Marvel Settles Suit With Lee

Marvel Enterprises Inc., which holds the rights to 5,000 comic book characters, settled a lawsuit with Spider-Man creator Stan Lee over film royalties and plans to start producing its own movies.

The company said it had signed an eight-year agreement with Paramount Pictures, a unit of Viacom Inc., to distribute as many as 10 films, according to a statement Thursday. Merrill Lynch & Co. set up a $525-million credit line to fund production, a loan backed by limited rights to 10 Marvel characters.

Developing movies is a shift in strategy for the New York-based company, which has licensed its characters to studios to make films such as “Spider-Man� and “Men in Black.� Producing for the big screen will bring more box-office profit, as well as fees from video and cable TV sales, the company said. Marvel may release a “Captain America� film as soon as 2007.

“This is nothing short of a major transforming event for Marvel,� Vice Chairman Peter Cuneo said in an interview.

Under its agreement, Paramount won’t contribute production costs, although it will fund advance promotions and advertising, the statement said.

The firm Thursday also said first-quarter profit fell 11% to $27.7 million after a $10-million cost to settle with Lee. Lee’s attorney declined to comment on how much his client got in total. The creator of superheroes, which include the Incredible Hulk and Daredevil, sued in 2002 for payments related to the first “Spider-Man� movie.

Films based on Lee’s characters have generated more than $2 billion in revenue in the last five years, according to Boxofficemojo.com, of which Marvel got at least $50 million. Until the settlement, Lee, who is also Marvel’s chairman emeritus and gets $1 million in salary, had not received royalties.

The agreement ends Lee’s rights to future Marvel profit, Cuneo said.

Net income fell to 25 cents a share, from $31.3 million, or 27 cents, a year earlier, the statement said. Sales fell to $104 million from $122 million as toy revenue from “Spider-Man 2� and “Lord of the Rings� waned from a year earlier.

Marvel shares rose 33 cents to $19.52 on the New York Stock Exchange.