After Nine Year Battle, Appeals Court Upholds US$540,000 Award to Sculptor for Use of Memorial Images on U.S. Postage Stamp

A long litigation battle by sculptor Frank Gaylord against the U.S. government has resulted in the confirmation of an award of more than US$540,000. In 1990, Mr. Gaylord won a competition to work on a federal memorial to veterans of the Korean War (Memorial), which had been authorized by the U.S. Congress. Ultimately, the Memorial comprised 19 stainless steel statues, designed to represent a platoon of soldiers in formation on the ground. The Memorial was completed, installed, and opened to the public in Washington, DC, in 1995. Mr. Gaylord filed a number of copyright registrations, covering the various statues.

In 1995, John Alli took photographs of the Memorial, one of which is the image at issue in the case. Mr. Alli sold prints of the photograph, obtaining permission (and paying a 10% royalty) to the prime contractor for the Memorial, which was the entity he believed held the copyright to the sculptures. In 2002, the U.S. Postal Service (USPS) obtained permission from Mr. Alli to use his photograph of the Memorial for a 37-cent stamp commemorating the fiftieth anniversary of the armistice of the Korean War. The USPS paid Mr. Alli US$1,500.

The USPS produced more than 86 million stamps during the stamp’s active life, and obtained US$5.4 million from sales of stamps to collectors, in addition to approximately US$17 million from sales to consumers. The USPS never obtained permission from Mr. Gaylord, whose sculptures clearly appeared in Mr. Alli’s photo, which appeared on the stamp.

Mr. Gaylord first sued the U.S. government in 2006, and the case has been up and down to the Federal Circuit Court of Appeals (Federal Circuit) three times. In its first decision in 2010, the Federal Circuit overturned the trial court’s ruling that the use of the sculpture on the stamp was ‘fair use’. Applying the test for ‘fair use’ found in the U.S. Copyright Act, the Federal Circuit held that the use on the stamp was neither transformative nor ‘fair.’ The Federal Circuit also rejected the government’s claim that it was a joint author of the work, and it remanded the case for a determination of damages.

Back at the trial court, Mr. Gaylord sought a 10% royalty, but the trial court awarded him US$5,000, which was the most money the USPS had ever paid for a stamp image. Mr. Gaylord appealed, and in 2012 the Federal Circuit reversed, finding that the trial court had improperly measured the damages. It explained that the trial court should base its award on a hypothetical, arms-length negotiation, considering evidence of value on both sides. On a second remand, the trial court considered evidence and expert testimony and looked at three different potential sources of damages:

  1. stamps bought for use as postage
  2. commercial merchandise, such as plaques, displaying the stamp
  3. stamps purchased by collectors.

The trial court awarded no damages for stamps sold to consumers and approximately US$33,000, plus interest, for commercial merchandise. As to the stamps purchased by collectors, the trial court determined that the USPS had received US$5.4 million in revenue from collectors and that a 10% royalty was an appropriate measure of damages. Thus, in total, it awarded Mr. Gaylord approximately US$573,000, plus interest (US$684,845).

The U.S. government appealed only the 10% award for the last category of damages. In its third decision in the course of the litigation, on February 4, 2015, the Federal Circuit upheld the US$540,000 determination. The Federal Circuit looked at the testimony (expert and fact) concerning a ‘hypothetical negotiation’, in which case, both sides “would have…the opportunity for making substantial profits if the two sides were willing to join forces…”. The Federal Circuit found that the trial court made no clear error in finding that the hypothetical negotiators, “presented [with] such an opportunity and acting under assumptions designed to identify market value, would have agreed to a 90/10 split of the revenue from retained stamps…”.

Copyright © 2024, K&L Gates LLP. All Rights Reserved.