An appellate court has affirmed a royalty award to a famous sculptor based on the U.S. government’s unauthorized use of his copyrighted work in a postage stamp. The decision by the Court of Appeals for the Federal Circuit in Gaylord v. United States comes after lengthy litigation that has revealed some of the complexities of intellectual property issues in government contracts.
Sculptor Frank Gaylord created statues of nineteen soldiers on patrol for a work at the Korean War Veterans Memorial known as “The Column.” The U.S. Postal Service issued a stamp depicting that work without obtaining Gaylord’s authorization, and Gaylord sued the government for copyright infringement.
Because the claim for copyright infringement against the federal government arose under 28 U.S.C. Section 1498, the case was tried at the Court of Federal Claims. In the course of protracted litigation that has included three appeals, the Court of Appeals for the Federal Circuit previously affirmed the lower court’s finding of liability by the government for infringement, then reversed the lower court’s original royalty award of $5,000, and now, at the conclusion of yet another appeal, has affirmed that Gaylord is entitled to 10% of the government’s $5.7 million in stamp revenue.
The Federal Circuit, following the “hypothetical negotiation” analytical framework used for determining damages in patent cases, affirmed the Court of Federal Claims in awarding Gaylord 10% of the government’s stamp revenue. Specifically, the Federal Circuit found that the lower court did not clearly err in either (a) concluding that Gaylord and the government would have agreed on a per-unit royalty instead of a one-time lump-sum payment, or (b) arriving at a 10% royalty rate.
Apart from the court’s discussion of how to calculate damages in this copyright infringement case, this case serves as a reminder of the complexity of intellectual property issues in the government contracting context. When this case was previously appealed to the Federal Circuit on the issue of liability, a majority of the judges found the government liable for copyright infringement, but Judge Newman wrote a strongly worded dissent explaining that the government could not be liable due to the explicit language of both the underlying government contract and the relevant statute. Judge Newman stated that Gaylord (as the subcontractor) could not have had a copyright in The Column due to the specific terms of the contract between the government and the prime contractor (the architecture firm that engaged Gaylord to create the sculptures), and even if he had a valid copyright, 28 U.S.C. Section 1498 barred enforcement against the government. But, because those issues were not raised by the attorneys for the government, the court declined to engage in appellate fact-finding.
Thus, the government probably could have avoided the hefty royalty award as well as the hassle and expense of lengthy litigation, if only its attorneys had been more aware of the significance of the copyright issues in the government contract and relevant statute and if they had argued those issues effectively in court.