We show that even though the Discontinuous Galerkin Spectral Element Method is stable for hyperbolic boundary-value problems, and the overset domain problem is well-posed in an appropriate norm, the energy of the approximation of the latter is bounded by data only for fixed polynomial order, mesh, and time. In the absence of dissipation, coupling of the overlapping domains is destabilizing by allowing positive eigenvalues in the system to be integrated in time. This coupling can be stabilized in one space dimension by using the upwind numerical flux. To help provide additional dissipation, we introduce a novel penalty method that applies dissipation at arbitrary points within the overlap region and depends only on the difference between the solutions. We present numerical experiments in one space dimension to illustrate the implementation of the well-posed penalty formulation, and show spectral convergence of the approximations when sufficient dissipation is applied.