Court uses hypothetical license to determine royalty damages against USPS

BVWireIssue #151-5
April 29, 2015

In 2002, the U.S. Postal Service issued a 37-cent stamp of a photograph of the Korean War memorial. It paid the photographer $1,500 for the use of the photograph. In 2006, the memorial’s sculptor, Frank Gaylord, sued the government for infringing his copyright. But the government and the court rejected the sculptor’s claim, saying the stamp constituted fair use of his work. The sculptor appealed.

Postage due: After five years and multiple decisions and remands, the appeals court ruled that the sculptor should be paid a royalty based on a hypothetical license for his work and not what the USPS usually pays for the use of an image on a stamp. The lower court considered stamps used to send mail, commercial merchandise featuring an image of the stamp, and unused stamps purchased by collectors. The lower court said the USPS made at least $5.4 million in revenue from the sale of stamps to collectors, which was almost pure profit, and awarded Gaylord 10% of the revenue, or $540,000—plus interest.

The 10% was based on what the sculptor normally charges to license his work. The appellate court said it would be reasonable for the trial court to conclude that the USPS had sufficient incentive to agree to that royalty rate for sales of collector stamps.

The case is Gaylord v. United States, Case No. 14-5020 (Fed. Cir., Feb. 4, 2015) (Taranto, J).

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