Postal Service owes $685,000 for unauthorized use of sculpture in $1500 photograph

Memorial Stamp The U.S. Court of Appeals for the Federal Circuit set the damages in Gaylord v. U.S. This fair use and unfair licensing action involved the Korean War Veterans Memorial sculpture and the government’s decision to license an unauthorized photograph of the sculpture without securing rights to the sculpture itself.

Frank Gaylord created the memorial. Later John Alli photographed the Memorial. Given the beauty of his photographs, Mr. Alli decided to license his photographs. He purchased a license to reproduce the Memorial from Mr. Lecky, an architect with Cooper-Lecky Architects, P.C. the prime contractor for the creation, construction, and installation of the Memorial. Lecky did not inform Mr. Gaylord of the license fee, instead holding himself out as author of the sculpture. Eventually, however, Mr. Alli settled with Mr. Gaylord by paying a ten percent net licensing royalty.

Mr. Alli licensed his photograph to the Postal Service for $1500. “The Postal Service produced approximately 86.8 million stamps before retiring the stamp on March 31, 2005,” noted the court.

In the 2010 decision, the Federal Circuit rejected the notion that the use of the postal service stamp was fair use of the sculpture. It noted that the “Postal Service acknowledged receiving $17 million from the sale of nearly 48 million 37-cent stamps. An estimated $5.4 million in stamps were sold to collectors in 2003. The stamp clearly has a commercial purpose.” Presumably the collector stamps do not purchase mail services from the Postal Service, turning almost all of that revenue into net profit. Although the court did not see market harm stemming from the unauthorized postage stamp on other licensing opportunities for the sculpture, it nonetheless rejected fair use. “Even though the stamp did not harm the market for derivative works, allowing the government to commercially exploit a creative and expressive work will not advance the purposes of copyright in this case.”

The court also rejected claims the suggestions to the sculpture transformed the ownership into a joint work or the rather bizarre suggestion that the sculpture is an architectural work – meaning “the design of a building as embodied in any tangible medium of expression…” and a building as “humanly habitable structures.” Looking at the photograph below, it is difficult to see where one might inhabit the work. Gaylord memorial

Last week, the Federal Circuit answered the question as to the value of Mr. Gaylord’s sculpture depicted so beautifully in the photograph. According to Mr. Gaylord’s counsel, “the sculptor of the Korean War Veterans Memorial … has been awarded 10 percent of the United States Post Service profits from selling the collector stamps that featured the sculptures.”

The choice of the ten percent net licensing royalty seems particularly appropriate given the license granted by Mr. Alli to Mr. Gaylord. According to Mr. Gaylord’s attorneys, he was awarded $685,000.

Heidi Harvey of Fish & Richardson represented the artist on a pro bono-contingency hybrid basis. While it is disheartening that the U.S. did not settle this case earlier and that it took the position the work was not owned by the artist, the robust licensing fee hopefully rectifies the damage done by the Postal Service.

(Photographs from the 2010 Federal Circuit decision)

Guest Repost: 4th Cir: Liking on Facebook is Protected First Amendment Activity

As a follow-up on a topic covered at the 2013 Law + Informatics Symposium, Workplace Prof Blog, A Member of the Law Professor Blogs Network posted the following article. Given its relation to our symposium, the author kindly agreed to let us re-post it here:

ComputerSome of you may recall that we previously blogged on a case from Virginia in August of last year concerning whether, in a public sector First Amendment  case involving political activities, liking someone or something on Facebook counted as protected First Amendment speech.  I said it most certainly did in the ABA Journal at the time, even though the district judge said it certainly did not.

Secunda [The earlier post explained that the ABA Journal quoted “Paul Secunda (Marquette) as “speechless” that Judge Raymond A. Jackson of the Eastern District of Virginia ruled, in Bland v. Robertsy, that a public employee “liking” something or someone on Facebook is not protected First Amendment expression.  The article is ‘Like’ Is Unliked: Clicking on a Facebook Item Is Not Free Speech, Judge Rules.”  Ed.]

Yesterday, the Fourth Circuit made the world right again by finding that liking a candidate’s campaign page on Facebook was in fact protected First Amendment speech.

Here is the link to the 4th Circuit’s decision (2-1) in Bland v. RobertsAnd here is the pertinent language from the Court’s opinion:

On the most basic level, clicking on the “like” button literally causes to be published the statement that the User “likes” something, which is itself a substantive statement. In the context of a political campaign’s Facebook page, the meaning that the user approves of the candidacy whose page is being liked is unmistakable. That a user may use a single mouse click to produce that message that he likes the page instead of typing the same message with several individual key strokes is of no constitutional significance.

Friend of the blog, Bill Herbert, has written on these First Amendment issues involving social networking by public employees in: Can’t Escape from the Memory:  Social Media and Public Sector Labor Law.  The article has now been published in North Kentucky Law Review as part of the  Law + Informatics Symposium on Labor and Employment Issues.  A shout out to Jon Garon, Director of the Law + Informatics Institute at NKU for organizing this very worthwhile event.


Negligence might finally be actionable for breach of duty to protect customer data

Business relationships are often strained when a third party successfully breaches the data security of a target, creating profound negative consequences not only to the target but also to that company’s vendors, business associates, and customers. These damages are often costly but sometimes hard to identify or quantify.

In the majority of security breaches, the customers who have had their identity exposed have suffered no actual economic harm. The courts, therefore, are appropriately reluctant to give monetary damages to those injured customers and generally refuse to compensate for the time lost checking credit scores or otherwise dealing with the problems associated with the data breach.

The vendors and business associates, however, may incur substantially greater economic losses and more direct financial injury. Because this injury is exclusively economic loss, a question remains whether such loss is compensable under tort law or whether all remedies are limited entirely to contract claims.

In Lone Star Nat. Bank v. Heartland Payment Systems, No. 12-20648, 2013 WL 4728445 (5th Cir. Sept. 3, 2013), the Fifth Circuit reversed a dismissal of a tort claim based on the plaintiff bank’s assertion it suffered financial harm when it had to replace consumers’ compromised credit cards and to refund fraudulent charges as a result of the negligence of the defendant in securing against data breach. The case arose from a 2008 data breach of the defendant’s payment processor’s systems, exposing 130 million credit card numbers.

The Fifth Circuit focused on the law of New Jersey after establishing the jurisdictional basis for the claim. The court explained, “the economic loss doctrine generally limits a plaintiff seeking to recover purely economic losses, such as lost profits, to contractual remedies.” Economic losses are generally covered exclusively by contract remedies, unlike tort principles which “are better suited for resolving claims involving unanticipated physical injury, particularly those arising out of an accident.”

Contract may be better than tort, but such a limitation oversimplifies the scope of tort law. Tort injuries occur in inchoate interests such as defamation and assault. Not all tortious harms are physical.

The New Jersey Supreme Court had earlier held the tort remedy applied when a duty was breach. It explained that when “a defendant owes a duty of care to take reasonable measures to avoid the risk of causing economic damages, aside from physical injury, to particular plaintiffs or plaintiffs comprising an identifiable class with respect to whom defendant knows or has reason to know are likely to suffer such damages from its conduct. . . .” People Express Airlines, Inc. v. Consolidated Rail Corp., 495 A.2d 107 (N.J. 1985).

Based on this line of reasoning, the Fifth Circuit reinstated the claim. It acknowledged that New Jersey law generally did not permit the tort claim if there was a contract between the parties, since the terms of their express agreement should govern the allocation of risk. But third party beneficiary law often provides that parties not directly negotiating the agreement may still be affected by it, and so to might a group of readily identifiable tort victims who are not party to the contract but affected by the duties created.

Since the defendant, Heartland “would not be exposed to ‘boundless liability,’ but rather to the reasonable amount of loss from a limited number of entities [then] even absent physical harm, Heartland may owe the Issuer Banks a duty of care and may be liable for their purely economic losses.” The decision merely allows the case to proceed and a great many additional defenses will be addressed. Nonetheless, the decision is an important reminder on the creation of contracts and the scope of those contracts as they affect third parties contemplated but not direct parties to the agreements.