively. It is undisputed that Penders, however, began submitting story

proposals to the Sonic Titles in 1993. Thus, the alleged Archie contracts (even if validly

executed) would fail to meet the statutory requirements, and cannot be relied upon as

evidence that Mr. Penders’ works published in the Sonic Titles were works made for hire.

Failure to Form a Valid Contract

Again, even assuming that the documents provided were validly executed by both

parties, there is clearly a failure of the parties to form a valid contract under relevant contract

law.

No Consideration

The documents lack any valid consideration, a necessary element for the formation of

any contract. First, the contracts do not contain any actual promise of monetary in exchange

for execution of the documents themselves. In fact, the contract specifically identifies

numerous forms of compensation which the contractor is not entitled to receive, but no actual

compensation is identified.

The only compensation discussed is based on potential future employment, which

employment is not guaranteed or promised. This is, at best, an illusory promise, and thus

cannot be considered adequate consideration. Further, under the terms of these documents, a



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 14 of 41



contractor could be asked to perform work but not be paid for it should the work not be

acceptable to Archie; yet, the contracts would grant Archie rights in any such work.

Thus, if a person signing either of the documents were to receive no future work from

Archie, or Archie were to refuse to accept work created by that contractor, then Archie would

have received benefits under the contract without requirement to compensate the creator. In

fact, Penders often produced work on speculation, and in numerous instances was not paid for

the work he created, including works that were then used by Archie in published works. Absent

valid consideration, there can be no enforceable contract. Incentivising such work is the very

reason why, absent a clear document, Work for Hire is circumscribed and artists are

encouraged to develop works to put into the free market on their own volition with their own

talents.

Ambiguity

Additionally, the Licensed Comic Books Independent Contractor’s Agreement contains a

number of blanks and un-selected cross-outs. The Licensed Comic Books Independent

Contractor’s Agreement fails to identify any particular series or any particular licensor. As

noted above, Penders worked on more than one title, and on more than one licensed property.

Thus, there is no way to ascertain from the face of this document what licensed property is

intended to be covered by such contractor’s agreement. Without such an understanding, there

can be no meeting of the minds, and thus no means for forming a valid, enforceable contract



between the parties.





Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 15 of 41



Does Not Reflect Standard Practices in the Comic Book Industry



Finally, the contracts relied upon by Archie do not comport with the standard practices

found in the comic book industry. Within the industry, creators are required to sign separate

work for hire agreements with each assignment submitted to a publisher for publication.

Historically, this has generally been done by use of a pay voucher filled out by the creator,

where such voucher contains the work made for hire agreement and assignment language, or

by placement of similar language on checks, the endorsement of which confirmed the status

and/or transfer of rights.

In conclusion, Penders continues to dispute (i) that the document copies produced by

Archie were validly entered into by the parties, and (ii) even if the originals are found and it is

determined that they had, in fact, been validly entered into, that the agreements themselves

constitute enforceable contracts. Thus, Penders properly obtained his copyright registrations

and the same are valid, and that Archie’s activities constitute an infringement of his copyright

rights in the registered works.

c. Defendant’s Counterclaims

Penders alleges as follows:

Penders and Michael Kanterovich, who has assigned all of his rights relevant to the

instant matter to Penders in signed writings, prepared, approached and submitted three

"Sonic" story ideas to ACP for approval during the second half of October 1993. ACP in turn,

submitted all three stories to Sega for approval, and Sega and ACP eventually approved two of

the three stories.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 16 of 41



This method of working on a comic book was different than Penders was used to doing

with other publishers. Specifically, rather than receiving a specific assignment, Archie invited

the writers to pitch story ideas, which ACP would submit to Sega for acceptance or rejection.

Unlike Penders' experience of submitting scripts at any other comic book publisher, ACP

insisted scripts be submitted in full panel page layout form, clearly depicting everything in a

rough visual format rather than in normal text format. Penders was paid no additional money

for producing these story layouts, despite the additional time and effort it required, and

received no credit or acknowledgement for them in the published works.

Once Sega and ACP approved the two story ideas, , ACP would act as a conduit and relay

the selected story submissions to Penders, wh, along with the other contributor, worked

together on full story scripts for those ideas. The first two stories authored by Penders and

Kanterovich appeared in issue No. II, cover dated June I994, released in March 1994.

Following acceptance of the first group of story ideas, Penders and the other contributor began

to work on additional story synopses for submission to ACP, which additional stories similarly

were approved by ACP and Sega.

Though Penders and his fellow contributor were soon identified by ACP as the new

regular writers for the Sonic Comics, there was at no time any official undertaking by ACP to

formalize Penders' working arrangements, and no guarantee of future work for the Sonic

Comics. More significantly, there was no Work for Hire agreement or arrangement. Penders

and the other party created the works on their own and at their own risk, and retained all rights

to the works. It is undisputed that there was no agreement entered into at this time.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 17 of 41



Early in the Penders/ACP relationship, Penders was presented with the opportunity to

write a story introducing the "Knuckles the Echidna" video game character into the Sonic

Comics continuity, intended to be a try-out for such character. The Knuckles story appeared in

issue #13, cover dated August 1994, released in May 1994. Although Sega was initially skeptical

of the idea, the story proved popular. In the ensuing years, Penders would be given the chance

to script and illustrate many more stories featuring the Knuckles character, eventually leading

to a Knuckles mini-series and then a regular, ongoing Knuckles comic book series that continued

for nearly three years.

Starting in late 1994, Penders began to write solo stories with increasing frequency. In

addition, in mid-1995, Penders began to provide full pencil artwork for the Sonic Comics, at first

for covers and then interior artwork.

At all times through this period, it is undisputed that Penders was working for ACP as a

freelancer with no contract. Moreover, the only ACP-generated documents that were being

provided to and signed by Penders and that pertained to the work Penders created were pay

vouchers and checks that Penders endorsed.

None of the ACP pay vouchers tendered by ACP contained any legal language, or made

any reference to ownership or transfer of copyright rights in the materials that Penders was

producing for the Sonic Comics. None of the checks that Penders received from ACP in payment

for his work contained any legal language concerning copyright rights or a transfer of his rights

to ACP. Penders understood that there was no transfer of his rights in the stories Penders

pitched, whether or not they were accepted by ACP for publication. As a result, his enthusiasm



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 18 of 41



for working on the Sonic Comics continued to grow as Penders introduced new concepts, story

ideas and characters, all of which Penders believed he owned as their creator.

Penders' Counterclaim 1 is for declaratory judgment, seeking a judicial determination of

the validity of his copyrights, both registered and unregistered, with respect to his creations

and his ownership thereof, and thus that ACP’s use of any such material constitutes

impermissible infringement on Penders’ copyrighted property. Penders further seeks a

declaration that Penders’ own use of his properties does not constitute breach of contact or

any other violation of ACP’s rights. Lastly, Penders seeks declaration that ACP does not own

“All works submitted by Mr. Penders”, contrary to ACP’s assertion in its November 23rd , 2010

letter to Penders’ then counsel.

Penders' Counterclaim 2 is for the direct infringement of his exclusive rights of

reproduction, distribution, and the preparation of derivative works in these works, specifically,

ACP's compilation and reprinting of Penders' copyrighted works within various issues of Sonic

Archives, the use of Penders' storylines and/or characters in other Sonic comic books, and the

creation of derivative works in the form of electronic media versions of the Penders

Copyrighted Works for distribution via electronic channels.

Penders' Counterclaim 3 is for the vicarious infringement of Penders' works by ACP as

the result of the direct infringement of his works by others, believed to include, without

limitation, Apple, Inc., Sony Computer Entertainment Europe, Diamond Comics Distributors,

Graphicly.com, Worldcolor Press (formerly Quebecor), Toys R Us, Barnes and Nobles, Jazwares,

Comixolgy, Kablenews, and iVerse Media LLC, directly infringing activities which ACP receives a

direct financial benefit from and has the right and ability to supervise.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 19 of 41



Penders' Counterclaim 4 is for the contributory infringement of Penders' works by ACP

as the result of the direct infringement of his works by others, believed to include, without

limitation, Apple, Inc., Sony Computer Entertainment Europe, and iVerse Media LLC, where ACP

had knowledge of Penders' rights and induced, caused, and/or materially contributed to the

directly infringing activities.

d. Plaintiff’s Defenses to Counterclaims

1.

First Counterclaim:



Penders’ First Counterclaim is duplicative of ACP’s first party claims, and should be

dismissed for all the reasons stated in ACP’s Rule 12 Motion to Dismiss, which remains pending

before the Court and is fully incorporated herein by reference. See D.E. 39 and 40. Notably,

Penders made no effort to oppose ACP’s motion to dismiss the First Counterclaim in his

response. See D.E. 42. Accordingly, for all the reasons advanced in support of its first party

claims, recited above, Penders is not entitled to the relief sought in this counterclaim. In

addition, Penders, for the first time, seeks declaratory judgment that “his own use of his

properties does not constitute breach of contact or any other violation of ACP’s rights” and that

“ACP does not own “All works submitted by Mr. Penders”, contrary to ACP’s assertion in its

November 23rd , 2010 letter to Penders’ then counsel.” These claims for relief are not pled in

the counterclaim or in the prayer for relief.

2.

Second Counterclaim:

Penders’ second counterclaim is for direct copyright infringement “of his exclusive rights

of reproduction, distribution, and the preparation of derivative works in these works.” The

Defendant bears the burden of proving two elements: (1) ownership of the copyright and (2)



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 20 of 41



unauthorized copying by the defendant. Penders is unable to prove either element, and

therefore cannot support a claim for copyright infringement. The party alleging infringement

“must necessarily establish the content of the copyrighted work that it contends was

infringed.” Airframe v. L-3 Communications Corp., 658 F.3d 100 (1st Cir. 2011). As a threshold

matter, Defendant has failed to provide any evidence of the specific works that he claims have

been infringed, and the “content of the copyrighted work.” Although Penders may have filed

copyright registrations, those registrations are not evidence of ownership of a copyright.

Copyright registration is a precondition to filing suit for copyright infringement; registration has

been called an additional element of infringement. See Reed Elsevier, Inc. v. Muchnik, 130 S.Ct.

1237, 1241-9 (2010); Cosmetic Ideas, Inc. v. IAC/InteractiveCorp, 606 F.3d 612, 615 (9th Cir.

2010). Penders has failed to obtain registration for works he claims have been infringed, failed

to produce the works he alleges to have been infringed that are subject to purported

registrations, and has even failed to produce the registrations he has obtained. The

registrations he has obtained are invalid for a multitude of reasons.

First, ACP and Penders entered into two binding and enforceable contracts, where

Penders agreed to assign and did assign, all right, title and ownership interest in and to each

Work and all of the Works to ACP. Despite Penders claims to the contrary, the ACP-Penders

Agreements are valid contracts and comport with the requirements for a binding contract. A

valid contract requires “an offer, acceptance, consideration, mutual assent and intent to be

bound.” Arakelian v. Omnicare, Inc., 735 F. Supp.2d 22 (S.D.N.Y. Aug. 18, 2010). In 1996,

Penders and ACP entered into the Contractor’s Agreement and the Licensed Comic Books IC

Agreement. The Agreements were supported by valid consideration in the form of ACP’s



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 21 of 41



promise to give Penders compensation for his work on stories, scripts, artwork and other

creative expressions for the Sega Comic Book Series. Penders claims that the contracts do not

contain any actual promise of money (consideration) in exchange for the work provided is

nonsensical. The terms clearly state in Paragraph 5 of the Contractor’s Agreement that work

commissioned by ACP and acceptable to ACP shall be compensated by a fixed sum. In fact, the

parties conducted this course of conduct for many years. “A benefit to a promisor or a

detriment to the promisee is sufficient consideration for a contract.” Kinley Corp. v. Ancira, 859

F. Supp. 652, 657 (W.D.N.Y. July 25, 1994). ACP would be receiving the benefit of Works from

Penders, and Penders would receive the benefit of compensation for those works.

Both agreements were signed and dated by Penders. Penders once again makes the

tired and uncorroborated argument that the ACP-Penders agreements are forgeries, despite

there being no evidence to support such a claim, and despite his admission he has no proof

Archie forged the documents. Archie did not forge these documents. It is incumbent upon a

party claiming a nongenuineness of a signature to produce firsthand proof of the forgery.

Bradford Trust Co. of Boston v. Merrill Lynch, Pierce, Fennder & Smith, Inc., 622 F.Supp. 208

(S.D.N.Y. 1985). Penders has failed to produce any evidence that the agreements were forged

(because they are not forged) nor has he ever identified a handwriting expert to testify as to

nongenuineness of the documents. Penders’ admission that he has no proof of any forgery

should be dispositive on this issue. This argument is unfounded and contradicts Penders’ own

sworn testimony.

Penders’ claims that he was not paid for all of his work, yet he worked for ACP for over

twelve (12) years, and was paid in full for all of his work, in accordance with the Agreements (he



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 22 of 41



was even paid for work which was not acceptable to ACP and which was never published by

ACP). Similarly, Penders never claimed any ownership of the works or made any demands for

additional compensation for use of the works. Penders argues that “under the terms of these

documents, a contractor could be asked to perform work but not be paid for it.” This is simply

not the case. The terms of the Contracts very clearly provide for compensation to Penders for

work commissioned by ACP and acceptable to it; equally clear in this relationship (as in any

business relationship) is that ACP would not pay for work which was not acceptable to it. See

D.E.1,at Exhibit A and B (“Contractor’s full and complete compensation for each assignment

that is completed on time and in a manner that is acceptable to Archie, will be a fixed sum

based on a rate to be mutually agreed upon.”). Moreover, the ACP-Penders Agreements that

Penders alleges are invalid are the very same Agreements that were enforced by this Court in

litigation in this district with another writer and ACP, deciding the same issues in this case. See,

DeCarlo v. Archie Comic Publications, Inc., 127 F. Supp.2d 497 (S.D.N.Y.), aff’d, 11 F. App’x 26

(2d Cir. 2001), cert. denied, 534 U.S. 1056 (2001); Archie Comic Publications v. DeCarlo, 258 F.

Supp.2d 315 (S.D.N.Y. Apr. 23, 2003), memorandum opinion (citing DeCarlo v. Archie Comic

Publications, Inc., 127 F. Supp.2d 497 (S.D.N.Y.)) (noting that ACP had previously been

determined to own copyrights in the properties and an order to quiet title is proper), final

judgment and permanent injunction, 2003 WL 21354692 (S.D.N.Y. June 11, 2003), aff’d, 88 F.

App’x 468 (2d Cir. 2004).

Contrary to the DeCarlo case law, Defendant argues that the ACP-Penders Agreements

are not enforceable contracts because the documents are ambiguous. Under the applicable

law, “ambiguity requires more than one reasonable interpretation of the contract.” AIU North



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 23 of 41



America Inc. v. Caisse Franco Neerlandaise de Cautionnements, 72 F.Supp.2d 350 (S.D.N.Y. Oct.

28, 1999). Penders does not and cannot establish that there is more than one reasonable

interpretation of the agreements. The ACP-Penders Agreements clearly state, on their face, the

subject matter of the agreement. For example, the Revised Newsstand Comic Independent

Contractor’s Agreement (“Contractor’s Agreement”) states in all capital letters that it is an

INDEPENDENT CONTRACTOR’S AGREEMENT. The next paragraph of the Agreement further

states that it is a “work for hire agreement.” The Contractor’s Agreement contains no blanks,

was signed and executed by Penders and is filled out in its entirety. The ACP Licensed Comic

Books Independent Contractor’s Agreement (Licensed Comic Books IC Agreement”), signed and

executed by Penders on December 12, 1996, does contain two blank spaces, which is clearly

explained by ACP’s President Michael Pellerito, and also served as the basis of the parties

relationship for many years, which established a course of performance under its terms.

However, even if the Court accepts Defendant’s argument that the Licensed Comic Books IC

Agreement is ambiguous, extrinsic evidence is admissible to establish that the parties intended

to enter into this contract and established a course of performance over many years according

to the terms of the agreement. Indeed, Penders never claimed ownership of the works he

supplied to ACP and ACP paid Penders for all work acceptable to it and that was published.

Accordingly, the terms of the agreements are binding and enforceable.

In the event that the Licensed Comic Books IC Agreement is unenforceable due to these

two blanks, then the Contractors Agreement, which contains no blanks, controls all of Penders’

submissions and similarly provides that Penders is an independent contractor of ACP and “all

works and properties are and shall be works for hire owned by and for the benefit of Archie.”



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 24 of 41



The Contractors Agreement clearly states that Penders’ work on all “Licensed Properties” (there

is no dispute in this case that the work at issue is a “Licensed Property” of ACP) shall be

governed by that agreement unless and until the contractor signed the Licensed Comic Books IC

Agreement. That agreement also contains terms under which all works are assigned to ACP.

Defendant argues that the ACP-Penders Agreements “do not comport with the standard

practices in the comic book industry.” The standard practices at other publishers is irrelevant.

The ACP-Penders Agreements conformed to the standard practice for ACP’s dealings with its

Independent Contractors. Indeed, the DeCarlo cases show that the 1996 agreement is a form

used by ACP regularly. ACP is one of the most successful and longest running brands in the

history of the comic book industry and has executed hundreds of contracts with independent

contractors. In 1996, ACP’s practice was to send out two signed copies of the contract to sign

to the independent contractor, and have the independent contractor return one copy to ACP

and keep one for his or her own personal use and record. In conformance with this policy, ACP

sent Penders two contracts to sign, which he testified during his deposition that he received

those contracts. Penders signed both agreements and returned a copy of each to ACP, in

accordance with ACP’s long standing policies and procedures. Defendant cites no evidence to

support his argument that the Agreements do not comport with practices in the comic book

industry, and there is no expert disclosure for testimony to establish any purported “standard

practices” in the comic book industry.2


2 Defendant has identified Elliot S! Maggin to testify “as to the industry standards regarding
work for hire agreements and assignments.” It appears that Defendant plans to call Maggin to
provide expert testimony yet no Rule 26 expert disclosure was ever made in this case. This
testimony is or will be subject of a Motion in Limine and to Exclude.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 25 of 41



Defendant also argues that the ACP-Penders Agreements did not exist prior to July 2010.

This is completely false. These documents were signed and executed by Penders more than

fifteen years ago. Contrary to Defendant’s claims, ACP never informed Penders that “no

agreements or contracts between Archie and Mr. Penders existed” and there is no evidence to

the contrary. In fact, Penders emails to ACP (Gorelick) in 2008 admit and request copies of the

“agreements I *Penders+ signed” with ACP. ACP undertook a diligent search for the Agreements

when Penders requested copies of the Agreements he signed. There is ample evidence that the

ACP-Penders Agreements produced to Penders are true and accurate copies of the documents

that Penders executed and submitted to ACP in 1996. The copies that ACP has provided to

Defendant that were found in the files that the original agreements would have been

maintained, and are evidence of the contents of the original documents and are admissible

under the Federal Rules of Evidence in lieu of the lost originals. FRE 1003-1004. ACP undertook

a diligent search of its regularly kept business records and files, and the copies of the ACP-

Penders Agreements were located and produced to Defendant. ACP and Penders entered into a

valid and binding contract where Penders agreed to assign and did assign all right and interest

in each Work to ACP. Penders is not the legal or rightful owner of the copyright to the works.

Second, Penders’ registrations are not prima facie proof of validity of the copyrights

under 17 U.S.C. § 410 because they were not filed within five years of the date of first

publication of the work. The presumption of validity of the Copyright’s Office’s registrations

only applies when the registration “was made before or within five years after the first

publication of the work.” All of Penders copyrights registrations were filed more than five years

after the first publication of the work, and therefore are not entitled to a presumption of



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 26 of 41



validity.3 Similarly, none of the asserted registrations include a statement that the subject work

was made for hire, as required by 17 U.S.C. § 409(4). Therefore, Penders cannot use the

registrations to prove the first element of copyright infringement.

Third, Penders is equitably estopped from asserting his claims for copyright

infringement. Under applicable federal law, a party can be estopped from pursuing a claim

where: (1) plaintiff had knowledge of defendant’s conduct; (2) plaintiff either (a) intended that

defendant rely on plaintiff’s acts or omissions or (b) acted or failed to act in such a manner that

defendant had a right to believe it was intended to rely on plaintiff’s conduct; (3) defendant

was ignorant of the true facts; and (4) defendant relied on plaintiff’s conduct to its detriment.

DeCarlo, 127 F. Supp.2d 497, aff’d, 11 F. App’x 26 (2d Cir. 2001), cert. denied, 534 U.S. 1056

(2001); Archie Comic Publications v. DeCarlo, 258 F. Supp.2d 315 (S.D.N.Y. Apr. 23, 2003),

memorandum opinion (citing DeCarlo v. Archie Comic Publications, Inc., 127 F. Supp.2d 497

(S.D.N.Y.)) (noting that ACP had previously been determined to own copyrights in the

properties and an order to quiet title is proper), final judgment and permanent injunction, 2003

WL 21354692 (S.D.N.Y. June 11, 2003), aff’d, 88 F. App’x 468 (2d Cir. 2004). Penders knew that

ACP considered itself the owner of the Works, yet he testified in his deposition that he told his

attorney he claimed ownership of works to his attorney when he filed for Bankruptcy in 1994.

He also testified that he believed ACP infringed his works in 1997, more than ten years prior to

the commencement of this lawsuit, yet he testified that he never attempted to register the

works with the Copyright Office (nor did he ever attempt to register his works until 2010) or

contact ACP and tell them that he believed ACP to be infringing his works. Despite believing


3 For further support and case law, see Plaintiff’s Reply to Defendant’s Opposition to Plaintiff’s
Motions in Limine, D.E. 60.



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 27 of 41



ACP to be infringing his work as early as 1997 Penders remained silent in order to gain more

work from ACP and in fact ACP continued to commission work from Penders and Penders

supplied ACP with works for more than fifteen (15) years. He did not begin seeking to register

copyrights until 2009. Penders did not list any intellectual property or copyrights in his

Bankruptcy Petition.

The second element of equitable estoppel is also clearly satisfied. ACP was unaware

that Penders fashioned himself as the owner of any rights in any works he supplied to ACP. ACP

relied on Penders’ silence and relied on the Agreements Penders signed when it began

reprinting materials in which Penders now claims rights. “Silence in the face of an explicit

contrary assumption by an innocent party may constitute a concealment of facts or a false

misrepresentation for estoppel purposes.” Gen. Elec. Capital Corp. v. Armadora, S.A., 37 F. 3d

41, 46-47 (2d Cir. 1994). ACP relied on Penders’ behavior to their detriment, and had no reason

to believe that Penders considered himself to be the owner of the works, especially considering

Penders’ long employment with ACP and the two agreements he executed.

Fourth, Penders cannot prove a copyright infringement claim because at least five of the

fifteen allegedly infringing reprint materials clearly exceed the three year statute of limitations.

17 U.S.C. § 507 (b). Penders is barred from recovery of any damages for any reprint materials

occurring in 1994, 2007 and April of 2008 because the claims accrued more than three years

prior to the commencement of this action. Penders recovery and damages are also limited

solely to the acts, if any, occurring within three years of this suit. Each alleged act of

infringement claimed by Penders is a “distinct harm that gives rise to an independent claim for



Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 28 of 41



relief”, therefore each harm and claim for relief is limited to the three year statute of

limitations of 17 U.S.C. § 507(b).

Fifth, the seventeen (17) registrations Penders filed prior to May 8, 1995, the date of his

bankruptcy discharge, are invalid and cannot be used to establish ownership of a valid

copyright. Penders filed for Chapter (7) Bankruptcy on December 12, 1994. Notably, he stated

on his bankruptcy petition that he has no rights to any “patents, copyrights, and other

intellectual property.” Penders swore under oath and penalty of perjury that he had no rights

to intellectual property or copyrights. He is barred from now claiming that he had rights in any

copyright prior to his bankruptcy discharge.

Sixth, Penders registrations listing a co-author by written transfer agreement are invalid.

The Copyright Act requires that a transfer of a copyright be in writing and signed by the

conveyor of the rights. Penders listed a co-author on at least sixteen (16) registrations. Those

registrations were obtained without the requisite written transfer agreement. The assignments

Penders produced to ACP are defective, do not assign all the works, and were executed in the

Summer of 2011, after the registrations were obtained. A copyright registration is invalid when

it is shown that the Copyright Office received false information from the applicant that may

have resulted in the rejection of the application. Penders supplied the Copyright Office with

false information, and told the Copyright Office that he had obtained written transfer

assignments from co-authors, when in fact he had not and knowing that his application would

not be approved without a written transfer assignment. These registrations are invalid, and

would never have been granted but for the fraudulent information regarding the assignments.







Case 1:10-cv-08858-RMB-MHD Document 103 Filed 12/16/11 Page 29 of 41



3.

Third and Fourth Counterclaims:

Penders Third and Fourth Counterclaims for vicarious and contributory copyright

infringement both lack any legal or factual support. In order to prove a claim for vicarious

infringement, Penders must prove three elements by a preponderance of evidence: (1) A party

other than ACP directly infringed on his copyright; (2) ACP profited from or had a financial

interest in the infringing activities of the third party; and (3) ACP had the right and ability to

supervise or control the infringing activities of the third party. For both vicarious and

contributory copyright infringement “there must be the direct infringement of a third party.”

Artista Records LLC v. Usenet.com, Inc., 633 F. Supp.2d 124 (S.D.N.Y. June 3, 2009).

Penders now states that he “believes” Apple, Inc., Sony Computer Entertainment

Europe, Diamond Comics Distributors, Graphicly.com, Worldcolor Press (formerly Quebecor),

Toys R Us, Barnes and Nobles, Jazwares, Comixolgy, Kablenews, and iVerse Media have directly

infringed on Penders works. This allegation is entirely unsupported by the evidence in this case

and Penders is unable to meet even the threshold requirement for both vicarious and

contributory infringement. Penders’ belief that “Apple, Inc., Sony Computer Entertainment

Europe, Diamond Comics Distributors, Graphicly.com, Worldcolor Press