Appeal from the United States Court of Federal Claims in No. 1:06-cv-00539-TCW, Judge Thomas C. Wheeler.
HEIDI E. HARVEY, Fish & Richardson P.C., of Boston, Massachusetts, argued for plaintiff-appellee.
SCOTT BOLDEN, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellant. With him on the brief were STUART F. DELERY, Assistant Attorney General, and JOHN J. FARGO, Director. Of counsel on the brief were DAVID C. BELT and MICHAEL F. KIELY, Attorney, United States Postal Service, Washington, DC.
Before MOORE, REYNA, and TARANTO, Circuit Judges.
[113 U.S.P.Q.2d 1607] Taranto, Circuit Judge.
On remand from earlier holdings of this court, the Court of Federal Claims held that ten percent of $5.4 million in revenue (which was almost pure profit) was a reasonable royalty for the United States to
pay as damages for its unauthorized use of a distinctive copyrighted work on a postage stamp. Finding an adequate basis for the trial court's determination, we affirm.
Much of the background to the present appeal is detailed in our prior opinions, Gaylord v. United States, 595 F.3d 1364 (Fed. Cir. 2010) ( Gaylord I ), and Gaylord v. United States, 678 F.3d 1339 (Fed. Cir. 2012) (Gaylord II). Frank Gaylord, a World War II veteran and renowned sculptor, created The Column, consisting of nineteen stainless steel statues depicting a squad of soldiers on patrol, to form a central part of the Korean War Veterans Memorial located on the National Mall in Washington, D.C. The Memorial also includes a reflecting pool and a mural wall, created by others. Mr. Gaylord was paid $775,000 for his contribution, time and materials included.
In January 1996, roughly six months after the Memorial was completed and dedicated, an amateur photographer named John Alli visited the Memorial during a heavy snowstorm and photographed The Column, later titling the resulting photograph Real Life. In 2002, the United States Postal Service decided to issue a stamp to commemorate the upcoming fiftieth anniversary of the Korean War armistice. From the very outset of the process of selecting an image for the commemoration, the relevant Postal Service advisory committee fastened onto the idea of using The Column on the stamp. It selected Mr. Alli's photograph of The Column for the stamp face, and it paid Mr. Alli a one-time fee of $1,500 for the right to use his photo. The Postal Service did not seek Mr. Gaylord's consent to use The Column --the photograph was a " derivative work" of The Column under 17 U.S.C. § 106(2)--before issuing the stamp in 2003, and Mr. Gaylord never gave his consent. See Gaylord I, 595 F.3d at 1370-71.
Mr. Gaylord sued the United States for copyright infringement in 2006. In Gaylord I, we held that the government was liable to Mr. Gaylord for copyright infringement, because it used his work on the stamp without his permission, The Column was not a " joint work" (whose joint authors individually might grant permission), and its use was not protected as fair use. 595 F.3d at 1371, 1376, 1381. In Gaylord II, we vacated the Court of Federal Claims' decision awarding Mr. Gaylord $5,000 as the " reasonable and entire compensation" he was due under 28 U.S.C. § 1498(b). 678 F.3d at 1345. We remanded to determine the fair market value of a license for Mr. Gaylord's work based on a hypothetical negotiation with the government. Id. at 1344-45.
On remand after Gaylord II, the Court of Federal Claims reopened the record to allow additional discovery and expert reports, and it then held a two-day trial on damages. As we had suggested, and the parties accept as sound, the trial court broke down its consideration of damages into three categories of infringing goods: (1) stamps used to send mail;
[113 U.S.P.Q.2d 1608] (2) commercial merchandise featuring an image of the stamp; and (3) unused stamps purchased by collectors. Gaylord v. United States, 112 Fed.Cl. 539, 542-43 (2013); see Gaylord II, 678 F.3d at 1344. The first two categories are not now in dispute: the parties agreed that no damages would be awarded for stamps used to send mail and that a per-unit royalty was appropriate for the commercial merchandise, the trial court setting the rate at 10% of revenue to produce a merchandise award of $33,092 (plus prejudgment interest), which neither side now contests. Gaylord, 112 Fed.Cl. at 542-43.
The only question disputed in this court concerns the award regarding the third category--unused stamps. " After a full
review of the evidence presented by both sides," the trial court determined that a 10% per-unit royalty was appropriate to calculate damages for stamps purchased by collectors. Id. at 542. Based on evidence from regularly conducted surveys that the Postal Service commissions and relies on in its ordinary course of business, the court determined that the Postal Service received $5.4 million in revenue--which was " almost pure profit" --from unused stamps of The Column sold to collectors during the (now-ended) life of the issue. Id. ...