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Postal Stamp Infringement Valuation Determined

By Joel L. Hecker

Frank Gaylord created and is the copyright owner of his sculptures called the "Column", which consist of a group of 19 stainless steel soldiers which form the centerpiece of the Korean War Veterans' Memorial on the National Mall in Washington, D.C. In January 1996, an amateur photographer named John Alli visited the Memorial during a snowstorm and took a photograph of the Column. In 2002, the United States Postal Service licensed the photograph for use on the 37 cent stamp commemorating the memorial. However, the Postal Service did not get Mr. Gaylord's consent to use the photograph of his copyrighted sculptures.

Prior Judicial History

Gaylord sued the Postal Service for copyright infringement (Frank Gaylord v. United States, US Court of Federal Claims, Index No. 06-539C). In a torturous tangle of proceedings, the United States Court of Federal Claims initially found that the Postal Service's use of the photograph of the Column was a fair use and therefore it was not liable for copyright infringement. On appeal, the Federal Circuit Court of Appeals reversed that finding and found that the Postal Service had indeed infringed Gaylord's copyright in three categories: 1) stamps used to send mail; 2) unused stamps retained by collectors; and 3) retail goods featuring an image of the stamp.

On remand, the Court of Federal Claims awarded $5,000 in damages on the grounds that this amount was the largest the Postal Service had ever paid to use an image on a stamp. Gaylord appealed the damage award and the Federal Circuit once again vacated the Court of Federal Claims order and remanded the case for a determination of the fair market value of such infringing use. As instructed, the Court of Federal Claims has now determined the amount of damages due to Gaylord in an Opinion and Order filed September 20, 2013.

Stamps Used to Send Mail

On the second remand, the Court of Federal Claims was required, for the first element (stamps used to send mail), to calculate the value of a license granted based upon "a hypothetical, arms-length negotiation between the parties". In addition, the mandate instructed the court to determine whether an ongoing royalty of a one-time fee more accurately captures the fair market value of a license for stamps used to send mail. However, since Gaylord was no longer seeking damages for stamps used to send mail, the court awarded no damages for this category.

Unused Stamps Purchased by Collectors

The analysis for this category differs from used stamps, because the latter represent nearly pure profit for the Postal Service. The Federal Circuit instructed the Court of Federal Claims to consider whether the evidence supports an ongoing royalty rate or a lump sum royalty payment for the estimated $5.4 million collected from unused stamps. The Court found that a 10% running royalty is the appropriate approach, and thereby awarded $540,000 in damages for this component of the case (this stamp is no longer being sold by the Postal Service and therefore a finite amount of damages award could be made).

Commercial Merchandise

The record reflected that Gaylord has consistently licensed images of his Column for retail and commemorative items at approximately a 10% royalty, and therefore in the hypothetical negotiation he would have likely received that 10% royalty on merchandise. Accordingly, he was awarded damages equal to 10% of the estimated $330,919 collected by the Postal Service or $33,092.

Pre-Judgment Interest

Lastly, the Federal Circuit determined that Gaylord was entitled to pre-judgment interest in order to make his compensation complete. By stipulation between the parties, that amount was calculated at $111,752.94.

Total Award

The total award granted to Gaylord against the Postal Service therefore aggregated the sum of $684,844.94. Gaylord, after having the dismissal of his case reversed, as well as a reversal of the minimal $5,000 award, and with the benefit of two Federal Circuit Court decisions in his favor, has finally been awarded what he considers to be just compensation for the infringement of his copyrighted work. Perseverance indeed sometimes does pay!

Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, can be reached at (212) 557-9600, fax (212) 557-9610, www.RussoandBurke.com, or via email: HeckerEsq@aol.com.

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