#i went in expecting to speed through all the early archie stuff so i could get to the more moden things (and scourgeee i cant wait for him)

[pidgefudge]

i shouldve expected it but how come no one told me these comics were so unserious

[theamazingsallyhogan]

Sonic the Hedgehog, Scott Fulop, Narrative Ark LLC, Archie Comics, Sega of America, etc. : An update

Bear in mind that this is all pre-trial, and the situation is still very fluid. But I’ve had a few people ask for an update and I’ve seen many people spouting pure nonsense with their speculation, so I want to try to get people up to speed. This isn’t really my area so I might get some nuance wrong, but going through various public records I think I got the gist.

Before I say anything else I need to clear up a misconception. It’s a common error, one I made myself. People have been talking as if Scott Fulop is suing SEGA and Archie.

But Scott Fulop isn’t doing anything of the sort.

SBack in 2010, following Ken Penders’ lead, Scott Fulop filed copyright claims for a massive number of characters, stories, and concepts seen in the Sonic the Hedgehog comics published by Archie (I went into the situation between Ken and Scott here).  In October 2014, Fulop created a Limited Liability Company named “Narrative Ark LLC,” and on October 5, 2015, he legally transferred his copyrighted works and other intellectual property rights to the company.  The following day, Scott’s Narrative Ark’s lawyer sent Archie a letter informing them that they did not have permission to use Narrative Ark’s copyrighted material in any form.  Scott isn’t claiming to own anything and isn’t pursuing any legal actions, it’s all being done by Narrative Ark LLC, and Narrative Ark LLC isn’t Scott Fulop, it’s just a company founded by Scott Fulop that’s apparently done nothing but follow up on legal ownership of stuff that Scott Fulop created, with Scott Fulop being someone who would benefit financially from a legal victory.

After Narrative Ark provided Archie with photocopies of Fulop’s copyright registrations there was a period of negotiations that ultimately did not resolve the matter.  In August 2016,  Narrative Ark’s lawyer filed a lawsuit against Archie and Sega of America (SEGA) listing all the ways (”counts”) that those two companies are allegedly breaking the law. In October 2016, Archie’s legal team submitted arguments asking for most of the charges to be dismissed outright. 

In Counts I and II, Narrative Ark claims Archie and SEGA committed copyright infringement, and Archie’s legal team isn’t asking for that to be thrown out.  What they are asking to have dismissed are Counts III to VI.

In Count III, Narrative Ark claims that Archie violated the Lanham Act (the main trademark law in the United States). Archie cited the case of Dastar Corp vs. 20th Century Fox in their defense, and they’ve probably got good reason to be confident there. To give an example of how that defense has worked, some years ago General Universal Systems (GUS) developed a computer program called “Champion Packer” for one of their clients, Joe Lopez, who worked in the shipping industry. GUS only licensed the program to Lopez, while retaining full ownership of it.  Lopez then founded “HAL INC” with the intent of selling software that was really really blatantly based on Champion Packer.  When the case went to court and HAL INC cited Dastar, the ruling was basically “HAL INC didn’t pretend to be GUS while selling this, and HAL didn’t steal physical copies of GUS’ product and put them in new boxes with HAL’s name on them, so whatever else might be going on this isn’t a trademark issue”.

So Archie is making the case that this isn’t a trademark issue because it’s not like Narrative Ark LLC printed a bunch of comics and then Archie put new covers on them and pretended to have printed them. They printed the books and nobody disputes that, so they don’t think there’s any trademark issues here. 

In Count IV, Narrative Ark LLC also attempted to use New York’s General Business law against SEGA and Archie.  Archie’s lawyers pointed to where Narrative Ark’s lawyers made the claim that SEGA and Archie’s acts “have caused harm to the public,” and pointed out that even if everything else Narrative Ark claimed was actually true (which Archie/SEGA denies), then the only harm done to the public would have been some confusion, which isn’t enough to violate New York’s General Business Law.

Narrative Ark also filed against Archie and SEGA by arguing that the situation constitutes unfair competition (Count V) and unjust enrichment (Count VI).  Archie’s lawyers argue that those claims all hinge on the issue of copyright, so it’s preempted by Federal Copyright Law - the argument being that the correct way to resolve a dispute of this nature is to sue over breach of copyright, which Narrative Ark already did, and if Narrative Ark wants to explore other avenues then legally it will have to wait until after the copyright cases are finished.

Before I go any further I should point out that SEGA early on took the stance that they’re headquartered in California and do all their business there, plus they never had any dealings of any sort with Scott Fulop, so all this legal stuff happening in New York about Fulop’s work for Archie shouldn’t involve them.  On January 3, 2017, Narrative Ark’s lawyer put forth the argument that SEGA was still subject to the jurisdiction of New York courts, that it did business in New York, and it had sufficient supervision and control over Archie to be named as a co-defendant.

Back to the copyright issue (Counts I and II). 

Narrative Ark LLC compiled an extensive listing of material that allegedly made use of Fulop’s copyrighted work without his permission and without paying him for their usage.  It is a very very long list (over a hundred pages).  I included some examples here to demonstrate just how exhaustive it is.

Archie’s legal team make the argument that Scott created all the material he copyrighted and gave to Narrative Ark while working as an independent contractor for Archie, and that there was a formal expectation at the time of his employment that he would not retain ownership of his work.  In addition to claiming that Fulop did Work For Hire (something I explained earlier), and claiming that Fulop had been required to give up any ownership rights that were not covered by Work for Hire agreements, Archie’s legal team has invoked the doctrines of laches, estoppel, and unclean hands.

When “unclean hands” is invoked in a situation like this, it means the defendant is saying “it might look on the surface like the plaintiff has a case, but this all started when the plaintiff deceived us”.  The classic example is a building contractor suing a client for not paying a bill.  The client says the contractor has “unclean hands” because the contractor tricked the client with building cost estimates that were clearly too low (listing building materials for prices that are lower than they actually cost and the like).  Since the contractor only got the job by pretending the work would cost less than was reasonably possible, the contractor is in the wrong legally even though the client is the one not paying bills. 

Estoppel is a defensive doctrine with a few different aspects - here we’re talking about what’s called “promissory estoppel,” which is where an individual finds themselves in a situation where they stand to lose money due to a broken promise. A good example is a situation where a landlord promises a tenant that a lease will not be terminated, resulting in the tenant using his own money to improve the promises, followed by the landlord going against his word and terminating the lease.  The tenant can invoke estoppel since he wouldn’t have spent money fixing up the place if he hadn’t been promised that the lease wouldn’t be terminated. Another example would be a situation where a Amy saw a hammer she desperately wanted to buy after seeing it was on sale and got the storekeeper to promise to hold it for a few hours.  Amy came back the same day, having sold her ring for less than it’s actual worth to raise funds, only to find that the storekeeper had raised the hammer’s price because he knew that Amy was interested in buying it. Estoppel could be invoked because Amy lost money selling her ring for less than its worth based on the promise she’d made with the storekeeper.

The doctrine of laches is another legal defense.  Essentially it states that if you find yourself in a situation where you might be able to file a civil suit against another person, you have to make your move within a reasonable amount of time.  You can’t wait so long that they’re much less likely to be able to put up a good defense (memories have faded, documents have been lost), and you’re certainly not allowed to sit idly by with the intention of allowing them to continue what they’re doing just so they’ll find themselves in a bigger legal hole - laches is a way to stop people from setting up “lawsuit ambushes.” For example, let’s say that Mr. Hedgehog sees that his neighbor, Dr. Eggman, is doing some construction work. Mr. Hedgehog realizes early on that part of the garage Dr. Eggman is planning to build will cross the property line onto Mr. Hedgehog ’s property, but he says nothing. Years later the two have a falling out and Mr. Hedgehog files a lawsuit, demanding he be paid for the land now underneath Dr. Eggman’s garage. If in his statement Mr. Hedgehog happens to admit that he knew his neighbor was making a mistake even before construction started, then Dr. Eggman can use the doctrine of laches to say “Mr. Hedgehog had the chance to avoid all this and he didn’t, so he forfeited his legal rights”.  You’re required by law to speak up within a timely manner.

So in the Fulop case Archie’s legal team is saying that, yes, Scott Fulop did secure copyrights for his work (years after producing it), and he did turn those rights over to Narrative Ark, so on the surface it would look like Narrative Ark has a case.  But, they argue, for one thing Fulop should never have applied for those copyrights because he was Work For Hire and gave up all his rights to ownership when he was hired.  Furthermore, Fulop would have known for years that Archie was saying that all rights had been turned over to Sega, and he would have known that Archie was only employing him because they assumed there would be no legal issues regarding ownership of the work.  Moreover, they argue, if Fulop had any doubts about the situation he should have tried to address them years ago, instead of waiting while his stories were being reprinted and characters were being used over and over, thus creating a situation where he had more to gain and Archie/Sega had more to lose, while also making it harder for Archie and Sega to put together a defense due to the passage of time. 

At the same time that Archie was making these defensive arguments, they also accused Scott Fulop of libel for ever claiming that he had sole legal ownership of the work he had created while working for Archie. They argue that the lawsuit between Narrative Ark and Archie/Sega resulted because Scott lied to Narrative Ark when he turned over ownership of his copyrights and. And in so doing he hurt the perception of SEGA’s ownership and how Archie operates, which they argue is grounds for a libel suit.

On February 8 2017, Narrative Ark’s lawyer filed a motion to dismiss Archie’s claim against Fulop himself, arguing that Archie’s legal team had not correctly followed the procedures for making such a claim, that Archie was just trying to make life for Fulop financially difficult, and that obviously it makes no sense for Archie to seek legal action against Scott since it’s not like he owns the copyrights - Narrative Ark does, and clearly Narrative Ark is not Scott Fulop. 

And that’s where things are right now.