Federal Circuit Affirms 10% Royalty on “Pure Profit” Infringement by US Government

Gaylord v. US (Fed. Cir. 2015)

In this case’s third-trip to the Court of Appeals, the Federal Circuit has again sided with Sculptor Frank Gaylord — This time affirming the lower court’s award of 10% of $5.4 million in US Postal Service revenue as a reasonable royalty for its unauthorized use of Gaylord’s copyrighted work on a postage stamp.

Gaylord was commissioned by the U.S. government to design what turned out to be “The Column” as part of the Korean War Memorial in DC.  Gaylord, however, retained copyright to the work and, when the the Postal Service released a stamp depicting the work Gaylord sued.  Because this case is against the U.S. government, the lawsuit was brought in the Court of Federal Claims (CFC) and appeals from the CFC are heard by the Federal Circuit (CAFC). Memorial

In the first appeal, the Federal Circuit held that the government’s use was not a “fair use” but rather copyright infringement. In round-two, the Federal Circuit rejected the CFC’s award of $5,000 as a reasonable-royalty for the use.  Rather, the Federal Circuit held that the lower court must award “the fair market value of a license for Mr. Gaylord’s work based on a hypothetical negotiation with the government.”

The stamp business is interesting.  Most postage stamps are purchased and then used to mail letters with very little profit margin.  For those, the appropriate royalty rate is quite low and Gaylord agreed that he would not seek any royalty for used-stamps.  However, there are also a large number of stamp collectors and the USPS profit on those stamps is well over 90%. And, the popularity of collectible stamps tends to directly correlate with the quality and popularity of the work depicted on the stamp.  For this second category, the Court of Federal Claims determined that an appropriate royalty was 10% of revenues for the unused stamps.  On appeal, the Federal Circuit affirmed:

The basic premise of the hypothetical negotiation in this case would have been the opportunity for making substantial profits if the two sides were willing to join forces, which we must [hypothetically] assume they were. The Court of Federal Claims in this case determined that the negotiators, presented 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, which, here, is in substance a 90/10 split of profits, because the revenue for the unused stamps is almost pure profit to the Postal Service. The question for us is whether that result—giving the Postal Service 90% of the profits and Mr. Gaylord 10%—is within the range of reasonable findings from the evidence.

In reviewing that award, the Federal Circuit first confirmed that a royalty-approach was appropriate even though the USPS has never paid a royalty – its practice has always been to pay an up-front award of $5,000 or less.

The familiar advantages of a per-unit royalty can readily be found present here. A per-unit royalty is a logical way to tie the amount paid for the asset to the marketplace success it helps produce, which fits the objective of measuring market value.

Regarding the 10% split, Gaylord was able to show that he had previously obtained a 10% rate for other uses of the image and the 90% remaining leaves USPS with significant profit.  Those reasons sat well with the appellate court as well.

Thus, Gaylord gets $570,000 in royalties.

34 thoughts on “Federal Circuit Affirms 10% Royalty on “Pure Profit” Infringement by US Government

  1. 6

    Considering that this board is moderated, I find it surprising that any of Mooney’s comments in this thread have remained.

    As far as I am concerned, his comments in this thread are a large stain on this board.

  2. 5

    This is just run-of-the-mill low for Malcolm, and does not compare to at least two other lows: his mocking of Eric Guttag shortly after Eric’s dad passed away and his defense of 6’s use of the N word.

    1. 5.1

      Last time I checked Frank Gaylord was just an old sculptor with a litigious streak in him. I’m not required to approve of his behavior.

      But you seem to think he’s really, really special, “anon.”

      Tell everyone why you love Frank Gaylord so much. It must be a great story.

      1. 5.1.1

        What the H kind of strawman is that?

        None of my posts have anything to do with Mr. Gaylord being a special person or not and instead deal with simple representation of ANY client.

        Enforcing one’s rights seems to be (oddly, given your professed role) anathema to you.

        I suggest (again) that you find a line of work in which you can believe in what you do.

        1. 5.1.1.1

          What the H kind of strawman is that?

          Funny stuff. Let’s recount for everyone. “anon”, the blog’s resident s0 ci0pathic axxxh0le, believes that some “new low” has been reached. He doesn’t explain what that “new low” but it’s obviously an insult directed at me personally.

          Then the s0 ci0pathic axxh0le brings up some bizarre completely out-of-context fantasies from his past, involving other people who aren’t even commenting on the thead.

          When questioned about his bizarre behavior, the s0ci0pathic axxh0le then accuses the questioner of (try to believe it!) invoking a “strawman.”

          Get yourself to a psychiatrist, “anon.” Seriously. You need one and you need one badly.

          1. 5.1.1.1.1

            On your haste to “recount” you evidently missed the fact that it was IBP (not me) that accused your rant here against an individual who was merely asserting his rights as a new low.

            Let’s try to at least start your rants with some semblance to reality.

            As to my post 5, if you bothered (at all) to read the posts below, you would (or should) quickly realize that my post was in answer to IBP. My answer accurately portrays your rant here NOT as a new low – oops, your accusations are completely off.

            Go figure.

            As to my noted of your past lows, they are completely accurate. Dissembling like the events did not happen, or somehow are “out of context” does not help you. Don’t like them? I suggest (again) that you improve your own posts then.

        2. 5.1.1.2

          None of my posts have anything to do with Mr. Gaylord being a special person or not and instead deal with simple representation of ANY client.

          Does that include comment 5?

          Of course it doesn’t.

          Try to dial back the gaping axxhole factor, “anon.”

          This is going to be a really, really hard for you.

  3. 4

    Gaylord was commissioned by the U.S. government to design what turned out to b “The Column” as part of the Korean War Memorial in DC. Gaylord, however, retained copyright to the work and, when the the Postal Service released a stamp depicting the work Gaylord sued.

    Dude gets commissioned by the US government to produce a sculpture. Dude gets paid up front and as a direct result of that sculpture (the best known work of the artist) he is immortalized and receives name recognition and exposure to a degree that other artists only dream of. Dude’s work gets further exposure when his sculpture (oops, I meant the United States’ sculpture) is memorialized on a stamp.

    The legal merits of his copyright case notwithstanding, it’s reasonable to conclude here this Gaylord guy is little more than a selfish, thankless jerk. Maybe he’ll surprise everyone by donating most of that money to a cause more worthy than himself (the US postal service comes to mind).

    1. 4.1

      Supposedly, you are an attorney who can recognize the value to a client in the act of preserving and retaining the copyright for the client.

      Instead, we have you displaying your typical animus towards anyone “monitozing” anything.

      You are more than welcome to such “feelings,” but please be aware that these feelings betray how poor an applicant’s representative you would make (if this is truly your profession).

      1. 4.1.1

        <iyou displaying your typical animus towards anyone “monitozing” anything

        In fact I’m displaying my animus towards Gaylord in this particular situation.

        Try to keep up.

        1. 4.1.1.1

          Keep up…?

          Did you even bother trying to understood what I wrote?

          This is a specific example of you being a doosh.

          Keep up with that.

          1. 4.1.1.1.1

            Did you even bother trying to understood what I wrote?

            Yes. I read it carefully several times before responding.

            Again: I don’t have animosity towards “anyone monetizing anything.”

            You suggested otherwise. I corrected you.

            1. 4.1.1.1.1.1

              Your correction misses the mark and badly so, as your animus here is quite evident – as is your lack of appreciation of the value of the copyright.

              It’s difficult to “keep up” with the speed that you are digging that hole. I’ll just stand here on the surface and watch you keep digging, thank you.

              1. 4.1.1.1.1.1.1

                Your correction misses the mark

                N0, it doesn’t. It hits “the mark” squarely in the middle.

                It’s difficult to “keep up” with the speed that you are digging that hole

                I’m not digging a hole. Try to get the medical attention that you need, “anon.” Seriously. It’s long overdue.

                Dennis has tried to help you. But you keep acting like a “crazy person.”

                Just get the help you need. Take a vacation and give everybody a break.

      2. 4.1.2

        you are an attorney who can recognize the value to a client in the act of preserving and retaining the copyright for the client.

        You’re right.

        Like any reasonable attorney, I also recognize that exercizing your “right” to sue people may have lasting, harmful consequences that can outweigh the money obtained from the lawsuit.

        I know that’s going to be extremely difficult for you to understand. Prometheus and Myriad had a hard time with the concept as well, as you’ll surely recall.

        1. 4.1.2.1

          “Lasting harmful consequences”

          ????

          What the H are you talking about? Here. Now. This copyright case.

          (Use whatever type of sentence structure works for you, but try to be on point)

          1. 4.1.2.1.1

            Like I said: I knew the concept would be difficult for you to understand.

            Personally, I think it’s one of the key differences between a good advocate, on one hand, and a litigious trigger-happy hack on the other but, hey, I’m just a patent attorney who graduated from a great law school and who’s been paying very close attention to the behavior of the worst attorneys on the planet for decades now.

            You just keep doing what you’re doing. If it makes you happy, that’s all that matters as far as you know.

            1. 4.1.2.1.1.1

              Your paying attention to the worst behavior rather misses your own worst behavior on this blog.

              Kind of diminishes the value of anything you try to say.

              (That’s called credibility by the way)

              1. 4.1.2.1.1.1.2

                Not likely, as it is evident that you don’t give answers because you really do know that you are just being a doosh here.

                Maybe you’ll feel better if you attack someone enforcing their rights some more…

        2. 4.1.2.2

          And your reference to Myriad is daft, as I am sure that you recall that I NAILED that case – much to your own consternation.

          1. 4.1.2.2.1

            your reference to Myriad is daft

            No, it’s not “daft” at all. Myriad is perfect example of a company that could have taken a different approach to its business strategy but didn’t.

            I would never buy a product or service from Myriad if I could possibly avoid it, and I know I’m not alone. That’s because Myriad is a terrible company run by terrible people.

            Heckuva job.

  4. 3

    Dennis, your first paragraph says that the award was $5.4 million. I think you mean that the $5.4 million in revenue was the bases for the 10% royalty.

  5. 1

    A reasonable conclusion.

    If the USPS wants to pay $5000 for art, it can negotiate with the artist. If the USPS just takes the art, it can pay a reasonable royalty set by the court. There is no reason to suggest that an artist the USPS did not negotiate with would accept USPS’s habitual offer rather than market value.

    1. 1.1

      Hm.. I thought it was a work paid for by the government.

      This would appear to make it appear that no one can take photos of it, nor can it be used in any advertising of the site either…

    2. 1.2

      There is no reason to suggest that an artist the USPS did not negotiate with would accept USPS’s habitual offer rather than market value.

      Given that the US government immortalized this guy with a dream commission and set him up for a comfy life by doing so, it’s pretty reasonable that 50 years later, in his retirement years when he isn’t sculpting much of anything anymore, he’d take $5,000 handout for doing nothing along with a golden opportunity to make even more money from the resultant press that would accompany the stamp.

      It’s interesting that it took him 4 years from the stamp being offered to file the lawsuit. I wonder who was driving the litigation — Gaylord or one of his kids?

      Anyway, great way to cement that “legacy”, Gaylord! Good job.

      1. 1.2.1

        I am pretty sure that Mr. Gaylord’s opinion of you (not much, if anything), surpasses your legal acumen on the topic of copyright.

        1. 1.2.1.1

          I am pretty sure that Mr. Gaylord’s opinion of you (not much, if anything), surpasses your legal acumen on the topic of copyright.

          You’ve no basis to insult my knowledge of copyright law, patent law, or any other area of the law, “anon.”

          Shall we talk about your mental health problems again? If so, just keep it up the insults.

          1. 1.2.1.1.1

            I have every basis Malcolm: your own posts on the subject provide that basis.

            Don’t like it? Post better.

Comments are closed.