Number 9 is...no not really...number 9 is a good story, a good Spawn story so to speak. There's a bit of a flashback that shows that there's been Spawns in the past. But then it comes back to the present day and our Spawn, the one that was in the first seven issues, gets in a fight and does the comic book thing and whatever. That's one that Neil Gaiman's writing. And then for Neil, that's something that he's not really used to writing and so it gives him a chance to try something new and different himself.
--Todd McFarlane, Amazing Heroes Interviews #1
At one point in time, we settled the dispute, Todd and I. And one part of the dispute was he agreeing to give me the rest of the rights to Miracleman, so I would have owned Miracleman completely with Mark Buckingham. Todd sent me some of the film for Miracleman and what they had in their files, which wasn't very much, but that was that. And when I asked him for some more documentation, I never heard anything more.
Speaking as the co-owner of Miracleman, were they to try to do a Miracleman comic, I would probably stop them.
--Neil Gaiman, from the book Kimota.
Today’s entry continues, and concludes, the Deposition of Todd McFarlane in the Gaiman v McFarlane Angela law suit (you can ready part I here). This was the second day of McFarlane being deposed and he finally unleashed a bit and explained just why he went back on a deal between the two – a deal that would see Gaiman swap Angela for Miracleman. It’s not pleasant and can sense the tension in the air as McFarlane gave his answers while facing off with Neil Gaiman on the other side of the table, indeed more than once McFarlane simply replies that the lawyers would be better served asking Gaiman for answers rather than himself.
The main issue that prevented a deal from being done, in McFarlane’s eyes at least, was money. Gaiman pocketed a cool $100,000 up front for writing Spawn #9, as did Frank Miller, Alan Moore and Dave Sim. However, unlike Moore, Miller and Sim, Gaiman introduced new characters to the Spawn universe, and McFarlane began to profit from this by exploiting them – as any publisher would do. Gaiman was brought in to write more for McFarlane and the more he wrote, the more popular his characters became, in particular Angela. What could have been a one-off, disposable character became very important to both Gaiman and McFarlane, and that’s where the problems stemmed from. In hindsight a written contract would have been the best way to go, but in hindsight everyone is Einstein.
Although the case has ended, the sheer popularity and interest surrounding it is still as strong as ever, thus there’ll be more to come – watch this space. In the meantime, read some more McFarlane! It’s long, but, like Part I, it’s well worth it.
THE CONTINUED DEPOSITION OF TODD D.M. McFARLANE, taken at 8:55 a.m. on June 20, 2002, at the offices of Brown & Toleu, Ltd., 101 West Adams Street, Phoenix, Arizona, before PAUL GROSSMAN, a Notary Public and Certified Court Reporter #50028 in and for the State of Arizona, pursuant to the Federal Rules of Civil Procedure.
The plaintiffs were represented by their attorneys, Foley & Lardner, by Allen A. Arntsen, Esq. and Jeffrey A. Simmons, Esq.
The defendants Todd McFarlane were represented by their attorneys, Blackwell, Sanders, Peper, Martin, L.L.P., by Michael A. Kahn, Esq.
The defendant Image Comics was represented by its attorneys, Brobeck, Phleger & Harrison, LLP, by Matthew C. Lapple, Esq.
Also present was Kenneth F. Levin, Esq., Mr. Neil Gaiman.
TODD D.M. McFARLANE, called as a witness herein, having been previously duly sworn, was examined and testified as follows:
EXAMINATION BY MR. ARNTSEN
Q: Mr. McFarlane, you're aware you're still under oath?
Q: By the way, have you ever had your deposition taken before?
Q: On how many occasions?
A: I think twice.
Q: In what context?
A: One was up in Canada in a -- a lawyer billing dispute and the other was a few years back in another suit that was brought against me.
Q: Is that the Tony Twist suit?
Q: Did you ever testify in court before?
Q: How many occasions?
Q: Was that in the Tony Twist suit?
Q: By the way, I didn't -- I said this yesterday, but you understand if you don't understand a question tell me and I'll rephrase it. Do you understand that?
Q: And also during your testimony if something comes to mind or if, for instance, something came to mind that, you know, a previous answer you have given is incomplete or inaccurate, you should feel free to jump in to correct or supplement the record. Okay?
Q: Image Comics, what percentage of Image do you own?
A: Today? As a shareholder, one-fourth.
Q: And so did you -- was ownership interest always or your pro rata share depending on the number of shareholders?
Q: Are you the president of Image?
Q: And are there any contracts in place between Image and yourself or any of the other entities that you own?
MR. KAHN: Keep in mind there's written contracts and there's oral contracts and Allen's question will include both.
THE WITNESS: I can't -- I can't -- I can't speak for everybody, no. I don't know.
BY MR. ARNTSEN: Are there any contracts in place between you individually and Image?
A: Not written.
Q: Are there any oral contracts in place?
Q: And what are they?
A: That if I publish comic books that I will run them through the entity called Image comic books.
Q: So Image has a sort of right of first refusal on your comic books, is that right?
A: Yes, something like that.
Q: And then what are the terms of the contract?
A: That Image would do some of the leg work, solicitations, accounting, collecting bills, dealing with the printers, placing ads at times, sometimes helping you with your letter columns and collecting the bills, paying some of those bills and then passing it on to the individual person who had given them the comic book.
Q: So this contract you talked about applies to if Image is publishing a comic book that you create, correct?
Q: Are there any other contracts between you and Image?
A: Image solicits the toys that come from McFarlane Toys, so besides distributing those nationwide we also run ads in the Diamond Catalog that Image comic book puts in the Diamond Catalog.
Q: And does McFarlane Toys pay Image for that?
A: Again, it's not a -- we don't pay. The way that it works is that Image deducts and then gives out, so there's -- there's rarely ever a time somebody is given. They sort of take theirs and then pass it on to the individuals after that.
Q: Any other contracts between you and Image?
A: No. I think that's pretty much it.
Q: Are you aware of any contracts between any other entities that you own and Image?
Q: And do you receive any compensation from Image other than the licensor -- no, strike that.
What compensation do you receive from Image?
A: I don't know if we do. I think we have an accrual at the end of the year, but it's really based on sort of back stock sold. So I think if there's any profits made, then I think they usually divide it amongst the number of shareholders. So if there's a profit, I'd get whatever fraction of the shareholder I was at that point.
Q: Okay. Mr. McFarlane, you were just discussing a couple of agreements between you and Image, one related to publishing comic books and the other related to placing ads for toys. Was that contract between you as an individual and Image or between one of your entities?
A: Between my entities. The comic books would be Todd McFarlane Productions and Image and the toys would be McFarlane Toys and Image.
Q: Thank you.
MR. KAHN: Just for clarity, but if there's money left over at the end of the year the profits from that goes to you as a shareholder?
THE WITNESS: Right. A shareholder of Image Comics.
BY MR. ARNTSEN: You as an individual are a shareholder of Image and receive whatever kind of dividends or compensation would accrue from that as an individual, correct?
Q: Now we're going to start going through some documents and really what I'm going to be doing here, Mr. McFarlane, is sort of going back through the chronology of your relationship with Mr. Gaiman, which we pretty well covered -- which we went through yesterday, but now just in the context of some of the documents that were -- that were drafted on that.
Can you identify what was previously marked as Exhibit 12?
MR. KAHN: Do you want him to tell you what it is?
MR. ARNTSEN: Yes. He doesn't necessarily -- I'm not going to ask him in detail, you know, about word for word what it is. If he can tell us what it is.
THE WITNESS: It appears to be the script that Neil wrote for Issue 9.
It also appears to not be the complete script, though. It looks like it ends on page 15 and it would have been probably a 22 page comic.
BY MR. ARNTSEN: Okay. So -
A: So a partial script it looks like.
Q: Of Issue 9?
Q: Okay. And do you recall whether you made any editorial changes to that script as submitted to you by Neil?
Q: No, you don't recall or no, you did not?
A: No, I don't recall.
MR. ARNTSEN: All right. Mark this.
(Deposition Exhibit Number 34 was then marked for identification.)
BY MR. ARNTSEN: Can you identify Exhibit 34?
A: Neil, as I said earlier, used to write full scripts and then he would sometimes put thumbnails with it. I think these are the thumbnails that went with that partial script that you had shown me.
Q: For Spawn Issue 9?
A: For Spawn 9, right.
Q: And do you recall when these were forwarded to you in connection with the process of creating Spawn Issue 9?
A: I don't understand the question.
Q: Did these accompany the script that Neil sent to you?
A: I don't recall, but I would assume yes.
Q: And did Neil send this to you before you embarked on the art work for Spawn Issue 9?
A: No. I did the cover and then -- because we have to get a cover out first for solicitation, so we did the cover with the character on the -- on the front and then eventually we had to get the writing, actually putting the book together.
You can solicit, but at some point you have to actually do the book, so this -- this comes after putting out the cover. So, in beginning the process of putting the insides together.
Q: So you got Exhibit 34 after you had drawn the cover, but before you started drawing the insides of the book, is that correct?
Q: And what use did you make of these thumbnail sketches?
A: Usually when writers do this they are looking for a pacing. You know, they are looking to sort of say, "Here's sort of the pacing that we have of the book." So you sort of look at it and most of the writers that do that just go, you know, "Do whatever you want with it," you know. "If you like what I got there fine, if you don't change it."
Just it's, you know, you're the artist and I'm the writer and so you look at it and if anything sort of triggers an idea then you sort of move forward and if you don't, you sort of walk away from it. You modify. You are always modifying it.
Q: So you have it as a reference point to use more or less as you choose as the artist, is that essentially it?
(Deposition Exhibit Number 35 was then marked for identification.)
BY MR. ARNTSEN: Identify Exhibit 35, please. Do you know what Exhibit 35 is?
A: Not really.
Q: Have you seen it before?
Q: Do you recognize it as a copyright application for Spawn Issue 9?
A: Yes, it looks like it.
Q: And you're the copyright claimant, correct?
A: No. It should be Todd McFarlane Productions.
Q: But looking down at item 4 on the first page it says it's Todd Dean McFarlane, correct?
A: That's what it says, right.
Q: And up under item 2, do you see the name of author? That's Todd Dean McFarlane, correct?
Q: And it's got your year of birth, correct?
Q: And you indicate -- you checked "yes" where it says "Was this contribution to the work a 'work made for hire,'" correct?
A: I don't believe I show this on -
Q: You what?
A: I don't believe I filled this in.
Q: Did you authorize someone to fill this out on your behalf?
A: Yep. That looks like Beth.
Q: And who's Beth?
A: She used to work for me years ago.
Q: And what did she do for you?
A: She was an assistant to one of the presidents at the toy company.
A: Paul Burke.
Q: Okay. And she was your authorized agent, correct?
A: It appears.
Q: And it states here that -- under item 2 you state that you are the creator. It states that you're the creator of the text and art work, correct?
A: Where am I looking?
Q: Nature of Authorship, item 2 a.
A: What did you want me to look at?
MR. KAHN: It says "Work for Hire" and then "Nature of Authorship."
THE WITNESS: Oh, I see.
BY MR. ARNTSEN: Is that correct?
Q: But you weren't the creator of the text of Spawn Issue 9, were you?
Q: Neil was, right?
Q: Do you know -- do you recall the process that caused you to apply for a copyright for Spawn Issue 9 in April of 1996?
A: No. It probably wouldn't have been about Issue Number 9. It would have been the comic books as a whole.
Q: So you recall applying for a number of copyrights for previous comic books in 1996?
A: I don't recall the date specifically.
Q: No, but generally. I guess what I'm wondering about is what caused you to apply for a copyright approximately three years after the issue came out?
A: Probably I started having more lawyers hanging around me, so -
Q: Do you have any recollection in that regard or is that -
A: That's probably the closest thing to the truth, so -
Q: But do you recall that?
A: I don't recall.
Q: Okay. Do you recall addressing the issue of why you did not list Neil as the author of the text of Spawn Issue 9?
Q: And do you know why it is that you're listed individually as the copyright claimant instead of Todd McFarlane Productions?
(Deposition Exhibit Number 36 was then marked for identification.)
BY MR. ARNTSEN: Take a look at Exhibit 36. Can you identify what Exhibit 36 is?
A: Yes. It looks like the -- the -- some of the script for a couple pages from Spawn Issue 26.
Q: And this was written by Neil?
Q: And did you make any changes to this portion of the script before incorporating it into Spawn Issue 26?
A: I don't recall.
MR. ARNTSEN: Mark this.
(Deposition Exhibit Number 37 was then marked for identification.)
BY MR. ARNTSEN: Take a look at Exhibit 37, please.
Q: Can you identify what Exhibit 37 is?
A: What I think it is or -- or -
Q: Yes. Have you seen it before?
Q: Do you see that it purports to be a Certificate of Registration for a copyright for Spawn Issue 26?
Q: And you are listed as the author, correct?
Q: And you are listed as the copyright claimant, correct?
Q: And it's dated January 20, 1995, correct?
Q: Does this at all refresh your recollection as to why you would have applied for a copyright for Spawn Issue 26 fifteen months before applying for a copyright on Spawn Issue 9?
Q: And it lists you as the author of the text of Spawn Issue 26, correct?
A: What am I looking for?
Q: 2 a.
Q: And were you the author of the text of Spawn Issue 26?
A: Most of it.
Q: Was Neil Gaiman the author of the remaining portion of the text of Spawn Issue 26?
Q: Why didn't you list him here as a co-author?
A: I don't know. I didn't fill that out.
Q: Beth did again?
Q: And again the copyright is claimed for you as an individual, correct?
A: That's what it says.
Q: Do you have any recollection of the process of filling out and submitting these copyright registrations?
MR. ARNTSEN: Mark this.
(Deposition Exhibit Number 38 was then marked for identification.)
BY MR. ARNTSEN: Take a look through Exhibit 38, please. Can you identify what Exhibit 38 is?
A: It appears to be checks sent to Neil Gaiman.
Q: From whom or what?
A: From Todd McFarlane Productions.
Q: Do you recall what you paid Neil for his contribution to the script of Spawn 26?
A: Probably not exactly, but it was probably around a thousand a page or something.
Q: Yes. Do you recall how you would have come up with the calculation of what to pay?
A: Not really. I can -- again, Neil said he'd write them for free, he didn't want to be paid. So I didn't think that would be fair. So I wanted to get him some money. So I don't know if it was based on anything other than wanting to give him some money for his effort.
Q: Can you take a look at page number 347. Do you see the check, the check number 1145, the bottom half of that check where in the memo line it says "Angela Intro"?
Q: Does that represent the payment for this portion of the script of Spawn 26?
A: It's possible, yes.
Q: Do you have any recollection in that regard?
A: No. I'd have to see if there was any paperwork that accompanied that check.
Q: And do you have -- does this help refresh -- just assume for the moment that this is the payment for that.
Q: It was $3,300.
Q: Does that refresh your recollection as to how you came up with that number?
A: No. I'm -- it probably wasn't based on any formula. He did some work and I wanted to make sure he got paid, so -
Q: It was just essentially a number you thought was fair?
Q: Do you recall whether you made any other payments to Neil for the script for Spawn 26?
A: I don't recall.
Q: I'll show you what was previously marked Exhibit 14. Mr. McFarlane, is that in your handwriting?
Q: Do you recognize it as Terry Fitzgerald's handwriting?
A: I think so.
Q: And did you sign it or -- do you see where it's signed "Todd and Terry"?
Q: Did you sign that or did he just send a note on behalf of both of you?
Q: The latter?
A: Yeah. It's all in his handwriting.
Q: And what does this relate to?
A: I think this is in reference to the Angela mini series.
MR. ARNTSEN: Mark that.
(Deposition Exhibit Number 39 was then marked for identification.)
BY MR. ARNTSEN: Take a look at Exhibit 39, please.
(Deposition Exhibits Numbers 40 through 44, inclusive, were then marked for identification.)
BY MR. ARNTSEN: Can you take a look at Exhibits 39, 40 and 41. Can you identify what Exhibits 39, 40 and 41 are?
A: 39 looks like the script to Angela mini series Issue 1.
Exhibit 40 looks like the script for the Angela mini series Issue 2.
And Exhibit 41 looks like -- there's no page numbers on it -- either a partial or a complete script for Angela mini series Issue Number 3.
Q: And who wrote those scripts?
A: Neil did.
Q: Did you make any edits to those scripts?
A: I don't recall.
Q: Are you aware of anyone at Image making any edits to those scripts?
A: No, nobody else would have been authorized to.
Q: Okay. So if anyone would have, you would have and you don't recall, is that correct?
Q: And can you identify what Exhibits 42, 43 and 44 are? Mark that.
(Deposition Exhibit Number 45 was then marked for identification.)
BY MR. ARNTSEN:
Q: Can you identify what Exhibits 42, 43 and 44 are?
A: They appear to be thumbnail sketches for - Exhibit 42 -- although I can't be sure, but it says for the Angela mini series Issue Number 1.
Exhibit 44 appears to be thumbnails that may have been done for Angela mini series -- I guess it says Number 3 here.
And Exhibit 43, although we got a duplication in here. We -- we -- it's done twice here, the duplication, but minus that it appears to be thumbnails that may -- may have accompanied some of the work done on Angela mini series Number 2.
Q: And do you know who drew those thumbnail sketches?
A: I believe Neil did.
Q: And did you receive these thumbnail sketches in connection with the development of the Angela comics?
A: I don't recall.
Q: Would they have come to you?
A: I don't know.
Q: Did you have any involvement in the art work for the Angela mini series?
A: I wasn't the artist on that book, unlike Issue 9. Greg Capullo was the actual artist.
Q: So, did you have any involvement in the art work?
A: Just in my conversations with -- talking Greg through some of his problems if he had any or what he wanted me to have in it visually.
Q: And do you have any recollection of receiving these thumbnail sketches?
Q: Take a look at Exhibit 45. And I'll represent to you that Exhibit 45 is comprised of three copyright registrations.
Q: Do you recognize Exhibit 45 as copyright registrations for Angela 1, 2 and 3?
A: I don't understand the question.
Q: What do you understand Exhibit 45 to be?
A: They appear to be Certificates of Registration.
Q: For Angela 1, 2 and 3?
Q: And you are listed as the copyright claimant for those works, correct?
Q: And you are listed as the creator of the text and art work for those works, correct?
A: Where am I looking there again?
Q: 2 a, Nature of Authorship.
Q: And you weren't the creator of the text or the art work for those works, were you?
Q: Did you ever tell Neil that you were applying for a copyright for Angela 1, 2 and 3?
A: I don't recall.
Q: Do you recall what you paid Neil for his work for Angela 1, 2 and 3?
Q: I'll show you a document that was previously marked Exhibit 9 and I wonder whether that would refresh your recollection at all. Now, I'll also show you a document previously marked Exhibit 38 and I'll call your attention to pages 345 and 346 and see if that refreshes your recollection at all.
A: So -- so, what's the question?
Q: Do you have any recollection as to what you paid Neil for his work on Angela and on the Angela mini series? And then the second, if you do, how you kept - how you determined how much to pay him?
A: No. It looks like we paid him some advances.
Round numbers were usually advances.
Q: Those would be the $10,000 payments?
And then the other ones, I don't know how we derived those calculations off the top of my head.
Q: Do you have any recollection of that at all as to how you came up with those calculations?
A: It -- no.
Q: For instance, was it a percentage royalty, do you know that, or do you just have no recollection?
A: I don't have a recollection. But again most -- most things are percentages, so again I don't know what formula we got to that percentage.
Q: But it would be some percentage of sales?
A: I don't know. Percentage of something.
Q: Okay. And the percentage of something, that would in some way be tied to the sales, correct?
A: I can't say it. A percentage of something.
Q: What kinds of things might it be -
A: I don't know.
Q: -- other than something tied to sales?
A: It could be -- it could be print runs. It doesn't necessarily mean that you sell everything. It could be just a percentage of a cover price. It could be a percentage of other things. So I don't know what formula we actually used in this case.
Q: Did you and Neil ever discuss what – how Neil would be paid for the Angela mini series?
A: I don't recall specifically about it, but again I think that we were in the beginnings of the conversations of trying to do some of the stuff that he was getting at DC Comics.
Q: And do you recall any specific discussions in that regard?
Q: Would you have been the person who Neil would have had those discussions with or would someone else on your behalf?
A: It's possible he could have talked to others.
Q: Who would it have been?
A: Terry. He might have. And if I was busy on the phone he might have talked to Terry. I think Julia Simmons was working for me at that time. He might have talked to her. But you'd have to ask them.
Q: Terry Fitzgerald?
(Whereupon, a short recess was then had at 9:38 a.m. until 9:47 p.m.)
(Deposition Exhibit Number 46 was then marked for identification.)
BY MR. ARNTSEN: Now I'm shifting gears and talking about this, the sort of dispute resolution process that you and Neil went through in 1996 and 1997.
First of all, do you recall Neil coming out to your house in Phoenix in the summer of 1996 to try to work out an agreement with you?
A: I don't recall the date. I know that Neil came out to the house once.
Q: At kind of sort of early on in this process?
A: Well, during this process some time, yes.
Q: What do you recall about that?
A: That he -- that he came to my house, came up to my office. I've got an office in the house. I believe Larry Marder was there. And again I think that, you know, we exchanged pleasantries, brought each other up to date on some things we were doing.
He had, I think, a short clip from some work he was doing for the BBC that he wanted to show, that he was proud of. And then I think I indicated to Larry at some point that -- that Marc Silvestri, one of the Image partners, Larry was the head of Image at that point, had quit, and then I don't recall if Larry stayed or what he -- whether he didn't stay or what he did with the news, and then Neil and I probably went and had some conversations again trying to see if there was any common ground on moving all this forward.
Q: Do you recall that conversation with you and Neil at this time?
A: Not specifically.
Q: Generally what's your recollection of it?
A: That we were having conversations, ongoing conversations, to try to move all this forward to get on with our lives.
Q: When had been the most -- prior to this meeting at your house how long had it been since you'd seen Neil in person approximately? I'm just trying to get a sense of the frequency of in-person meetings.
A: I don't think there were that many. Maybe once a year, once every two years or something like that.
Q: And have we exhausted your recollection of that conversation at your house?
Q: Take a look at Exhibit 46. Do you recall getting this?
A: No, I don't recall this.
Q: Do you recall any discussions with Merrilee Heifetz with respect to payments to Neil around this time?
Q: Do you recall getting Exhibit 45?
Q: I'll show you what was marked yesterday as Exhibit 25. Have you seen that before?
A: I don't recall.
Q: Do you see it indicates that -- Exhibit 25 indicates that it had some pages of DC contracts attached to it? Do you see that?
A: Oh, in the first sentence you mean?
A: Yeah, it indicates something like that, right.
Q: Do you recall ever seeing those contract excerpts?
A: I don't recall.
Q: Do you ever recall ever seeing any of Neil's contracts with DC Comics?
A: I recall seeing maybe a page or two of – of some royalty formulas with sort of blocking-outs above and below, so, you know, maybe a page or two of limited information during this whole process.
Q: Okay. But that's all?
Q: I'll show you what's been previously marked Exhibit 27. Do you recall seeing Exhibit 27?
A: Not specifically.
A: Generally, uh-huh.
Q: Okay. What do you recall about it?
A: I think this is the part of the relationship where Larry was in the middle trying to mediate, if you will, a little bit of it and I think that part of his task was again to try and see what both parties were agreeable upon and what -- what they were disagreeing upon and then trying to gather information on what would sort of soothe both sides.
It appears that is Larry's attempt to find some of that information out from Neil's end and then possibly pass it on to me.
Q: Do you recall getting that information from Larry?
A: Not specifically, but he sent it to me because I probably did.
Q: But you have no independent recollection of your consideration of that information in Exhibit 27?
A: If I got this, I would have -- I would have either had a follow-up oral conversation with him or made some notes on this concerning some of the information that we have in here, so -
Q: So, do you believe that there is a copy of this document somewhere that has your notes on it?
A: It's possible.
Q: Do you recall seeing any such annotated copy of this document?
A: I don't recall.
Q: Okay. So, is what you're saying you don't know if you put notes on a copy of this document but that that's your standard practice? Is that what you're saying?
A: Yeah. Again I don't type much, you know, so I'm sort of slow at typing, so usually what I'll do - and I don't write a lot of memos either, so what I usually do is when I get information to me I usually scribble on what people are presenting to me and then I use that as a follow-up to a conversation that I'll usually have back saying, you know, "Look at point 2. I've got a question about point 2," so -
Q: And you don't recall whether you did that with regard to Exhibit 27 or not?
A: Yeah. I don't know. If Larry had given this to me, then I would have -- I would have at least looked at it. I don't know what the complete follow-up to it was, but I would have looked at it.
Q: And do you know whether you would have jotted notes on your copy of it?
A: It's possible. I mean, if I had -- I either would have jotted notes or any clarity or I would have verbalized those questions to get clarity.
Q: Okay. Do you have any recollection of that at all with regard to this document?
A: Not specifically how I did it one way or the other.
Q: Do you recall doing it one way or the other?
Q: Exhibit 26, do you recall getting that?
Q: Exhibit 29, take a look at that for a minute.
Do you see Exhibit 29 appears to be a FAX to Neil from Larry Marder?
Q: Dated December 17, 1996?
Q: And it says, "Enclosed is TMP's offer regarding royalties for Angela, Medieval Spawn and
Q: Do you recognize that that is what this is?
Q: Okay. Describe the process that resulted in your coming up with this offer?
A: I don't recall the specifics, but we were exchanging information back and forth, so this appears to be either an offer or -- or potentially a counter-offer to the ongoing conversations that we were having.
Q: Did these different percentages here, did you come up with those?
A: I would have based on the information that would have been given back to me.
Q: From whom?
A: From Larry and -- and Neil through the process. I wasn't working independent through all this.
Q: And what information went into your coming up with this offer? How did you come up with it?
A: I don't know. It may be looking at some of the information that Neil had passed on either himself or through Larry and then trying to come up with numbers that would make sense in the context of getting to the point that we wanted to, which was to try and get that DC contract.
Q: Okay. Well, first of all, you see how your counter-offer is organized by character?
Q: And the percentages for the Angela character are five times the percentages for the Medieval Spawn and Cogliostro characters, correct?
Q: Do you recall making that decision or coming up with that relationship?
A: Only -- only that, again going to what I mentioned yesterday, that I felt that Medieval Spawn and Cogliostro were essentially my characters and that Angela I understood the effort that we both put into it, so I gave her a lot more weight in what I was willing to pay than I did those other two characters.
Q: Okay. And looking at Exhibit 29, it talks in terms of percentages of net.
Q: What is net?
A: Well, in this case it would depend upon sort of the end result of what Todd McFarlane Productions had done, so -
Q: So what you were saying, for instance, for Angela comic books you were proposing that you would pay Neil 10 percent of what Todd McFarlane Productions received?
Q: And for comic books Todd McFarlane Productions would receive money from Image under the process you had discussed earlier, correct?
Q: Okay. And then for licensing for foreign comics, that would be again what Todd McFarlane Productions would get?
Q: And what was the -- who would pay Todd McFarlane Productions for foreign comics?
A: It would be the various international comic book distributors around the world.
Q: Such as? Just give me an example.
A: Well, I think we had one in Italy and one in Japan, I mean, so we would have various contracts with various people for different -- each language was usually a different contract, so -- and then they would give you money.
Q: And the money would come -- I mean, these were companies that weren't affiliated with you?
Q: Okay. And so they would pay -- these are distributors, publishers? What are they?
A: Yes. Some of them were both. You know, again each guy sort of had his own business. Some were strictly publishers and some did a little bit of both.
Q: And did TMP Asia or TMP Europe have anything to do with publishing or comics or was that just toys?
A: Just toys.
Q: And then foreign trade paperbacks the same thing?
Q: Did Todd McFarlane Productions have standard contracts with foreign companies as to what you would, you know, kind of what your share would be, how that worked?
You described how the Image contract worked for domestic companies. How did it work for foreign companies?
A: I don't know there was a standard. I think each country potentially had a standard, but you couldn't match them all together. You couldn't say Spain was Japan because again depending upon, I believe, the sort of the need for American comic books depended upon what they were willing to give and the sales that they were projecting, so each one was pretty much individual.
Q: Okay. And then movies, audio and stage, 5 percent of net. What's the net there?
A: Well, again it would be some calculation of what Todd McFarlane Productions received.
Q: And how does what Todd McFarlane -- I mean, I thought it was Todd McFarlane Entertainment that did that kind of thing.
A: No. Todd McFarlane Entertainment didn't come into existence until like around '98 or '99 officially, so -
Q: So, as of the end of 1996 what were the kinds of income that Todd McFarlane Productions were receiving from movies, audio or stage?
A: In what year?
Q: At the time of Exhibit 29, the end of '96.
A: Nominal at best. Maybe even none.
Q: Retail products includes toys. What does net mean there?
A: Whatever formula we agreed to of what Todd McFarlane Productions ended up with.
Q: And we testified earlier as to your various toy companies. There are a number of them, correct?
Q: And how does -- how does income they receive from the sale of toys come back to Todd McFarlane Productions?
A: If it's based on ideas that Todd McFarlane Productions is licensing out, then we pay a royalty percentage, it looks like, just like we do with all the other ones.
So, if it was, for instance, if we do baseball toys we have to give royalties to the baseball players. If we do a movie, Austin Powers, we owe money to the company that owns Austin Powers. If we do Spawn, we owe money to the company that owns Spawn. That would be Todd McFarlane Productions. So we pay a percentage to Todd McFarlane Productions.
Q: So that would be the case for Spawn, Angela and Cogliostro? So, how was that calculated?
A: I think generally it was around 5 percent.
Q: Five percent of?
A: Five percent of the wholesale price that we sold to our vendor.
Q: Okay. So that would go to Todd McFarlane Productions. And for the Angela toys you were proposing that Neil accept 10 percent of that 5 percent, correct? Bottom of the first page.
Q: Okay. Or half of one percent, correct?
Q: Cards. Was that Todd McFarlane Productions?
Q: And so is the net with reference to Todd McFarlane Productions, how did payments for cards work with Todd McFarlane Productions?
A: The same as everything else. So again I believe that the -- eventually we did cards. I don't know if they are out there or whatever, but another outside company did it and then money would eventually be given to me, Todd McFarlane Productions.
Q: And so let me just understand hypothetically. You had some cards and they would have a number of characters on them and let's say one of the characters was Angela. How would -- just as a practical matter assume that this was the agreement in place. How would the 10 percent to Neil be calculated?
A: Well, given we haven't defined all the specifics, but let's use generalities here. We'll just use round numbers to sort of make it easy for everybody.
If there were a hundred cards in a set and let's say one card out of the hundred contained Angela, that would mean that she is 1/100.
If I received as Todd McFarlane Productions $100, then I would say, "Hey, I got -- I got -- I got $100 but Angela is at this point 1/100 of that." And so again at that point actually in that case I'd probably have just split that one dollar in half, half to Todd and half to Neil.
Q: So a 50 percent of net as opposed to a 10 percent of net?
A: Well, in that specific case because there's a fraction. Again there's no definitions as to net. We didn't get that far as to defining and clarifying how we would actually define the net. You can actually sub break net up into a lot of areas depending upon whether it's an inclusive of one character or whether it's a multitude of characters. We never got that far.
Q: Well, again this is your proposal, right?
Q: And it was you telling -- and you dictated this to Mr. Marder, correct?
A: Or over the phone, right.
Q: And so -- so -- but what you're saying is at the time you did this you were proposing these calculations in terms of net, but you hadn't nailed down in your own mind what you were meaning by net?
A: Right. Well, what I wanted to do hopefully is to - is to have a dialogue eventually with Neil that we could actually agree what net is. Net is a very ambiguous word, as you may or may not know, in any field. And so it shouldn't necessarily be a one-sided conversation. So both parties should agree what net is eventually.
Q: And what Exhibit 30 was is essentially a counter-offer to Neil's proposal which had been in some of the prior exhibits?
A: Right. And again just to sort of add a little bit, some of the reason for nets, too, is that there is always I think confusion that Todd McFarlane Productions and Image comic books weren't the same entity. And so because Image comic books gathered all the money didn't necessarily mean that's what the money was, where in the case of the DC contract, DC gathers it and like there is no middle man for DC comic books. So this is making clear to Neil that, you know, I'm not Image. It's me and you. This is what I get from Image. Then I can start splitting the pie that I get because otherwise I don't have anything, so -
Q: Did you ever tell Neil that the percentage with regard to toys is the percentage that went to Todd McFarlane Productions as opposed to TMP International or, you know, your toy companies?
A: Well, given that Neil and I – communications were always between Todd McFarlane Productions and Neil, I don't know if I ever specifically, but that was our relationship, Todd McFarlane Productions and Neil Gaiman.
Q: And how did you come up with -- with the percentages?
A: You know, I don't recall. I know that Neil had been giving us some information and Larry passed some, so I was probably trying to amalgamate it all in in a way that would make sense.
Q: And do you recall the process by which in your counter-offer you were proposing payments relating to Medieval Spawn and Cogliostro of one-fifth of the payments for Angela? Do you recall how you -- where the math came from with that?
A: Not exactly, no.
Q: Generally do you have any recollection? I mean, I understand your testimony as to why you thought it should be smaller.
Q: And was this just where you ended up with that?
A: Again it was a counter to what Neil was bringing the information or information that I had. So again trying to clarify the value of each one of these characters and who sort of created what, it was more of that, you know.
I think it was more a generality that I felt just looking at these numbers that, you know, Angela should be getting a lot more because I understood that. I was a little more suspect on the other two.
Q: I'll show you what's been marked Exhibit 31.
Do you recall seeing that?
Q: Do you have any recollection about Exhibit 31?
Q: Exhibit 32.
A: Is that the same thing that i just saw or not?
MR. KAHN: There's been some changes.
THE WITNESS: What.
MR. KAHN: Different date.
BY MR. ARNTSEN: If you look at -- if you want to compare Exhibit 32 to Exhibit 30, and Exhibit 32 is about two months later, and what it appears to do is add a reference for McFarlane Toys.
A: Oh, I see.
Q: And what I'm trying to understand is the process that you went through in revising your counter-offer to add that additional reference to McFarlane Toys.
A: Oh, I see. It appears that although it should read Todd McFarlane Productions, again we sort of ran into it, you and I, that once you start using my name and all these companies, people start to confuse.
So this -- this appears to be a clarification that Neil's deal is with Todd McFarlane Productions. And so again people have a tendency to want to jump by the party that they are actually doing business with and lump all my companies, although they are separate, as sort of doing business with them directly. And so again I think this is clarifying that he would get a percentage of what Todd McFarlane Productions got and from the toy company, not what the toy derived because that's -- that's another number.
Q: Do you recall the process that caused you to modify your counter-offer with this? Were there some discussions involved that you can recall?
A: There were either -- no. Somebody might have been confused about a definition. Somebody might have just been trying to clarify a definition or something.
Q: Do you recall any conversations with Neil during this time about this sort of exchange of information and offers and counter-offers?
A: What was the question?
Q: Do you recall having any conversations with Neil really between the meeting in your house in Phoenix and when you met with him in Oakland in May of '97?
Q: Do you recall any conversations with him in between those two times?
A: Not specifically.
Q: Do you have any general recollection of any such conversations?
A: Yes, I do. I don't recall. I know again, because I know Larry was doing most of the go between, so I don't know. I don't recall if Neil and I ever butted into each other during any of that.
Q: So you don't have any recollection of any such conversations?
Q: Is that correct?
Q: What do you recall happening next after you sent the revised counter-offer, Exhibit 32?
A: Generally, I -- I know it wasn't accepted.
Q: How do you know that?
A: Because we were sitting in the room and Neil is suing me right now.
Q: Do you have any other recollection as to, you know, what happened next after Larry sent out Exhibit 32 in February of '97?
A: No, not directly to what the reaction was.
MR. ARNTSEN: Mark this.
(Deposition Exhibit Number 47 was then marked for identification.)
BY MR. ARNTSEN: I'll show you what's been marked Exhibit 47.
And just for the record here, Mike, just to make this clear with this, we had -- we just came out - Jeff just came up with this yesterday. Is that correct?
MR. SIMMONS: Yes.
MR. ARNTSEN: We haven't produced it yet.
MR. SIMMONS: This is correct. We found documents in another attorney's office that we were in the process of going through and producing and some of them may have been produced to you this week and we got it back.
(Discussion off the record.)
BY MR. ARNTSEN: Have you seen Exhibit 47 before?
A: No. Or I don't recall.
Q: Do you have any recollection of seeing Exhibit 47 before?
Q: And you see that Exhibit 47 is a letter from Neil's lawyer to Larry Marder, correct?
Q: And that attached is some DC contracts, correct?
A: It appears to be a replication of some type of contract, but I don't know what that contract is.
Q: Right. But on the third page from the top it says "DC Comics," correct?
A: Right. But this is a Xerox, so I can't vouch for its authenticity.
A: So it's a contract here.
Q: Right. But on the first page it says DC contracts and Neil Gaiman, right, or DC Comics and Neil Gaiman?
Q: And you see on the first page of Exhibit 47 the first paragraph indicates that this appears to be a response to your February 18th offer, which is Exhibit 32, right?
MR. KAHN: It's sent to Larry Marder for your reference there.
THE WITNESS: Right. But that's what that line says there.
BY MR. ARNTSEN: And do you recall discussing Exhibit 47 with Mr. Marder?
Q: No recollection at all?
(Deposition Exhibit Number 48 was then marked for identification.)
BY MR. ARNTSEN: I'm showing you what's been marked Exhibit 48.
Off the record.
(Whereupon, a short recess was then had at 10:22 a.m. until 10:25 a.m.)
BY MR. ARNTSEN: Take a look at Exhibit 48. Do you recall seeing that document before?
A: I don't recall, but it appears to have been sent to me.
Q: Do you see how -- it appears to be a note to you from Neil, correct?
Q: Dated April 22, 1997, correct?
Q: And you see it indicates in the first sentence, "Further to our yesterday's conversation" and then he talks about toy payment?
Q: Do you have any recollection of that conversation?
A: Not specifically.
A: Well, generally I think all the conversations were we're humming the same bars. We were still trying to plow through our global sort of agreement here. So I'm -- generally I would say the conversation dealt with us trying to keep moving forward through the process.
MR. ARNTSEN: Mark that.
(Deposition Exhibit Number 49 was then marked for identification.)
BY MR. ARNTSEN: Can you just take a look at Exhibit 49. And I'm not going to -- you don't need to -- I mean, it's up to you. You certainly are free to read it if you want to, but I am not going to ask you questions about the details or substance of it. I'm going to basically ask you what it is and put it in context?
Q: So, take as much time as you think you need to feel comfortable with Exhibit 49 and if you decide you want to look at it in more detail because of some question I ask you, you'll have plenty of time to do it at that time, too.
Do you recognize what Exhibit 49 is?
A: Yes. It looks like it's a transcript of - of a conversation Neil and I had.
Q: Was this a conversation in April or early May, 1997?
Q: Okay. Where was the meeting?
A: I think it was in Oakland up in somebody's hotel room.
Q: And do you recall that conversation being taped?
Q: And then do you recall requesting a copy of that tape?
A: I think later on either a copy of the tape or a transcript or something. Just some documentation of having -- having it, you know.
Q: And generally what was the -- what was the subject matter or purpose of the meeting that Exhibit 49 relates to?
A: I think at this point, having failed to not be able to come to some resolution with Larry Marder working in between, I think that we got back to Neil and talked again, if you will, and either he or I requested trying to just get the two boys in the room and see if we couldn't plow through all this again. So it was - it was just a continuation of ongoing conversations.
Q: Trying to work out a resolution of the issues between you?
Q: I'll show you what's been marked Exhibit 2.
Q: Do you recall seeing that before?
A: Yeah. I think Neil sent it off to me.
Q: And what did you do upon receiving Exhibit 2?
A: I don't recall specifically, but generally I would have done sort of the same thing, taken a look at it. If I had any follow-up questions or inquiries, I would have -- I would have asked about them.
Q: Okay. Asked who about them?
A: Well, either get clarification from Neil or if that wasn't enough then possibly try to get answers elsewhere, but again looking at information trying to see whether that's acceptable information or not.
Q: Do you notice that Exhibit 2 has a FAX line across the top dated July 30, 1997 from Todd McFarlane Productions to Paul?
Q: Who's Paul?
A: Probably Paul Burke.
Q: And who is he?
A: The president of the toy company.
Q: Okay. Do you recall discussing Exhibit 2 with anyone after you received it?
A: Not really.
Q: How is that different from "No"?
Do you have any recollection of discussing it with anyone?
Q: Were there any parts of Exhibit 2 that you didn't understand upon reviewing it?
Q: Exhibit 2 is Neil's proposal to you for a resolution, correct?
Q: What parts of this didn't you understand?
A: I don't know specifically, but given that we didn't finalize the deal, there must have been something there.
Q: Well, why don't you look through and just tell me as you sit here today if there are any of the provisions there that -- that you don't understand or believe you didn't understand back then?
A: Again they would have been probably more general questions. So, for instance, let's just start at the top. Creator royalties; well, what's the definition of a creator? In some contracts sometimes that includes the writer, the writer, penciler and the writer, penciler, inker. As a matter of fact, in some cases it also includes the letterer and the colorist. So he's got a creator royalty. Well, who is that? Because I penciled and inked, so is the inker involved in this or wouldn't he be involved in it?
A: Again questions like -- at times it was one of the things that kept sort of hopping in and hopping out was I was getting numbers and I had to clarify again is that number for the creative party? Then we have to divide it by two because there was at least two of us. Sometimes we even had to divide it by three given that I was the inker. So is that an inclusive number or isn't it an inclusive number?
Later on merchandising, promotional he uses net again as we sort of determined earlier and that's sort of an odd word and I probably would have wanted some clarification or figured out how we got to net and we would have had to sort of make sure that we were all on the same page as to net.
And even in some of the pro rata stuff that we would have to come up with some kind of agreement, and again there's different sets of circumstances to different situations and all, so it would have just been -- it would have just been general clarification.
Q: I'll show you what's previously marked Exhibit 1. Have you seen that before?
Q: Do you see that? Who is Sheila Egger?
A: She is my assistant.
Q: It appears she just indicated to Neil that you were going to get back to him with a response to Exhibit 2, is that correct?
Q: Do you recall doing so?
A: Not specifically, but I might have just said "Tell Neil I'll get back to him." So whether she did that as a FAX or a phone, I don't know how she would have done it.
Q: What do you recall was the next step in this process?
A: I don't.
Q: I'll show you a document that's marked Exhibit 19. Do you recall seeing Exhibit 19?
Q: And what is Exhibit 19?
A: It appears to be a letter from Neil to myself and us again trying to get to a resolution of our ongoing discussions.
Q: And he's proposing a resolution, correct?
Q: And what was your -
A: Or he's doing a point. We're going over big broad strokes here, right. We're getting the main points, if you will, of some of the accounting, so -
Q: Were there any significant issues with regard to the resolution that were not set -- not discussed in Neil's letter?
A: Well, most of this is accounting, so again eventually we'd have to get around to doing the things that lawyers like to have in contracts, too: Indemnity clauses, who has jurisdiction, or when you trade off, all those other sort of silly paragraphs, so -
Q: What was your response to Exhibit 19?
A: I think we were -- I think we were heading in a good direction. I think -- I don't know if this came -- it appears this came after our conversation in Oakland, so this was taking some of what Neil and I had discussed in Oakland and tried to push this all forward.
Q: Okay. Can you identify what Exhibit 20 is?
A: It is a handwritten FAX. It looks like it's from me sent to Neil.
Q: I notice that on the third line it says, "All I can say to the point is beauty."
Q: What does that mean?
A: It's a Canadian term. It says right there.
Q: I know. What's it mean?
A: It means -- it means pretty good.
Q: As of this point in time did you think you pretty well had a deal in place?
A: Well, I -- I thought we had some of the broad strokes of the accounting inching toward where we wanted to go to, right.
Q: And you said there were a couple of other clarification questions you had, right?
Q: And were there any open issues in your mind other than those that you set forth in Exhibit 20?
A: Well, directly everything outside of accounting still is sort of open to discussion, but again this is all accounting. Most of this stuff that Neil and I were -- the big issues were usually accounting issues, so again there would have to be follow-up details. But again as far as accounting, these seem to be my -- my concerns at this time.
Q: And again these discussions weren't just limited to accounting. For instance, sort of central to the transaction was Neil exchanging his rights in Cogliostro and Medieval Spawn for your rights in Miracleman, correct?
A: Right. His accounting rights. Not his rights. His accounting rights.
Q: So, was he still retaining -- he wasn't conveying to you all of his rights to Cogliostro and Medieval Spawn in exchange for all of your rights to Miracleman?
A: I don't understand the question.
Q: Okay. You said that -- when I asked the question initially you said, no, Neil was only going to convey to you his accounting rights -
Q: -- to Cogliostro and Medieval Spawn.
Q: What rights was he going to retain after having done that?
A: Well, at that point that's all he had --
A: -- was accounting rights.
Q: So, he was going to convey what he had to you?
A: What I think it was was that -- is that he was getting paid moneys for some of those characters, so again those accounting rights then would be shifted over to me and I wouldn't have to actually pay him any more for Medieval Spawn or, you know, however we decided the other characters for an example.
Q: Okay. Right. So what this deal contemplated was he was going to convey to you whatever rights he had in Cogliostro and Medieval Spawn in exchange for whatever rights you had in Miracleman, correct?
A: For accounting purposes.
Q: Well, for the -- after that transaction he wouldn't have any residual rights of any kind in Cogliostro and Medieval Spawn, correct?
A: I believe that's what we had agreed to.
Q: And you wouldn't have any rights, residual rights, in Miracleman, correct?
Q: So whatever rights you had, they were getting transferred back and forth, right?
Q: And that was -- I mean, that was one of the terms of the deal that Neil was setting forth in Exhibit 19, correct?
Q: And then what the accounting issues related to were sort of back payments relating to Cogliostro and Medieval Spawn up to the time of the deal and then payments for Angela both going backwards and forwards, correct?
Q: Those were the accounting issues, right?
Q: And, for instance, as among the rights that you were going to convey to Neil relating to Miracleman were any copyright or trademark rights you had to Miracleman, correct?
Q: And again putting aside the question of, you know, whether he had any and what they were, whatever intellectual rights Neil had to Cogliostro and Medieval Spawn were coming to you, correct?
A: It was never a point of conversation, but, you know, we assumed that lock, stock and barrel both ways, yes.
Q: Okay. I'll show you what's been marked Exhibit 33 and ask you if you've seen that? And you may want to look at it in the context of Exhibit 20.
Do you recognize Exhibit 33 as a response by Neil to you of your note to Neil that's Exhibit 20?
A: Right. Actually, we -- they both have the same date.
Q: Right. And in 20 you state in the second paragraph "Before consummating this marriage I just need clarification on a few things," correct?
Q: And the first one relates to the exchange date, correct?
Q: And that's item 1 of Neil's response, Exhibit 33, correct?
Q: And so was that satisfactory to you?
A: Well, we would probably do a follow-up, something a little more impressive than two boys doing handwritten stuff given that we had a complete dispute at this point, but again the big points -- the big points for accounting were agreed upon here.
Q: And nowhere in any of this correspondence does it discuss this follow-up contract you're talking about, right?
Q: Okay. So item 1 of Exhibit 33 is Neil's response to your first request for clarification, correct?
Q: And that was satisfactory to you, correct?
Q: Then item 2 was your question on whether the creator royalty presented, you say, in his DC offer. Where the heck is that? What were you referring to there, the creator royalty presented in his DC offer?
Is that referring to Exhibit 2, the creator royalty discussed there?
A: It may -- it may have been have just been - I don't know specific to any one of these papers, but again just the general term in and of itself because it's -- again royalties are sometimes divisible depending on the number of people.
A: So again sometimes -- and this was part of the confusion. Sometimes Neil would use the term and sometimes it related to just the writer's pot and other times it related to more than the writer's pot and it seemed to sort of move at times, so I needed to start to sort of clarify that.
Q: It refers to the creator royalty in Exhibit 2, correct?
A: No. I'm -- I'm asking the question generally as it pertains to the questions that we discussed all the time, so I don't know if it was specific to any one number. It was just, "Let's be clear that when we're talking about certain things, you know, as a creator royalty in DC, when you use 'creator' is that writer or is that creator? And if it's creator, then how many people are involved in the creator part of it?"
Q: And then in item 2 of Exhibit 33 he responds to that question, correct?
Q: And he says no, that's the writer, creator royalty, correct?
Q: And did you have any further discussions with him on this?
A: I don't think so.
Q: Okay. And then item 3 refers to the -- well, it's not numbered, your third request for clarification which is in that indented paragraph on Exhibit 20, correct?
Q: And you said it relates to a formula DC Comics uses on derivative characters, correct?
A: Right. Right. I was asking for the formula.
Q: Right. And Neil says the formula is 50 percent of Angela, right?
Q: Did you have any further discussions with Neil on that?
A: No, not that I recall.
Q: So Neil had responded to all of your – to your requests for clarification and you had no further discussions with him on his responses, correct?
A: I don't recall any.
Q: Okay. So at this point in time did you believe you and Neil had reached an agreement on the royalty and accounting issues?
Q: So what was still left to be agreed on?
A: Some of these answers.
Q: Well, and what were you doing -- again I thought you indicated you didn't get back to Neil on any of his answers?
Q: So, what was the disagreement?
A: Well, it -- let's just take it from my perspective now, okay? We're getting close. I've got my hopes up. So I asked a couple follow-up questions to Neil because we're getting close and I get these answers.
I'm suspect about the answers. I've been suspect about some of his answers for quite some time, sir. So, when I see that he's now making up a formula, he's not saying, "This is how it works." He's making up a formula. "I'll just calculate it."
Now he's making it up that it's like, well, is it a formula or isn't it a formula? You keep referring to your DC contract and now are you just going to make it up on the sly here? You know what, I'll do some investigation on my own.
So at this point now I'm not getting again the satisfaction I need out of Mr. Gaiman's answers, so I at this point decide I should sort of investigate a little bit further.
Q: And did you look at the DC contract that was sent to Mr. Marder?
A: No. I never saw it.
Q: Well, then the -
A: I never saw it. This is the first time I've ever seen this elusive contract, so it will be quite curious reading tonight.
Q: And did you talk -- Mr. Marder had previously provided to you a summary of Neil's DC contract provisions, correct?
A: I don't know if it came from him, but I got something of one, one page or two pages or something.
Q: We previously discussed Exhibit 27, correct?
A: Right. I thought you meant from his actual contract. Excuse me.
Q: No. But Exhibit 27 is a memo from Larry Marder to you saying enclosed is a breakdown of all the contracts that Neil is working under at DC, correct?
Q: So, did you check back with Mr. Marder saying, "I want to -- I want to verify some of Neil's statements here"?
A: Well, somewhere along the line Mr. Marder got pushed out of all of this because it wasn't working again.
A: So again I don't -- I don't quite recall. But again I was getting conflicting information or inconsistent would be sort of a fair term -
Q: All right.
A: -- information and I needed sort of clarification. So, at this point in '97 I believe there is no Larry Marder. I have pushed both of us somewhat - there is no Larry. It's Neil and I again. I'm now having dialogue with Neil and I'm asking Neil questions and I'm getting answers and the answers don't quite sit with me.
So now I'm -- at this point I believe this is when I tried to contact Terri Cunningham because she is the keeper of the DC contracts, so, you know, she -- she would have sort of -- she is as close to the horse's mouth as I can get.
A: So I wouldn't have talked to anybody really. I wanted to sort of get this down to make sure that we were both sort of consistent and happy with where we wanted to be here and I had outstanding issues at this point.
Q: Did you ask Neil to send you a copy of his DC contract?
A: Casually off and on. I said, "You want to send me the contract? It would make it easier." But again for privacy reasons and I -- I got contracts, too, you know. So, you know, he didn't want to send it.
He gave me his numbers. I assumed they were truthful numbers based on reality. So again, you know, that was -- that was sort of our relationship at the beginning, so --
Q: What do you mean he didn't want to send them?
A: I never had it. I never got it. So I don't know what his reasons are. Mr. Gaiman, you can ask him why he never sent it to me.
Q: Okay. Even though he did send it to Mr. Marder?
A: He sent it to Mr. Marder. He didn't send it to me, so -
Q: And Mr. Marder was your employee at Image, right?
A: Mr. Marder was -- depending on the date, was probably the head of Image comic books at that time.
Q: And then went from there to work directly for you -- for your company, correct?
Q: As long as we are talking about -- we are interested in the DC contract, take a look at the third page of Exhibit 47.
Q: Just a second here. I'm just going to sort through this stuff. Do you see how in the first paragraph here, the introductory paragraph, the second sentence, it says: "In accordance with your agreement, you have revised the pre-existing characters of DREAM (SANDMAN) and DESTINY."
A: Excuse me. Where am I starting to read?
Q: The first paragraph, second sentence.
A: Oh, okay.
Q: In accordance.
THE WITNESS: Right here?
MR. KAHN: Right here.
THE WITNESS: Oh, okay. Go ahead.
BY MR. ARNTSEN: "In accordance with the agreement, you have revised the pre-existing characters of DREAM, (SANDMAN) and DESTINY, and have created the characters of" – and then it lists a number of characters, correct?
Q: And then the last sentence of that paragraph -- and then it says after, "collectively referred to herein as the 'Characters'" at the end of that sentence, correct?
Q: Okay. And then if you turn to the next page, item (b), Retail products and Services. Do you see that?
Q: You have to use words.
A: Yes, sir.
Q: And if you can take a look at item – just read through item (b) there.
A: You want me to read all of (b)?
Q: Yes. Both paragraphs.
A: Okay. Okay.
Q: Item (b) relates to royalty payments to Neil when characters -- when the characters are used for retail products, correct?
MR. KAHN: But before he answers I just want to object. I'm a lawyer and I have trouble following this.
THE WITNESS: I'm not a lawyer and this ain't my contract, so you know what -
MR. KAHN: Let me just --
THE WITNESS: I have no opinion about somebody else's contract or definitions and what the relationship is with somebody else. So with that said, ask me your questions, please.
MR. KAHN: Let me -- let me -
MR. ARNTSEN: Let your lawyer get his objection in first.
MR. KAHN: Let me just also say, you know, this is an isolated paragraph in a document written in dense legalese, which I'm having trouble following.
THE WITNESS: And I have never seen.
MR. KAHN: And my understanding, going back to Exhibit 2, is that we are not using his special deal but we are supposed to be using a standard DC deal with doing these calculations. But, with all of that, you can ask him questions about his special deal over here.
BY MR. ARNTSEN: Can you turn back to paragraph (b) which you were just reading.
MR. KAHN: We're there.
BY MR. ARNTSEN: All right. That relates to royalty payments for retail products and services relating to characters that Neil -- relating to characters, correct?
A: You know, I can't speak to the definitions of DC comic books, so -
Q: Okay. So you can't answer my question?
Q: All right.
A: This is not my contract.
Q: Right. And you note item (b) has two paragraphs, correct?
Q: And the first paragraph contains certain percentage royalty payments relating to retail products and services, correct?
A: I can't say that.
Q: Well, do you see the .8 percent?
A: I see -- here's what I see. I see that there are numbers in relationship to something. I don't know exactly what those somethings are, how they derived it and what their definitions are. But I do see numbers, right.
A: I can't say specifically what each one of those are for.
Q: Right. One of those numbers, the first such number is .8 percent, correct?
A: Right. There is a number .8 percent on this piece of paper, right.
Q: And then that's under small i, correct, in the first paragraph, correct?
Q: And then under small ii there's another percentage, 2.5 percent, correct?
MR. KAHN: We'll stipulate that that number appears under ii.
BY MR. ARNTSEN: All right. Do you see that, sir?
Q: All right. And then the second paragraph starts, "Notwithstanding the foregoing, with respect to the characters of DREAM (SANDMAN) and DESTINY only," and then it contains a following discussion, correct?
Q: And Dream, Sandman and Destiny were the characters that Neil had revised, correct?
If you need to look back at the first paragraph on the first page of the contract you can do so.
A: It appears that way, although I can't specifically verify what this contract is for, right.
Q: And then in the second paragraph of (b) it contains some percentages relating to the Dream, Sandman and Destiny characters, correct?
Q: And those are different percentages than in than those set forth in the first paragraph of item (b), correct?
Q: For instance, instead of .8 percent there's a .592 percent, correct?
Q: And instead of a 2.5 percent there's a 1.85 percent, correct?
Q: The numbers in the second paragraph are approximately 75 percent of the numbers in the first paragraph, correct?
A: Well, you know, I don't know that there's any direct correlation. You're matching numbers. I don't know that there's any direct match here.
Q: Okay. So you don't know if it's approximately 75 percent?
A: Well, .5, .592 is not 75 percent of 2.5.
Q: No, but it's -
A: Your math -- you're now making -- you're making an assumption that we're now matching numbers. You're matching one number to another.
MR. KAHN: I think he -- I think all Allen is asking you for is pure math.
THE WITNESS: For pure math, if you're talking .592 and matching it to .8, yes. If you're matching the number 2.5 to the number 1.8, right.
BY MR. ARNTSEN: Okay. The numbers in i and ii in the two paragraphs, the item (b), correct?
Q: All right. And then can you turn to page 4 of the contract. Do you see under item 2 (a) it discusses spin-offs?
Q: Why don't you take a look at that paragraph for a minute?
A: Read it all the way down to (b)?
Q: Have you had a chance to read it?
Q: And that provides for a pro rata allocation in the case of spin-offs correct?
A: You know, I -
MR. KAHN: Before Todd answers, I'm going to object again. I don't know what it provides for. I'm a lawyer. I just read this isolated paragraph. He may understand. It's written in legalese. He's not read the rest of the contract.
We will stipulate that this document speaks for itself. If you want Todd to try to interpret this language in isolation, I'll go ahead and let him do that. I don't know what the point is.
MR. ARNTSEN: Okay. Can you read my question back, please?
(Whereupon, the record was then read back by the reporter as requested.)
THE WITNESS: You know, I -- I don't understand what this is saying. I see (a). Next to the word (a) is the word "Spin-offs." The rest of it is -¬is legalese that sort of unfortunately confuses me as I read it.
BY MR. ARNTSEN: Well, you see the phrase "publisher's pro rata allocation," correct?
MR. KAHN: Where is that?
MR. ARNTSEN: The line that begins "Royalties" about six from the end of the first paragraph.
THE WITNESS: That sentence there, it goes all the way up to the top.
MR. ARNTSEN: I'm just showing you where the phrase was.
MR. KAHN: We see a phrase that says "publisher's pro rata allocation." Do you see that phrase?
THE WITNESS: Yes, I do.
BY MR. ARNTSEN: What do you understand that to mean?
A: I don't know. It's DC Comics.
Q: Okay. Can you -
MR. KAHN: You know, my colleague just makes a good point, which at least for the record I will note that this Character Equity Agreement attached to Exhibit 47 actually references and apparently incorporates two other agreements which are not before the witness or are in the record.
MR. ARNTSEN: That's fine.
Q: Can you identify what Exhibit 18 is?
A: Yes. It appears to be the initial stages of an attempt to draw up a contract.
Q: This handwriting on it, whose handwriting is it?
Q: Who did you have draw -- draft Exhibit 18?
A: I don't recall.
Q: What do you recall about -- first of all, I assume that Exhibit 18 was drafted at your direction?
Q: Who did you direct to do so?
A: I don't know who I got this from.
Q: Okay. What do you recall with regard to what information did you give whomever you directed to draft Exhibit 18? What did they use to draft it?
A: I don't recall. It could have been some of the documents in front of us. It could have been me just verbalizing everything.
Q: And this was a character agreement entered into as of July 1, 1997 is what it says, correct?
A: At the top, right.
Q: And then what's the last page of Exhibit 18?
A: It appears to be some accounting numbers derived from Medieval Spawn, Angela, Cosmic Angela, 13 inch Angela toys.
Q: Okay. And then royalty calculations?
Q: Whose notes are on this?
Q: Can you identify what Exhibit 3 is? Have you seen Exhibit 3 or any part of it before?
Q: Is any of the handwriting on Exhibit 3 yours?
Q: Okay. Can you identify what Exhibit 4 is? Do you know what Exhibit 4 is?
A: I'm not done.
A: This is Exhibit 4. It contains notes, additional notes on it.
Q: Have you seen Exhibit 4 before?
A: I don't recall specifically, but it was FAXed to me, so I probably looked at it.
Q: Okay. Is your handwriting on the first page of Exhibit 4 where it says "16 pages"?
Q: Okay. Is your handwriting on the fourth page which has 474 on the bottom? Is that your handwriting?
Q: Is your handwriting on the next page, 475, on the bottom?
Q: And then the next three pages are some communications, correct?
Q: Okay. Do you recall what the purpose was of Exhibit 4 being FAXed to you at your hotel?
A: Yes. Again I think we were trying to head into a resolution and get some of the accounting out of the way at Neil's request, and I think this is just sort of the process of getting -- getting there hopefully.
Q: Let me show you what was previously marked Exhibit 4A and ask you if you can take a look at that and I'll ask you some questions about it.
Have you seen Exhibit 4A before?
A: Not specifically, but I probably did.
Q: Does your handwriting appear anywhere on it?
A: On the page with the number 473 at the bottom.
Q: Yes. Is that -- all the handwriting on that page is yours?
Q: And the pages 471 and 472 is a memo to you from Allan Inglis, correct?
Q: Regarding the Gaiman agreement, correct?
Q: And it's a royalty calculation on Medieval Spawn and Angela figures, right?
A: It's his perception of it.
Q: It says "based on our agreement," correct?
Q: And the total royalty he calculates is $155,531, correct?
Q: And then looking at page 473 with your handwriting, is that this creator percentage being divided by two issue that was discussed that you testified to with regard to some of the prior communications between you and Neil?
A: In -- in a general sense this is the end, trying to get a handle on how we apply all these numbers throughout, somewhere throughout this process.
Q: Sure. Okay. Mark this.
(Deposition Exhibit Number 50 was then marked for identification.)
BY MR. ARNTSEN: Who is Allan Inglis?
A: Allan was my former COO at McFarlane Toys, TMP International.
Q: For what period of time?
A: Maybe from '96 to 2001, for about five, six years.
Q: Where did he go to?
A: Don't know.
Q: Why did he leave?
A: We moved the toy company from Michigan out to Phoenix and I wasn't inclined to bring him with me.
Q: So he stayed in Michigan?
Q: I'll show you what -- I'll show you what was marked Exhibit 50. Have you seen that before? Do you recall getting this?
A: No, but it's got my name on it, so -
Q: Do you see the last sentence? It says, "If this isn't going to happen, let me know and we can renegotiate."
Q: Did you respond in any way to that?
A: No. Or I don't recall. I don't recall.
Q: Do you know where in Michigan Allan Inglis lives?
A: Right now currently?
Q: Lived the last time you knew.
A: Well, the office was in Plymouth. In the Detroit area.
Q: The best you know he resides in the Detroit area?
A: To the best of my knowledge.
Q: Take a look at what was previously marked Exhibit 5. What's Exhibit 5?
A: It appears to be some of the calculations for some of the moneys that were to be paid to Mr. Gaiman.
MR. ARNTSEN: Okay. And this is within the subject area that Mr. McFarlane is a 30(b)(6) designee, correct?
MR. KAHN: Sure.
BY MR. ARNTSEN: What were these calculations, for the moneys due Mr. Gaiman?
Q: And on the various pages -- the first page is a summary page, correct?
Q: And then it refers to pages A through K, which are attached and there's even a Q on the end of it, correct?
Q: Is this your handwriting on the last page?
Q: And what was the -- and so what you're saying is instead of the .8 percent it was supposed to be 3.2 percent, correct?
A: Yes. Probably correcting some errors some place along the line.
Q: And so the $25.24 should be multiplied by four, correct?
Q: That was what your correction was?
Q: And these royalty calculations were under the accounting agreements that you and Neil had reached over the previous months in some of the documents we have discussed, correct?
Q: And then on some of these pages there are notes at the bottom?
Q: Are those notes that you dictated?
A: Some may have been. Some may not have been. They just might have been -- I -- I didn't type these.
A: So I don't recall how much of this was me dictating, if any, on any of these pages and how much was just giving sort of insight as to what the numbers sort of meant, gave some clarity to some of it.
Q: Okay. Well, can you take a look at the third page of Exhibit 5. It's a got a number 528 at the bottom.
Q: And this relates to Medieval Spawn toys, correct?
Q: And you refer, or the note at the bottom starts, the last paragraph, do you see where it says, "Also, I had a conversation with Terri Cunningham."
Q: That's you, right?
Q: So this would be a note that you had dictated, correct?
A: Probably, right.
Q: And is this the conversation with Terri Cunningham that you testified to yesterday?
Q: And does this refresh your recollection as to when this conversation was?
A: With Terri?
A: It references it was just recently, so this is a August 4, 1997 document, so it probably was within a few weeks of that possibly.
Q: Okay. And this concerns the -- this was the conversation relating to how DC handles derivative characters, correct?
Q: But your conclusion was that notwithstanding that information, you were -- the last sentence, "Still I'm willing to pay some moneys as long as all the other matters are sorted out," correct?
Q: And then did you state that you had another phone conversation with Terri Cunningham after this time?
A: In the -- in the document?
Q: No. Yesterday. Do you recall having another telephone conversation with Terri Cunningham?
A: Right. I had a follow-up one. Yes, right.
Q: Do you remember when that was?
A: Probably shortly -- probably in August some time.
Q: Okay. And what was the -- what was that conversation about?
A: Just getting more clarification on -- on how we prorate stuff. Again, you know, I think that one may have been about how you prorate potential revenue for television stuff or Hollywood stuff or things like that.
Q: And why was that an open issue?
A: Because I think if we look at some of the other documents it was just part of the big global agreement that, you know, these I think are limited to the specifics of pages A through K and they are not necessarily inclusive of all the accounting that may or may not have been due at that time or was going to come due eventually, so -
Q: And what did Ms. Cunningham tell you in that last conversation?
A: I don't recall specifically. I just know that it was another inconsistency to all of this.
A: So -
Q: And you testified about that conversation yesterday and that's all you can recall about it, correct?
Q: Would you like to take a little break?
A: No, I'm -- I'm ready.
MR. KAHN: Actually, any time in the next ten minutes I would like to take a little break. I can wait.
MR. ARNTSEN: Okay. Why don't we -- let me just go through a couple more documents.
MR. KAHN: Sure. I don't want to cut you off here.
MR. ARNTSEN: There's a logical break point coming up.
MR. KAHN: Good.
BY MR. ARNTSEN: Showing you what was previously marked Exhibit 7, have you seen that document before?
A: Not specifically, no.
Q: Do you recall what the urgent message referenced in the second paragraph there is?
A: Again just trying to get more follow-up clarification.
Q: Have you seen Exhibit 21 before?
A: No. I don't recall seeing it.
Q: Do you have any understanding as to what this relates to, Exhibit 21?
A: I think -- I can't be sure, but this may have been in part of the settlement. Neil wasn't willing to take a verbal apology, so he would like it in cash.
Q: Identify what Exhibit 10 is? First of all, is it your handwriting?
A: Yes. It looks like me doing some kinds of calculations.
Q: Would this again relate to royalty payments to Neil?
A: I would presume, yes.
Q: Okay. Why don't we take a little break right now.
A: Can I just add here that again those numbers are not numbers that were due Neil, but me just trying to get a handle on the process of what we did or did not owe Neil. So those are -- those are not numbers that I would stamp as due Neil.
Q: But -- and you're referring to Exhibit 10, correct?
Q: Okay. Let's take a little break.
A: Just some calculations.
(Whereupon, a short recess was then had at 11:38 a.m. until 12:06 p.m.)
(Deposition Exhibit Number 51 was then marked for identification.)
BY MR. ARNTSEN: Can you take a look at Exhibit 6, please.
What is Exhibit 6?
No, that's Exhibit 51. We'll get to that in a minute. But what is Exhibit 6?
A: It appears to be more documents making calculations for potential moneys due to Mr. Gaiman.
Q: And there's a cover memo from Sheila Egger to Neil Gaiman, correct?
Q: And Sheila sent this on your direction?
A: Probably, yes.
Q: And the cover memo indicates that Sheila would be sending another check to Neil the next day, right, or that it should be to Neil the next day?
Q: And again that was at your direction, correct?
Q: And this is August 11th, correct, of '97?
Q: And can you take a look at Exhibit 51. Can you tell me what this is?
A: Not specifically, but the memo says it deals with foreign sales.
Q: And it's a March 26, 1998 check to Neil Gaiman?
Q: And would that again relate to royalty payments?
Q: And this would have been sent at your direction?
A: Not necessarily.
Q: Who is authorized to send royalty checks for your company without being instructed to do so by you? Under what circumstances?
A: By 1998 I've got a lot of accountants, so, you know, we've got -- with all the various companies and all the various people working for me, we've got hundreds if not thousands of bills going in and out all day. So each of those aren't cleared to me.
Q: But in order to send this check somebody would have had to have confirm that money was owed Mr. Gaiman, correct?
A: Potentially, yes.
Q: And how would they have gone about doing so if they didn't contact you in connection with that?
A: You know, I don't know. I don't know who - who sent this check out and what the circumstances were for it.
Q: Okay. At any period of time between August 1st of '97 and March 26th of '98 did you contact Neil and say, "Neil, we don't have a deal" or words to that effect?
A: I don't think so.
Q: So during that period of time it would have been reasonable for Neil to assume that the deal was in place, right?
A: You'd have to ask Neil that question.
Q: You don't know of any reason why it wouldn't be, right?
A: You'd have to ask Neil that question.
Q: All right. Because you didn't communicate with him on that subject, right?
A: Right. I didn't.
Q: And nobody communicated with him on your behalf to your knowledge on that subject, correct?
Q: Can you take a look at Exhibit 8. What is that?
A: A letter to Mr. Gaiman that I either typed or dictated sort of officially giving him my stance at that point as to where I was at.
Q: And this letter was January 12, 1999, correct?
Q: Had you had any communications with Mr. Gaiman between August of 1997 and January of 1999?
A: Me personally?
A: Not that I recall.
Q: Or anyone from your business on your behalf other than royalty payments that we've gone over?
A: Probably some of the people in the office.
Q: Do you have any recollection of any?
A: Just, you know, Neil phoning, somebody on Neil's behalf, somebody's phoning.
Q: Do you have any specific recollection of any such calls or being told of any such calls?
Q: What do you recall?
A: "Just put it on hold, you know. Just don't answer. Again okay. You know, click. Just tell him.”
Q: What do you mean there?
A: Again, we understand. We understand that Neil's phoning. We got it. We got your message.
Q: So Neil is calling your office asking to speak with you?
A: I don't know. Just Neil, Neil or Neil's representative, somebody is calling again.
Q: Regarding what?
A: Just I don't know. Again I never took the phone calls. Just they are phoning again. Probably you'll have to ask Neil why he was making the phone calls or instructing people.
Q: But how do you know that such phone calls occurred?
A: Because somebody would have said to me, "Hey, you know, Neil phoned again or his representative. Okay. Okay."
Q: That's the extent of your recollection of these calls?
Q: All right. What -- what prompted you to send Exhibit 8?
A: Probably the number of phone calls, you know, just to sort of get my people not to have to keep answering phone calls. I'll just go, "Here, you know, I'll send him a letter. Make it quick."
Q: How did you -- describe the process by which you came up with a position set forth in this letter?
A: I sort of went over the ongoing conversations we had, what we had talked about potentially confirming in Oakland and put all that again feeling that Medieval Spawn who was sort of the big crux in my sort of ongoing conversations, was that I essentially all of this from my perspective was just to get Spawn back and that, and that whatever I had traded -- again I felt that I -- I was trading for something I already had. So at this point I was -- I'm going to keep all of this.
And I think in the -- one of the things we had talked about is maybe continuing to give ongoing accounting on Angela, but even that, I mean, we are essentially down to Miracleman and potentially Angela. That's all we have got at this point. He's got my money. He's got my money. I'm not going to get money back out of this guy. So sort of going let's just cut this thing. Let's just cut this thing completely now.
Q: Do you recall getting a telephone call from anyone from DC or Marvel on Neil's behalf relating to one other project that Neil might want to do using Medieval Spawn or Angela?
Q: You have no recollection of anything like that?
Q: And so what you're saying is that what prompted you to send this letter was because Neil had been calling your office and you wanted him to stop, is that correct?
A: Well, either Neil or some representative. Somebody, you know, so -
Q: Nothing, nothing else? There wasn't anything else involved that caused you to send Exhibit 8 on January 12th of 1999?
A: No, I don't think so.
Q: Okay. Did you receive any response from Neil?
A: No, I don't recall.
Q: Do you have any recollection of any communications with Neil between when you sent Exhibit 8 and when this lawsuit was filed?
Q: Do you recall any of your representatives or employees having communications with Neil that were transmitted to you?
Q: Okay. So Exhibit 8 is sort of the last communication in the chain, correct?
A: Yeah. It appears to be.
Q: And you don't know of anything different from that, right?
Q: I apologize. Just one other question on Exhibit 6, which we discussed already.
Can you take a look at the third page. It's got a number 521 at the bottom. Are you there?
Q: And you instructed your staff as to how to go about this calculation, correct?
Q: And looking down, this relates to the Angela and Angela trading card, correct?
A: This is in reference to a Spawn trading card set that had -- it appeared with 109 cards in it.
Q: And 17 of them had Angela on them, correct?
A: I can't -- I can't say that. I can't say that for a certainty.
Q: The first line is publisher's royalty, correct?
Q: And then the second line is total number of cards that include art work of Angela, correct?
A: That's what the line said. But what I'm saying is that potentially this calculation could have been an inclusive one. Those 17 cards may or may not have been Angela. They may have included other ones. So I don't know if we had other calculations for Medieval Spawn and Cogliostro. We may have just taken all of them and lumped them and somebody may have called them Angela. I'd have to look at the cards and see if they were all Angela. They may have included some of the other characters we're talking about.
Q: And so 17 of 109 is 16 percent of the set, correct?
Q: And then you multiply that 16 percent times the publisher's royalty, correct?
Q: And then you come to the publisher's royalty of Angela art work, correct?
Q: And again that's 16 percent of the 323,000, correct?
A: Well, I lost you there.
Q: You're multiplying the $323,341.72 times 16 percent to come up with the 51,734.68, correct?
Q: Okay. What does the next row mean?
A: Given -- it's giving a weight to an individual card within the confines of it, which would mean that the card set was called Spawn. It was based on Spawn. The headline was Spawn. The title was Spawn. It was listed as Spawn, Spawn, Spawn, Spawn. So, to say that a Spawn card and a 20th ranked character would be of equal value didn't make -- didn't make much sense.
So there was a deduction that essentially was from Spawn, the big boy. And so anything -- anything less than Spawn isn't at the same value. And then there's a number. Then it is multiplied.
Q: So you concluded that the Angela character or characters were worth 50 percent of the Spawn character, is that what that means?
A: Right. Which probably was a generous number at the time.
Q: Okay. I just need to understand the calculation process.
And again you don't recall if that refers to just Angela or Angela, Medieval Spawn and Cogliostro, correct?
A: Right. I'd have to look at the set.
Q: Okay. Okay. Here's a small portion that you're probably going to want to mark confidential, attorneys eyes. I'm going to ask him -- let's go off the record just for a second.
(Discussion off the record.)
(The following excerpt was designated "Confidential.")
(Discussion off the record.)
(Deposition Exhibit Number 52 was then marked for identification.)
BY MR. ARNTSEN: Can you identify what Exhibit 16 is?
Have you seen Exhibit 16 before?
A: No, not that I recall, but -
Q: What did you do, if anything, to ascertain what intellectual property rights of Eclipse you were obtaining out of the bankruptcy as opposed to tangible property?
A: Well, again looking at the documents from the bankruptcy trustee and what it was they put down there and then later on whatever it was that they handed over, probably getting some lawyer to look at it to sort of go, "What did I just buy, you know?" So -
Q: And do you ever recall finding out somebody letting you know what you just bought with regard to intellectual property rights?
A: Well, again I don't recall what the opinion was once it came back, but "whatever was in that pool is yours now."
A: And that there was no disputes at that point over anything.
Q: And do you recall whether Mr. Fitzgerald forwarded a copy of Exhibit 16 and the attached documents to you?
A: I don't recall.
Q: Do you ever recall prior to acquiring the rights out of the Eclipse bankruptcy looking at any contracts that might have been in place between Eclipse and Mr. Gaiman?
Q: Do you recall any discussions concerning any such contracts?
A: No, because it was -- it was an Eclipse bankruptcy, so it was Eclipse, not specifically for any one character.
Q: Okay. You were just getting whatever rights Eclipse had?
Q: Take a look at Exhibit 52.
(Deposition Exhibits Numbers 53 and 54 were then marked for identification.)
BY MR. ARNTSEN: Did you have a chance to look at Exhibit 52?
Q: If you look at the second to last page, page number 1391, is that your signature?
Q: Did you direct your attorney to file this trademark application?
Q: In October of 1997?
A: I told him to -- to go and get the paperwork done for a trademark.
Q: When did you tell him to do that?
A: Probably shortly after my last conversation with Terri Cunningham, which would have been maybe in August, August some time probably, September. Late August, early September.
Q: Okay. Did you communicate to Mr. Gaiman in any way that you were going to be doing this?
Q: As far as Mr. Gaiman knew he had the rights to Miracleman, is that right?
A: You'd have to ask Mr. Gaiman that question.
Q: He didn't know anything to the contrary, right?
A: You'd have to ask Neil that question.
Q: Why did you ask your lawyer to file the trademark application for Miracleman at this time?
A: We were -- we're now at the tail end of some of -- sort of some of these conversations here and again I thought we were -- I thought we were pretty close. I thought we were getting pretty close. We were finally going to get a deal done here.
But to get near the finish line made me feel pretty good and given this is August, the movie's coming out, I'm trying to enjoy life. To find out that some of the information that had been a constant source of discussion may not have been completely forthright was becoming wearisome to me, and so again at some point the straw broke the camel's back. Neil in good faith had been receiving moneys trying to get the calculations that we were giving him based on what we thought was truthful information and he had my money and my character and was giving me back something that essentially something that we had that he had represented that he had which from my perspective he didn't and it was -- I was never going to get money back from Neil. I didn't think that would ever be true. So I had to grab something. The only thing that was still left was I gave him money and Miracleman. The money was gone and so I -- I told him to get Miracleman back.
Q: Okay. Because you had obtained your rights from Eclipse to Miracleman, whatever those rights were, in early 1996, correct?
A: Well, whenever the auction was held.
Q: Okay. Take a look at Exhibit 16.
Q: But you didn't do anything with regard to registering any intellectual property rights until the fall of 1997, correct?
A: I don't know. This is the first time that we did something or later on I know there was a lapse or something they notified me on.
Q: What do you recall with regard to that, with regard to the lapse?
A: That they -- that they -- well, it's my - Jon is my lawyer. Am I allowed to talk about that?
MR. KAHN: This is something Jon told him. I didn't realize that. If you heard something from Jon, your lawyer, then that's covered by privilege. There are documents that we produced and they can answer that. You should not get into any discussions about the documents or the situation that you had with Jon Chick, your attorney. You can talk about discussions you had concerning these matters with non-attorneys, but your discussions with Jon Chick are privileged.
THE WITNESS: Okay.
BY MR. ARNTSEN: Were all of your discussions concerning the lapse with Attorney Chick?
Q: Did you have any discussions on that subject with anyone else?
Q: Okay. Take a look at Exhibit 53. Is that your signature on the second to last page?
Q: And that's you're signing as to the declarations set forth therein, correct?
Q: And you are stating that you're either the owner of the trademark sought to be registered or entitled to use such mark in commerce, correct?
Q: And what did you do to satisfy yourself that those were true statements?
A: Well, again those were discussions with Jon, so -
Q: Okay. Anything else other than discussions with your lawyer?
Q: All right. Take a look at Exhibit 54. Is that your signature on the bottom?
Q: What prompted you to sign and file this document?
MR. KAHN: The same caution, Todd. If what prompted you was a conversation with Jon Chick, you can answer to other things but not to the subject of the conversation with Jon Chick. You can identify Jon Chick as the person that prompted you to do this, but that's all you can say.
THE WITNESS: All right. So after discussions with Jon and then this came out of those conversations.
BY MR. ARNTSEN: Okay. Anything else other than that?
Q: Let me just take a minute to confirm nobody else has any other questions they want me to ask you, but I am all but done.
(Whereupon, a short recess was then had at 12:42 p.m. until 12:47 p.m.)
BY MR. ARNTSEN: Mr. McFarlane, who at -- do you know anyone at your company, if I wanted to get hold of Allan Inglis, who would, you know, that would know how to do that?
A: Possibly Steve Peterson.
Q: Is he with the company?
A: Yes. He is the new COO.
Q: And you can get that from looking at the tax information from 2001, right?
A: Yes. And Steve might have a phone number, too.
MR. ARNTSEN: Can you get that for me?
MR. KAHN: Yes, we can get that.
MR. ARNTSEN: Do you recall -
MR. KAHN: But just, Allen, so I don't forget, Jeff, if you could just remind me.
MR. ARNTSEN: We will. We'll put it in a letter.
MR. KAHN: If you put it in a letter, this way I'll -
MR. ARNTSEN: I'm with you.
MR. KAHN: We know where he is.
BY MR. ARNTSEN: Do you recall at a convention panel in 1993 saying that you didn't even know there were any other Spawns until Neil told you that?
A: I don't recall.
Q: Okay. You have no recollection of making such a statement?
A: No. I've done a lot of panels.
Q: Okay. And then now I'm just waiting for one more exhibit. On at least some of the Spawn comics there's a letter page and letters and answers to letters. Do you know what I'm talking about?
Q: And some of the letters are to you and then there would appear -- and then there would be – strike that. I'll just go at it directly.
(Deposition Exhibit Number 55 was then marked for identification.)
BY MR. ARNTSEN: I'm going to show you Exhibit 55 and ask you if you can identify that. And I'll represent to you that it is the cover page and then a page of Spawn 11 and I've got the original there in front of you.
And can you just compare the two and confirm that that's the case?
Q: And you see on the second page of Exhibit 55 there is a letter saying "Dear Todd" from a Matthew O'Brien?
Q: Do you see what I'm referring to?
Q: And then there's an answer to that letter that starts with "Matthew."
Q: Did you write that answer?
A: Right. Yes, I wrote that.
Q: Okay. We're done. Thank you.
MR. KAHN: Certainly, I have what I hope will be no more than five to ten minutes of follow-up questions and then we'll be done.
EXAMINATION BY MR. KAHN
Q: Todd, yesterday when you were asked about a conversation you had with Terri Cunningham concerning DC Comics contracts and handling of derivative characters, according to my notes you said you thought that conversation took place in 1996. Today is it my understanding you believe that conversation took place in the summer of 1997?
A: Right. Yes, 1997.
Q: Earlier today Allen showed you several copyright Certificates of Registration for different issues of Spawn and Angela.
As an example, let me show you what has been marked as Plaintiffs' Exhibit 37, which references Spawn Issue Number 26.
Q: Do you recognize the signature on the second page as being that of Beth Ann, however her last name is pronounced?
A: I don't know her signature, but -
Q: Okay. So you don't recognize the signature. Do you know who Beth Ann was?
A: Yes. She was -- she was an assistant to Paul Burke and did some work maybe for Jon.
Q: Where was Beth Ann's office in January of 1995, which is the date of Plaintiffs' Exhibit 37?
A: The exact office?
Q: Was it in Phoenix or was it in Michigan?
A: No, it was in the Detroit, Michigan area.
Q: Where was your office in 1995?
A: In Phoenix, Arizona.
Q: Did you review this Certificate of Registration before someone signed it and sent it in on your behalf?
Q: Is the name of the author in paragraph 2 of this registration, namely Todd Dean McFarlane, your understanding of who the copyright owner was?
A: No. Like I said, those should have been Todd McFarlane Productions. So, Todd McFarlane, an individual, has never grabbed any of those rights.
Q: And did anyone talk to you about why the box under 2 a for contribution to this being a work made for hire, did anyone talk to you about that before that was checked?
Q: Earlier today Mr. Gaiman's attorney showed you a group of scripts and thumbnails marked Plaintiffs' Exhibits 39 through 44 and I'm showing them to you again today now, Todd. I have a question for you about these exhibits, two questions.
Do you see on the first page of each of these exhibits there is a stamp that says "Library of Congress, August 3, 2000, Copyright Office"?
A: Uh-huh. Yes.
Q: And there's also what looks like some sort of product code or registration number.
A: A bar code.
To your recollection were these on the copies of the scripts and the thumbnails that were received originally from Neil back at the time that these issues were being created?
A: I never -- I don't recall seeing the thumbnails, but on the scripts they were to come in in the mid '90s, so it would be tough to have a 2000 date on a 1995 document.
Q: So, do you know where these particular copies of the scripts came from that are bearing these Library of Congress stamps?
MR. KAHN: Could you mark this as the next exhibit?
(Deposition Exhibit Number 56 was then marked for identification.)
BY MR. KAHN: Todd, take a look at Exhibit 56 which actually consists of several pages stapled together. And once you have taken a look at it, would you -- if you recognize what this is, describe it? What is Exhibit 56?
A: It appears to be thirteen pages of various follow-up accounting statements that we would get at Todd McFarlane Productions from Image comic books on various -- various items that we did.
Q: Let me ask you to look, for example, at the page about two-thirds of the way through bearing the number PM 1684.
Q: Is that a statement you received, you being Todd McFarlane Productions, from Image Comics for Spawn Issue Number 26?
A: Right. We'd get a statement like this, right.
Q: And what is shown on this statement starting with the first column going down briefly?
A: This page is for some accounting for Spawn Issue Number 26 comic book. The first column is a first payment and then the other subsequent columns is for - after that are additional accounting that would apply to this same subject matter, Spawn comic book Number 26.
Q: So, for example, the second row in the first column is "Date Shipped 12/27/94." What does that refer to?
A: Probably in reference to when the comic book was sent out to Diamond Comics.
Q: So the comic book is printed by them and is being sent to the distributor?
Q: The next -
A: Or from the printing plant. It could be from the printing plant.
Q: Okay. Then the next line is "Cover Price."
That's the cover price on the face of the comic book?
Q: Take us very quickly down to the first line that says "Net Cash." What are these other entries?
A: From starting with "Total Invoiced"?
Q: Right. We don't need to go line by line.
Q: The next set.
A: So, let me -- let me now switch into Todd McFarlane, Image guy.
A: Okay. A shareholder now. My understanding of how all this works. Total Invoiced would be the number of copies that were shipped times whatever percentage of the cover price we would receive. So again if a comic book cost in this case $1.95, you don't get $1.95. That's the retail price. We sell it at a wholesale price. And that wholesale price, just for round numbers, is half, is half the cover price to use generic round numbers then. Then that's how you would probably get pretty close to that total invoice.
"Less Discounts Taken" is a number I believe that is part of our contract with Diamond Distributors, that depending upon volume of comic books coming from our company and various other companies they get to make these deductions based on what's coming through the pipeline of all the companies and sometimes specifically ours. So that's a -- that's not a in-house deduction. That would actually be something that Diamond comic books would have taken off.
We at Image then it appeared would have received the 254,091.01, which is the net revenue to date.
And then the "Balance Due" appears to be of what is due to us, they still haven't given all of us. I guess it looks like they need to collect on the 35,000. So, I think -- so I think if you added this up to the line above, it says "Net Revenue to Date."
And then in the first column it doesn't appear to be any -- although there's one, two, three, four, there's five other lines, there's no deductions or additions there.
Q: So you get to "Net Cash" which is the amount of money that Image has collected so far on this comic book?
Q: And is there -- anything below that down to the line called "Due to Creator" are all the deductions, all the total expenses?
A: Right. So -- so, in this example, Image comic books has $218,000, but Image comic books has fronted and paid the printing bills and all those others. We now have to go back and -- and pay those bills or there's moneys that are due. So that's what all that is.
If you go down here, most of that's probably for printing, Ronald's Printing, which is the next line below the first bolded line.
A: On this one, this one right here, the headline says "Ronald's Printing." So that's the bulk of it. The other categories are Olyoptics, a little bit of coloring. Studio Color Group is film separations.
Q: And we don't need to go line by line. These are the different expenses that Image Comics pays -
Q: -- in connection with having this issue printed?
Q: It brings us down to a gross profit number of $119,406.09.
A: Where are you at? Oh, right here. Yes, yes, yes.
Q: And then if we keep going down that column there are additional expenses until we come down to a column called "Net Income Before Image's Royalty." Do you see that?
Q: And then you talk about this fee. It looks like for this particular issue it was 2,000 plus 2 percent?
Q: That gets deducted from the amount?
A: Right. That's Image's overhead fee, right.
Q: And then we get a line called "Due to Creator for Book, $113,278."
Q: And then we have "First Payment to Creator."
That would be the check that would go from Image Comics to Todd McFarlane Productions?
A: Right. In this example, right.
Q: Is this a document, namely this page and all the other pages, in Plaintiffs' Exhibit 56 that was created in the ordinary course of business by Image Comics?
Q: And it's a document that Todd McFarlane Productions would have received in the ordinary course of business?
Q: And for Spawn Issue 26 it shows a shipping date of December 27, 1994. This is the issue that you testified about earlier for which Mr. Gaiman wrote a portion of the script, is that correct?
A: Yes. A couple pages, right.
Q: And in your testimony yesterday you stated that Mr. Gaiman had told you that he did not want or need to have credit for that portion of the script that he wrote, correct?
Q: Between the shipping date of December 27, 1994 and the date that this lawsuit was filed, Todd, did Mr. Gaiman ever complain to you about his lack of credit for the portion of the script that he wrote for Issue 26?
Q: And at any time before December 27, 1994 did he complain to you or request credit for the portion of Issue 26 that he wrote?
Q: If you turn to the next page, is this a similar statement from -
A: 1685 at the bottom?
Q: Yes. Is this a similar Image statement for the first issue of the Angela mini series?
A: Yeah. This -- the difference on this one as compared to the prior one is that this would be accounting for first payment only. If there was any moneys due later on and any of the accruals, then those columns begin to get added. As you can see, there's five columns in 1684.
A: And there's one column in 1685.
Q: My question: On Angela Number 1 it indicates a shipment date of December 20, 1994. Is that consistent with your recollection of when Angela Number 1 was published and shipped?
A: I can't say for certain either. It's in that area.
Q: And December of -- in the December, 1994 area?
Q: And the next page is Angela Number 2, page 1686. That shows a shipment date of approximately one month later.
Q: Angela Number 2. Is that consistent with your recollection of when Angela Issue Number 2 in the mini series was printed and shipped?
A: Well, again we try to get books out on a monthly basis, so it would have been a month after or pretty close to a month after Issue 1. So that would be consistent in theory.
Q: And then the next one is Angela Number 3. That's page 1687.
Q: Is that the Image statement for Angela Number 3?
A: Right. Or one of them.
Q: And that shows a shipping date of approximately one month after Angela Number 2. Is that also consistent with your recollection of the publishing sequence for those three issues in the mini series?
A: There appears to be an error. So let's correct an error here, young man.
A: Okay. So, 1685 says that the shipping date, if this is the correct date, is December 20, 1994. So the next one is 1686. If you cross over into a new calendar year somebody should have added that '95 to that since it came out the next year. So somebody didn't have their date right. The year that 1167, it should have been 1995 because if you go to page 1687 then we're back to 1995. So somebody added a number.
Q: So, in the year -- okay. Looking at these statements then, is it your recollection that Angela 1, 2 and 3 came out roughly -
Q: -- in a three month from December of 1994 to February of 1995?
Q: Let me have you look at the very last page in this document.
What does this page from Image Comics refer to?
A: This appears to be some accounting statements for the Angela trade paperback that was published.
Q: What was the Angela trade paperback?
A: That I think was a collection of at least the Issues 1 through 3 of the Angela mini series. It may contain some additional pages.
Q: And does this page of Exhibit 56, namely page -- the final page of this exhibit, show or indicate when the Angela trade paperback was published and shipped?
A: It says November 7, 1995.
Q: So the three -- at least the three issues of Angela and possibly some additional materials were put together in a trade paperback in the type of final production and published by Image Comics sometime toward the end of 1995?
MR. KAHN: I have nothing further.
RE-EXAMINATION BY MR. ARNTSEN
Q: Just a couple of questions on Exhibit 56.
Can you just -- just turn to the last page of Exhibit 56. You see the last four rows talk about amounts due to the creator?
Q: Who's the creator?
A: Within the confines of Image, it's essentially the people who give us the comic book. So it's not specific. It's whoever we owe the cash to is the person that brought us the complete comic book.
Q: So, with regard to the Angela trade paperback, who is the creator as shown on the last page of Exhibit 56?
A: Those payments would have been made to Todd McFarlane Productions.
Q: And would that be true with regard to all of the references to creator on Exhibit 56? Creator is Todd McFarlane Productions?
A: Payments, right. The payments would have all gone to Todd McFarlane Productions.
Q: Okay. So wherever the word "creator" is used that means Todd McFarlane Productions, correct?
A: Correct. Or licensor. In this case Todd McFarlane Productions, right.
Q: Okay. That's all. Thanks.
MR. LAPPLE: No questions.
MR. KAHN: We will not waive signature.
(Whereupon, the deposition was then concluded at 1:20 p.m.)
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