# In the United States Court of Federal Claims

No. 13-942C (Filed: June 29, 2018)

* * * * * * * * * * * * * * * * * * * * * *

ROBERT S. DAVIDSON

Plaintiff,

v.

THE UNITED STATES,

Defendant,

* * * * * * * * * * * * * * * * * * * * * * C o p y r i g h t i n f r i n g e m e n t ; 2 8 U.S.C. § 1 498(b) ; Originality; Fair use; 17 U .S.C. § 107; Flat fee license; Running r oyalty; Mixed license.

J a m e s J

. P is a n e l l i a n d T

o d d L

. B i c e , L a s V e g a s , N e v a d a , w i t h w h o m w e r e D e b r a L

. S

p i n e l l i a n d D u s t u n H

. H o lm e s , f o r p l a i n t i f

f

.

Sc o t t B o l de n , D e p u t y D i r e c t o r , U n i t e d S t a t e s D e p a r t m e n t o f J u s t i c e , C i v i l D i v i s i o n , C o m m e r c i a l L i t i g a t i o n B r a n c h
, w i t h w h o m w e r e Ch a d A

. R e a d l e r , A c t i n g A s s i s t a n t A tt o rn e y G e n e r a l
, a n d G a r y L

. H a u s ke n , D i r e c t o r , f

o r d e f e n d a n t

. L e e L

. P e r l a a n d A l ex a H a n n a , D e p a r t m e n t o f J u s t i c e , a n d R e d d i n g C

. C a t e s , U n i t e d S t a t e s P o s t a l S e r v i c e , o f c o u n s e l

.

O P I N I O N

BRUGGINK, Judge

.

This is an action for copyright infringem ent brought b y R o b e rt Davidson, the sculptor of the Lady Liberty replica statue in front of the New York-New York Ho te l & Casino in Las Vegas, Nevada, against the U nited States, acting thro u gh the U nited States Postal Service ( “Postal S ervice,” or “USPS”). A two week trial was held in Septem b er 2017. Post-tria l b r i e fing is now c om

plete, and post-trial argum ent was held on May 1
, 2018. Because

we find that Mr. Davidson’s work was original and because the Postal Service’s use of it was not perm itted by statute, h e is entitled to com pensation in the am ount of $3,554,946.95, plus interest.BACKGROUND

Plaintiff fabricated a replica of the Statue o f Liberty on the grounds of the New York-New York Hotel & Casino in Las Vegas in 1996. He applied for and obtained a copyright for the replica in 2 013, too late for the statutory
presum ption o f v a l idity. It is also undisputed that the Postal Service used a photograph of tha t w o rk o n a stam p released in Decem

ber 2010 without
perm ission or attribution (“Lady Liberty stam p”). Plaintiff n o w s eeks

com pensation for that use under 28 U.S.C. § 1498(b) (2012).

Defendant answers that plaintiff’s work is too sim i lar to the original in New York Harbor and that the governm ent’s use c opied nothing o r iginal to plaintiff. Defendant also p resents the defense of fair us e u n d e r 17 U.S.C. § 107 (2 01 2 ). We rejected on s umm ary judgm ent a d efense under section 120(a), which exem

pts pictorial representat i o n s o f architectural works. Davidson v. United States
, No. 13-942C, 2017 WL 3033774 (Fed. Cl. July 18, 2017). The q

uestions for trial were thus whether the Las Vegas Lady Liberty is sufficiently original t o b e afforded copyright protection, whether the
governm e nt’s use was infringing, and, if so, whether it was otherwise excused

as f air use un der 17 U.S.C. § 107. The final question, if there was originality, infringem ent, and no f

air use, i s the m e asure o f com p ensation owed plaintiff.

Trial told the story of how Mr. D a v i d son was c ontracted to create the replica and then his actual process of creating the statue that sits o n the corner of Las Vegas and Tropicana Boulevards in Las Vegas, Nevada. The narrative then shifted to the P ostal Service’s selection and use of that im age for its new 2011 “workhorse” Forever Stam p, followed by the events that happened after the use of Davidson’s statue was discovered in 2011. The third act consisted of the presentations of experts who offered opinions on the m erits of the s tam p

am ong collectors and, m ost centrally, what the governm ent would have paid for such a use of plaintiff’s work had the parties negotiated beforehand at

arm ’s length under n orm al m arket conditions. We received testim ony from the following witnesses:

1. P laintiff Robert Davidson prim arily testified about his background in working w ith large-scale plaster work and sculpting, including his actual

m eans and m ethod when sculpting the Las Vegas Lady Liberty at issue.

2. Roy Betts is a U SPS senior p ublic r elations representative. He testified regarding his public statem ents after the identity of the Lady Liberty

2im a ge was p u b l i c a l l y d i s c o v e r e d
, an d o th e r i n t e r n a l c o m m unications regarding that issue.

3. Shawn Q u i nn is the USPS program m anager for technology acquisition. He testified regarding his experience at the Postal Service
, t h e proce ss o f m anufacturing the s tam ps at issue, USPS’s decision to continue using the Lady Liberty stam p after the identity of the sculpture was d iscovered, and other background inform ation.

4. Joe Stratton is the Postal Service’s m anager of technical anal ys is, accounting, a n d f

inance. He testified regarding his p ostal experience as it relates to the sale of s tam

ps, USPS accounting procedures as they relate to the

s a l e of stam

ps, and any profits derived therefrom

. He also testified m or e specifically about the sale of the stam ps at issue in this case and how they were accounted for.

5. Terry McCaffrey was the form er m anager of stam p developm e n t at USPS. H is testim ony was heard v ia taped video deposit ion. He testified

ab o u t the P ostal Service’s process in s electing the i m a ge of M r. Davids o n ’ s work as w ell as the approval and finalization o f that im age. He was also asked why a flag-bearing stam

p was m arried to the Lady Liberty stam p, about s tam

p

c l assifications, and to p r ovide other background inform ation about relevan t Postal Service processes and contractors.

6. William Gicker is the Postal Service’s curre nt m a n a ger of s tam p develo p m e nt and was, at the tim e of the events discussed during trial, the “creative director for stam ps.” Tr. 812. He testified regarding the selection of the im age of Mr. Davidson’s statue, the process in finalizing that selection and placing it on the stam

p, and the expected sales of such a stam p. He was also asked about USPS policies and procedures regarding the intellectual property of t h e i m ag e s that the Postal Service uses on i ts stam ps and any resulting licenses.

7. Am ity Kirby is the U SPS senior licensing specialist

. She testified regarding her experience licensing out stam p im ages for third party use.

8. Jim Timm i ns is a business valuation expert with particular expertise in the valuation o f i ntellectual property. He t estified as plaintiff’s e xpert on the proper m easure of dam ages, offering his prior experience in valuing the licensing of intellectual property and his v a l u a t i on of a hypothetical license between plaintiff and USPS.

39. B ruce Isaacson is an expert in m arket research and public surveys.

He inform ed the court of the results of a 2016 survey that he c onducted r elated to public custom er behavior in retaining, or not, the Lady Liberty stam p.

10. David Keller is the supervisory p ark ranger for the National Park Service at the National Mall in Washington, DC, and was a p ark r anger at the Statue of Liberty from 2004 t o 2 011. He was offered as a re c o rds custodian for photographs o f the New York statue. Those photographs ultim ately were not adm itted into evidence.

11. Daniel Piazza is an assistant c urator of philately at the Sm ithsonian National Postal Museum

. He is an expert i n stam p c ollecting and the use and history o f s t a m

ps. He testified about stam p collecting generally and his opinion r egarding the popularity of the Lady Liberty stam p am ong collectors.

12. Christopher Bokhart i s an independent financial expert in accounting and dam a g e s relating to intellectual property. He shared his opinions regarding the v a lue of a hypothetical license between plaintiff and USPS, had one been agreed to before the events in question.

13. Sarah Handwerger is genera l c o u n s e l to RightsAssist, L LC, a contractor for the Postal Service. He r testim ony was accepted into evidence by way of a greed-upon designations and c o unter-designations o f deposition

e x c e r pts. S he testified regarding the selection of the i m a ge on the La dy Liberty s tam

p and her and RightsAssist’s role in that process. That testim o ny is in evidence as Joint Exhibit 12.

14. Sidney Brown is the Executive Director of PhotoAssist, a Postal Service contractor. She testified regarding her efforts for USPS in obtaining

r i g hts t o im ages that it uses on stam ps. Her testim ony w as presented i n t h e form of designated deposition transcript excerpts, which are in evidence as Joint Exhibit 13.

I. Mr. Davidson And The Las Vegas Lady Liberty

Mr. Davidson began working with plaster in the earl y 1970s, i nitially in building construction, prim arily on the outside of buildings being built in the Las Vegas area, where he h a s l i v e d h is entire life. He started at a com pany called Valley Plastering a s a water boy–hosing down stucco exteriors plastered the previous day. He worked h is w ay up the ranks over a 16 y ear period, reaching the rank of executive vice president b efore h e lef t the

4com pany in 1987. He then started his own plastering business in 1 988, called PlasterTech.

PlasterTech was at first prim arily subcontracted on c ustom residential jobs. As he gained s kill and reputation, plaintiff was tasked with interior plaster work as well. He recalled o ne hom e in which he finished 1 3 fireplaces, including one that had a l i o n’s head design. See PX 4 (picture of lion fireplace). 1 Thus began h is exp erience as a s culptor and designer of plaster work.

Plaintiff sold his business and e quipm ent to Ford Contracting in 1993 and began working directly for that com pany. Fo rd wa s a m

uch bigger contractor, working on large-scale comm ercial projects such as hotels. As his

career progressed, Mr. Davidson shifted focus to the custom d esign and sculpting of plaster p ieces. He explained that he used f o a m to c re ate the general contours of the finished pieces, which was e a sier to s hape and refine with a high degree of precision. Additional m aterials w ere placed on top of the foam , including the plaster or equivalent m aterial for the top finished layer.

One large project on which plaintiff worked at Ford Contracting was the Luxor Hotel in Las Vegas. Mr. D av idson d escribed his r ol e of using plaster and stucco, b o th o n the interior and exterior, as “them ing work.” I n that
case, it i nvo lv e d finishing the plaster and stucco surfaces t o m atch the Egyptian them e of the hotel. T r. 67. He and his crew finished m any of these walls to m im ic giant precut l i m e s t one blocks. I n doing so, he built wire
tem plates and cutters to m ake the lines uniform in appearance. Also part of the them e at the Luxor was a 110-foot-tall replica of the Sphinx in Egypt.

Mr. D avidson testified that Ford Contracting’s o riginal Sphinx sculpting subcontractor was unable to com plete the face of the s tatue, and so plaintiff volunteered to finish it. No finishing h ad been d one on the f ace when plaintiff took over that project; only the fram e s tood where the face would be. He d e sc r i b ed his f

inishing process. I t began with another firm m aking a

m aquette 2 based o n the face of the architect, Veldon Sim pson, who designed the Luxor Hotel. After establishing som e reference points on the fram e , Mr.

1 “PX” stan d s for plaintiff’s e xhibit; “DX” stands for defendant’s exhibit; and “JX” stands for joint exhibit.

2 A m aquette is a m

uch reduced scale m odel of the eventual statue.

5Davidson and his crew began adhering blocks of f oam , p r e c ut to r oughly

m atch the d im e nsions that w ere n eeded to form the f ace. From there, the foam blocks were filed, rasped, shaped, and sculpted a s b est Mr. Davidson could to

m atch the face of the Sim

pson m aquette. W hen he was s atisfied with one side of the f ace, he would t ake m e a s u r e m e nts to try to m atch the opposite side of the face a s closely as p o ssible. H e c h a n g e d the face som ewhat, however, to avoid an unnatural s ymm e try in the fa ce. After the form was correct, the plaster and o ther finish m aterials were l ayered on, and the statue was p ainted.

It took three m onths to finish the face of the Sphinx with the m ajority

o f t he w ork being done at night. During the project Davidson becam e acquainted with the Western Architecture firm and an individual nam e d Tracy Jones. Plaintiff testified that it was this relationship that led him to be selected

as the sculptor o f the Lady Liberty statue outside of the New Y ork-New York Hotel in Las Vegas. Mr. Jones connected plaintiff with a com pany known as Recreation Developm e nt Com pany (“RDC”), which had need of a sculptor as

a subcontractor to c reate the statue in front of the hotel and casino. After his

success with the Sphinx, Mr. Davidson w as e ager to take on the e ven la rger task of the Lady Liberty.

Plaintiff bi d $3 8 5,000 to do the finish work o n the Statue of Liberty replica. His was the winning bid. RDC w as respon s i b l e for building the
structure up until the point at which the foa m wo u ld b e applied by Mr. Davidson. Plaintiff testified that, per the contract, RDC was supposed t o have supplied a scale m odel f

or plaintiff to follow. No such m odel was provided to plaintiff, however. Instead he was provided only som e photographs o f the original, a 12-inch curio, and the architect’s outline of the general shape and form of the s tatue, which plaintiff u sed for rough d i m e nsioning. The Las Vegas s tatue w as intended to be approxim ately two-thirds of the size of the original Statue of Liberty.

Davidson took m any trips to his local l ibrary to view pictures of the New Y ork statue, but no picture he found provided “the three-dim ensional f eel of the s ta tu e.” Tr. 130. T he differences in s hadow and vantage point m eant that no one photograph was sufficient as a working guide. Plaintiff was thus left to construct his own m aquette as a g uide for the l a r ger s tatue, w hich he did. See PX 234 at 83-86, 7-50, 56-57 (pictures of the plaintiff sculpting the

m aquette). He d id so by m aking cross-sectional slices, stacking them up and gluing them together. T he m aquette was f inished with the s am e cem entitious acrylic-based coating as the final large statue. The m aquette was b uilt inside

a jig, which allowe d pl a i n tiff to transfer the dim ensions, scaled up, to the

6larger statue. Mr. Davidson also created a dim e nsioning graph to further aid

in getting the dim ensions right.

Plaintiff began the construction of the outside of the large statue before the m aquette was finished. Although the m aquette was his guide, it could not be perfectly replicated, nor did he try to copy it precisely. The process of form i ng the Lady Liberty was sim ilar to that u sed in building the f ace of the Sp h i n x

. L a r ge blocks of foam were cut to rough dim ension. Plaintiff then used finer t ools to sculpt the form a n d i m age he desired. The finish

m aterials–plaster m

ud and the acrylic-based coating–were a lso t o b e u sed to give shape to the statue. These could b e layered to supply extra depth or used
to fill in unwanted negative space. The very finest details were added by using hand rasps.

Plaintiff described the process of f inishing the 12-foot-high face i n this

m anner:

Then it com es to t h e p o in t w h ere I go in with those fine hand
rasps

. . . and start to rasp it down. That’s w hen the face starts to get som e life to it and it really starts to speak to y ou and kind of tells y ou which way it’s got to go. And it tells you if you do it
wrong. I t really does. You just start getting to t h a t p o i n t to where you are satisfied with the results and you just stop.

Tr. 160. H e w ent on to describe how the s t atue b egan to take life for him and to evoke an em otional response:

But then you get to this point, this is where you start giving the
eyes a little life, l i t t le subtle t ouches on the lips and every part of it.

. . . Like I said, this is the part o f the sculpture, r eally the only part of the sculpture, that . . . starts to speak to you.

Tr. 162.

He was asked what he had in m ind when creating the face:

Well, I f e l t s ince this was going to be for a new hotel in Las Vegas, I felt it just needed to be a little m ore a ppropriate for the hotel. I knew that the facade of the hotel w ould look sim ilar to the skyline of New York, b ut it wouldn ’ t duplicate i t. Everything is o ut of proportion.

. . . It was ju s t a feel. And I

7just thought that this needed a little m ore m odern, a little m ore contem porary face, definitely m ore fem inin e , j ust som e thing that I thought was m ore appropriate for Las Vegas.

Tr. 162-63. He further testified that he looked for guidance at a picture of his

m other-in-law every day and that her f ace was a large influence in the final form of his Lady Liberty’s visage. No direction was given to h im nor did
anyone sign off on his d esign decisions. He was given free r ein to sculpt the
statue so long as the them e of the New York City skyline was m aintained. His final product was, in his own words, “a little m ore m odern, a l i t t l e m o re fem inine.” Tr. 169

. H e t hought that the original statue’s face was “a little harsher. It wasn’t as welcom ing. It was a little m ore m asculine.” Tr. 175. He wanted an end r esult that was “softer” and “m ore contem pora ry

. ” Id. “It’s hard for m e to use adjectives. It’s one o f those things, you sculp t it and y ou do it until you think you got it right.” Id.

He was asked whether he m ade these changes to differentiate his work from the original or whether they were “just a byproduct of your design.” Tr. 174. H e replied that i t was a byproduct o f his d esign and that the s p ecific features—“m ore defined eyes and eyelids or a pronounced cupid’s bow shape of an upper lip”—were not specifically intended. 3 Tr. 173.

On October 4
, 1996, Mr. D avidson com p leted his work. He dedicated his achievem ent by placing a sm all plaque in m em ory of his m other-in-law on the crown of the s tatue. 4 Tr. 179; PX 233 at 296 (photograph of plaque). The parties stipulated that Mr. Davidson’s m aterial and labor c o s t s t o build the
statue totaled about $152,000, leaving him an approxim ate profit of $233,000 ($385,000 bid m inus the $152,000 in costs). The $ 3 85,000 that plaintiff

3 Those adjectival descriptions of the face of h i s statue were q uoted from plaintiff’s copyright application file (JX 7) and were not endorsed by him

on the stand. Defendant argues that these descriptions ar e not evidence because they constitute attorney advocac y

. I n a n y event, w e do not rely on those statem ents because plaintiff did not endorse them on the stand.

4 It reads: “In loving m em ory of Lucille S chwartz

. . . ‘This one is for
you, m om .’ Sculpting com pleted October 4, 1996, Robert Spencer Davidson.” Tr. 180.

8received for the project is com parable to other large projects that Mr. Davidson

com pleted subsequent to the Lady Liberty. 5

II. The Postal Service’s Use

The Postal Service introduced the first Forever Stam p in 2007, bearing the im a ge of the Liberty Bell in Philadelphia. A Forever S tam p is purchased
at the price of fir s t

- c lass postage at the tim e of purchase, but i ts v alue i n u se is always equal to the current price of one

- ou n ce first-class postage. Upon introduction, it quickly b ecam e the m ain “workhorse” stam p for USP S

. A workhorse stam

p i s one printed by USPS and used by the public prim arily to send first class m a il. It is a high volum e stam p with a high percentage being redeem ed for postage.

In 2008, the Postal Service began t o w ork on updating the im age of its Forever Stam

p. T erry McCaffrey, the m anager of stam p d e ve lopm e nt at the tim e, was i n charge of selecting the new i m a g e. Both he and W i lliam Gicker, M c C a ffrey’s eventual r eplacem ent, testified that the public w as tiring of the Liberty Bell im age. Tr. 735. McCaffrey w as l ooking for som ething “ different and unique.” Tr. 7 6 4. Because the new Forever Stam p was to b e a workhorse

s t am p, the Postal Service and the Citizens’ S tam p Advisory Comm i tt e e intended i t to be of a n ot he r patriotic icon. 6 Mr. McCaffrey testified that the

comm ittee l iked the idea of a U.S. flag stam p b ut that such an im age h ad been

u s e d s o m any tim es for workhorse stam ps that the Postal Service a n d

comm ittee did n ot want to issue th e f l a g s tam p by itself. U ltim ately a flag
stam p was issued contem

poraneously with the Lady Liberty stam p, and they were sold together.

5 Mr. Davidson testified that he also b uilt the Joan o f Arc at t h e Paris Hotel in Las V egas and a Mount R ushm ore-styled sculpture featuring Dudley Do-Right c haracters at Universal Studios in Orlando, Florida. He stated that he received about $350,000 gross for these works.

6 T he Citizens’ S tam

p Advisory Comm ittee is m ade up o f a m axim um of 12 non-USPS em

ployed individuals who serve at the Postm aster G eneral’s pleasure to assist in s ele ct ing im ages and ar twork for stam

ps. See Tr. 679. Hundreds of ideas f

or stam p subjects are also subm itted to the Postal Service by the general public. Mr. McCaffrey also testified that it i s an unwritten rule that there m

ust be a patriotic icon in circulation at all tim es. Tr. 676.

9Mr. McCaffrey be g an the search for a new im age by asking a

contractor, PhotoAssist, to give him access to several photo repositories to look for i m ages of the f

l ag and the Statue of Liberty. He testified that, at the tim e, the Postal Service had a l r e a dy used at least 20 different im ages of the Statue of Liberty on different stam ps in one form or another. He thus searched the sites h im s elf because h e was looking for s om ething “different and unique.” Tr. 764. Of all of those im a g es, only two o r three were isolated on the face, which is what he was drawn to for the focus of the stam p. Id. at 765.

McCaffrey i n i tially narrowed his selection to 2 4 im ages of the statue and the flag. These were then narrowed t o three im ages of e ach, one of which

was of plaintiff’s statue, a photograph o f the face taken by Raim und Linke. Mr. M cC a ffrey m ade these selections and did the subsequent culling by him self over the course o f a single afternoon. He then contacted Mike Owens
at P hotoAssist and asked him to obtain digital im age files that he could work with to m ake his final s election. The photograph of plaintiff’s sculpture cam e from Getty I m ages (“Getty”). Mr. McCaffrey did not realize that it was not of the New York statue. The other two p ictures, from other vendors, were of the original statue.

Mr. McCaffrey selected the p hotograph of plaintiff’s creation for u se

on the n e w s tam

p. I n June 2010, he purchased from Getty on behalf of the Postal Service a nonexclusive three-year l icense f or Mr. Linke’s p hotograph, which authorized USPS to print over one m i llion copies of the im age. P X 57 (Getty license agreem ent). U S P S p ai d Getty $1,500 for the license. 7 Mr. McCaffrey stated that he would not have selected the im age had h e known it

was not of the real Statue o f Liberty. Tr. 805. That testim ony was echoed by Sidney Brown, w hose deposition testim ony was adm itted in written form

. See JX 13 at 317-18.

7 M r. G icker, the current head of stam p d esign testified that the s tam p developm ent group h a s an annual budget of approxim ately $3.3 m illion, $400,000 o f w hich is designated for the purchase of art and im ages to be used

on stam ps. This b udget has rem ained largely static f or the past 10 years. Mr. Stratton testified regarding the overall financial picture o f the Postal Service, stating that costs have exceeded revenue e a c h year since 2006, m eaning that USPS operates at a loss. See T r. 647-48. Nevertheless, annual revenues have exceeded $60 billion since 2008. Pretrial Stips. of Fact ¶ 2. I f U SPS were a private firm , it would be a Fortune 500 com p any. Tr. 1003 (Gicker)

10After receiving th e r i g hts and the i m a ge, Mr. M cCaffrey sized and

cropped the picture t o m ake it appropriate for a first-class stam p. O ther than the addition of the typical Forever Stam p text superim

posed on the face of the
stam p , no f urther a lteration was m ade to the photograph. T he design had been generally approved for use on a workhorse stam p by the advisory comm i ttee and the Postm a ster General in 2008. T he c o mm ittee also approved the pairing of the Lady Liberty stam

p with the newly designed flag stam p on which Mr. McCaffrey had been working.

With the r ights to the i m age secured and finalized stam p designs approved, the Postal Service m ade the decision to i ssue the two new workhorse
stam p s on Dece m

b e r 1
, 2 010. According t o Mr. Gicker that schedule was accelerated from the n orm al practice. Tr. 828-29. USPS was anxious to m ove

on from the L iberty Bell stam p because the s e v e ral-year run of that s tam p

cr e a t e d accounting difficulties for the Postal S ervice. As the price of firstclass postage rose over tim e, it becam e m ore difficult for the Postal Service to account for the value of stam ps that were sold but unredeem e d

. A new issue allows the Postal Servic e t o m a rk all outstanding new stam ps at a m inim

um value on the new s tam

p issue date. 8 This internal pressure, in c onjunction with the external dem and for a new stam p d esign, drove the Postal Service to m ove quickly from the Liberty Bell stam p. In a ddition, the Postal S ervice hoped to put the new stam

ps in circulation in tim e for the h oliday m ailing season. The
two new stam

ps, Lady Liberty and the flag stam p , w e r e released for public sale

on or about Decem

ber 1, 2010, and went into full production as workhorse
stam p s. A p r e ss release was issued on that sam e day that attributed the photograph o f the s tatue to M r

. L in ke. PX 76. Plaintiff was given no attribution.

On March 18, 2011, USPS was m ad e a w are that the im a ge on the
stam p was that of plaintiff’s work when an i ndividual f rom a stock photography com

pany, Sunipix, e m ailed the Postm a ster General’s i nbox with that i nform ation. PX 37 at 3. T he P ostal Service and PhotoAssist quickly

8 As Mr. Stratton e xplained, a postage stam p is evidence of paym ent for future services to be r endered by USPS. Therefore U SPS cannot sim ply book

unr e d e e m e d s t am

ps a s, in essence, profit, w ithout accounting for the l i k e l i h o o d that s om e of those stam

p s will be called a n d t h e Postal Service required to provide service in exchange. See Tr. 634. As will be further e xplained, som e

am ount of stam

p s sold by USPS will ne v e r b e r edeem ed. These then can be accounted for as pure profit.

11confirm ed the facts and USPS began working internally o n what its response

would be. Layne Owens, the m anager of stam p developm ent, noted i n an

em ail to Stephen Kearney of USPS that, although PhotoAs s i s t h ad failed to properly identify the subject of the photograph, after looking at it, “it’s quite apparent that it had to be” of the Las Vegas r eplica. PX 85. In response t o an i n qu iry from Mr. Kearney, Mr. Owens represented o n M arch 21, 2011, t h a t , had stam p developm e nt “ known the origin of the photograph, we would have attributed the photograph a s having been t aken of the s t atue in Las Vegas; however, we would still have us e d t h i s photo.” PX 37 at 2. He went o n to explain that the Statue of Liberty had a p peared on 23 stam

ps prior t o this one and that Mr. M cCaffrey selected the im age he did becaus e i t “ was very different from anything we’ve done before. That was its a p peal.

. . . There are only s o m any ways t o continue t o reinterpret an i conic im age.” I d. Mr. Kearney then prom ised to pass along this i n f o rm a ti o n to Roy Betts, a USPS spokesperson, who had also received notice of the error fromSunipix. Id.

Mr. Owens confirm ed that inform ation to Roy Betts later that sam e day in a separate em ail: US P S “ s till love[ s ] the stam p design and would have selected this photograph anyway. We were looking for a different treatm ent of this icon that has been on 23 different stam ps.” PX 2 44 at 1. M r

. Owens further represe n t ed that corrections t o future m aterials regarding the s tam p would be m ade but that he did not thin k the P ostal Service needed to issue a stand-alone correction. That was the public position Mr. Betts dissem inated when a s k e d by m edia and stam p collecting groups. H e repeated the representation of Mr. Owens tha t the P ostal Service loved the im age, that it

was looking for som ething different, and that it would have s elected the im age

even if the facts had been known in 2 010. See Tr. 420-21 (Betts); see also PX 109; PX 110. He m ade the sam e statem ent s t o other USPS personnel. PX 108; PX 121

In an internal m em o dated March 23, 2011, M r

. K e arney detailed the

err o r , s t a ting that three b illion of the paired stam ps had been printed t o date and that the l egal departm e nt had been tasked with determ ining “what licenses

m ust be e xecuted.” P X 95. The m em o also refl e c t e d t h at USPS was

exam ining what the contractual relationship between the sculptor of the Las Vegas statue and the New York-New York Hotel w as, c o n c l u d i n g that “it [ w as] too e arly t o determ i n e w hether any l iability e xists o r how m uch

com pensation m ay b e r equired.” Id. Mr. Owens inform ed the C itizens’ Stam p Advisory Comm ittee on April 14, 2011, that the stam p would continue to be used until supplies were exhausted and that the “im age is a bold graphic that

12works well at s t am p si z e a n d i s imm ediately r ecognizable as Lady Liberty.” PX 104. He reported that the stam p was “very popular.” Id.

Several m onths l ater, i n r esponse to an inquiry by a m e m b e r of Congress, the P ostal Service s tated that i t should have correctly attributed the im a ge to Mr. Davidson and that new procedures had been put in place to avoid such errors in the future. P X 151 at 2 (June 8, 2011 letter from the Dep u ty Postm ast G e ne ral t o C ongressm an Elliot Engel). The P ostal Service’s letter also i ndicates that $8 m illion had been invested in p r i n ting these stam ps and that w ithdrawing and reissuing a n ew one would have b een cos t prohibitive. Id.

USPS continued to ship and sell the Lady Liberty st a m p. A s of June 2011, USPS had printed 10.5 billion of the s t am ps, 4.4 billion of which were already i n the f

ield f or sale or had been sold. It was anticipated that the

rem aining stam

ps would ship later that year. See PX 148 ( em ail f rom Charles Delaney to Roy Betts). M r. Quinn testifi e d th at, a s o f Septem ber 2011, an additional 1.12 5 b i l l i o n stam ps were issued. Tr. 539-40. A s Mr. Q uinn

e xplained, given the production already com pleted, it would ha v e b e e n im p ossible for USPS t o have produced another one billion stam p s to r eplace those already printed and ready for distribution. Tr. 529-32.

In January 20 1 4, the Lady Liberty stam p was retired along w ith the paired flag stam

p. Ultim ately, 4.9 billion of the Lady L iberty stam ps were sold, am ounting to just over $2.1 billion in sales for that stam p alone. Equal figures were sold and collected for the paired or “convoyed” flag stam p. 9

USPS em ploys a firm called Synovate to track and calculate h ow m any stam p s will not be u sed to send m ail. This p er c en ta ge is known as retention

or breakage. Tr. 546-51 (Quinn). The P ostal S e rv i c e t r acks these num bers because i t ac c ounts for stam ps that w ill never be redeem ed differently f rom those likely t o be used as postage. Stam ps retained by collectors o r o therwise

never redeem ed represent v irtually p ure profit f or USPS. Tr. 551. The higher the retention r at e , the better for USPS, and Mr. Quinn stated that exploiting breakage and retention was always of interest t o USPS m anagem ent. Tr. 551, 611.

9 It is n ot clear what happened t o the rem aining 4.5 billion stam ps that were printed but not sold or distributed for retail sale.

13To that e n d
, S yn o v at e p r o v i d e d q u ar terly surveys on retention of stam ps to the Stam

p Services Departm ent at USPS, which tracks such inform ation to glean which s t a m

ps consum ers were attracted to. Tr. 610-11. Mr. Q uinn created a spreadsheet i n 2011 that reflected a retention rate for the Lady Liberty and flag stam

p s at near l y 4.69% for that year, which am ounted to nearl y $7 5 m i llion in value to USPS. 1 0 Tr. 577-78, 5 82; P X 154; P X 154A. Mr. Quinn further explained, that although that r etention r ate is not high, those figures represented a high degree of profitability since the volum e of workhorse stam

ps is v ery high. 11 T h e f inal official U SPS e stim ate for retention of the two stam

ps was 3.24%. T r

. 632-33 (Stratton). That f igure was adopted in th e P o st a l Service’s financial statem ents. Tr. 633. The Postal Service’s final estim ate for profitability f rom the L a dy Liberty stam p is $70,969

, 4 1 9 w it h an equal num ber for the flag stam

p. See PX 2 12 (interrogatory answers).

III. Legal History

After the successful and profitable com pletion of the Las Vegas Lady Liberty statue, Mr. D avidson took a photograp h o f the f ace of the statue and used it as a logo for his PlasterTech bus i n e ss an d for a new concrete cutting business that he started. Tr. 189-90; PX 233 at 313 (photograph). He testified that b eginning around 1 997 or 1998 he used the im age on letterhead, business cards, equipm ent, and on the side of trucks. Tr. 189-90.

Plaintiff reports discovering the use of his statue by the Postal Service

one day after h is wife returned from a trip to a local p os t o ffice. She had purchased a book of Forever Stam ps an d e xc i t e dly notified her husband that

“ o u r statue is on the stam p.” 1 2 Tr. 1 92. Som e tim e thereafter, p l a i n t i f f

1 0 Other lower rates were a lso off e r e d at trial by defendant’s e xpert Bruce Isaacson based o n his own su rv e y work conducted for trial. We will discuss those num

bers in greater detail below.

1 1 H e also stated that, by contrast, a comm em orative s t a m p , which is usually of g reater interest to collectors, m ight h ave a retention rate as high as 20 percent. The gross num bers of total s ales of comm em orative stam ps w ould be m uch lower, however.

1 2 It is not clear from his testim ony when precisely this occurred, but it

m ust h ave been s o m etim e prior to January 2012 given that an attorney f iled a (continued...)

14contacted an at t orney regarding copyrighting h is work. She agreed t o file a

copyright application o n his behalf and did so i n January 2012. See JX 1 (copyrigh t ap plication). Mr. Davidson also contacted a litigation f irm based in Minneapolis, Minnesota, concerning his rights in his work. According to plaintiff, after several ye a rs working with Mr. Davidson, that f irm withdrew from representation b ased on an asserted c onflict of interest. See Tr. 194. Plaintiff then f

ou n d local counsel who perform e d som e additional work regarding the copyright registration. Mr. Dav i d s o n ’ s c o p yright eventually was issued w ith an effective dat e o f Novem ber 15, 2 013. See JX 2 (Copyright Registration No. VA 1-882-070).

Mr. Davidson has n ever s ought to license o r otherwise m o netize his copyright in the Las Vegas statue nor has he attem pted to enforce his copyright against any party other than the United States. He was asked why he sought

com pensation from

the governm ent in this lawsuit:

I don’t know how they would acknowledge m e. I don’t b elieve after the fact that they would put my nam e on the stam p. If my

nam e was on the s tam

p, then e v erybody would imm ediately recognize that i t was m e. And i t w as just a very tough, very dem a n d i ng project. And I’m very proud of h er, and it’s just

som ething I didn’t think lightly of.

Tr. 200. He was also asked what he w ould have done had the Postal Service approached him prior to producing the stam p and asked perm i ssion to use an im a ge. He responded that he would have s ought a dvice on what the v alue of an im age of his statue would have been. Tr. 200.

Plaintiff filed suit here i n Novem ber 2013. After three y ears of discovery, the parties f

iled cross-m otions for summ ary judgm e nt i n March and April 2017. Plaintiff sought a ruling that his work w as original and protected and that the governm ent was l iab l e f o r infringing his copyright; defendant asserted the defenses of non-originality, fair use, and that plaintiff’s statue was not eligible for copyright protection b ecause it was an architectural work for which pictorial representations are exem pted from copyright protection. We denied both part i e s’ m otions by an order d ated July 17, 2 018, in which we rejected defendant’s argum e n t r egarding the pictorial representation of

1 2 (...continued) copyright application on his behalf at that tim e.

15architectural works exception. We set the m at t e r f o r trial on all unresolved issues.

DISCUSSION

There is no dispute that defendant used an im a ge o f plaintiff’s statue without perm i ssion. Although the Postal Service paid for a license from Getty Im ages for the photograph, Getty had no rights t o the underlying subject of the photograph. 2 8 U.S.C. § 14 9 8 ( b ) w a ives s o vereign imm unity for claim s of copyright i nfringem ent a gainst the f e deral governm e n t “for the recovery of his reasonable and entire com pensation as dam ages for such infringem ent.” I d.

The C op yright Act specifically protects “ pictorial, graphic, and sculptural w orks.” 17 U.S

. C

. § 1 02(a)(5) (2012). These works m ust be original. Id. § 102(b). We previously held that Mr. Davidson’s statue was a sculpture rather t h a n a building but did not reach the question of originality. Davidson v

. United States
, No. 13-942C, 2017 WL 3033774, *3 (Fed. Cl. July 18, 2017). T he Copyright Act protects the “ the form but not [ the] m echanical

or utilitarian aspects” of “ artistic craf t s m a n s h ip .” I

d. § 101. Plaintiff m

ust prove a valid copyright, that it was infringed, and his dam ages.

Defendant has asserted that the statue is a r eplica and contains no truly original work, m eaning that plaintiff’s c opyright is invalid and the governm ent

o w e s n o t h ing for its use of an im age of plaintiff’s statue. A s a rela t e d
argum ent, d efendant c ontends that it copied no original e lem ents. Defendant also p l e a d s t h e s tatutory defense of fair u se under 17 U.S.C. § 107, which

excuses certain uses o f c opyrighted work. Defendant b ears the burden of proof on the statutory defense.

We begin with the question of whether Mr. Davidson’s statue is entitled
to copyright protection. If it is, we m ust d ecide whether defendant’s use was infringing and, if so, excused as fair under the statue. If not, we turn to what dam ages are owed. We answer the first three questions in favor o f pl a intiff and thus m

ust also consider dam ages. We take each issue in turn.

I. Infringem ent

The infringem e nt issue presents the court with two q uestions: 1) is Mr. Davidson’s copyright valid and, if so, 2) was it infringed? The parties disagree as to the correct answer to each.

16There is no question that plaintiff was tasked with creating a r eplica of

the Statue of Liberty in N ew York Harbor, but plaintiff t estified t h a t h e was given artistic license and that h e b oth intended and achieved a m ore contem porary and f

em inine face in th e e n d

. Defendant argues that there is insufficient evidence to es t ab l i s h t h at he a c com plished his aim and that the idea of a softer and fem inine appearance is n ot subject to c opyright protection. Defendant also avers that it did not infringe because nothing it copied was original. It is the face, which plaintiff points to as the discrim inator between the two statues, that was copied by defendant.

A. Mr. Davidson’s Statue Is Original

Plaintiff’s copyright registration was not w ithin five years of the p ublic availability of h is w ork, an d t h u s his work is not entitled to a statutory presum ption of eligibility. See 17 U.S.C. § 410(c) (2012). He therefore bears the burden of proving that his copyright is v alid, which is to say that he m ust prove his work to b e original. S ee F eist Publ’ns, I

nc. v. R ural Tel. Serv. Co.
,, 499 U.S. 340, 3 4 5 (1991) (“The sine qua non of co p y r ig h t is originality.”). This requires only a showing of “som e m inim al degree of c r eativity” and that it w as his own inde p e n dent creation of those o riginal elem ents. Id. The Suprem e C ourt described this level of r equired creativity as “extrem ely low” and stated that “even a slight am ount will suffice.” I d. The focus is o n the expression of an o riginal idea and not the i dea itself. O racle Am

. , I n c

. v. Google Inc

. , 7 5 0 F.3d 1339, 1354 (Fed. Cir. 2014). It is thus the case that a work of art n e ed n ot be wholly original to be copyrightable; i t n eed only be a

new and original e xpression of s om e previous work o r idea. See Feist
, 4 99 U.S. at 345 (stating that “originality does not signify novelty” in discussing the protection afforded to c om pilations). Derivative works and com pilations are

s pecifically a fforded protection by the act. 17 U.S.C. § 1 03(a) (2012)

. T h e protection applies, however, “only to m aterial contributed by the author of such w o rk
, as distinguished from the preexisting m aterial em p loyed in the work.” Id. § 103(b). As the Seventh Circuit stated, p laintiff m u st show “nontrivial expressive variation” between the o riginal and the d e r i v e d work and that any such differences “distinguish f rom the underlying work in som e

m eaningful w ay.” Shrock v. Learning Curve I nt’l, Inc.
, 586 F.3d 5 13, 521 (7th Cir. 2 009). This is not m eant to be a different or h igher s t a n d ard; the court need only fi n d the sam e level of “originality

. . . in a derivative work

. . . as

17that required for copyright in any other w o rk. 1 3 I d. at 5 20. Here, we find that burden m et.

Mr. Davidson’s testim ony establishes that his intent w as not t o m erely
copy the S tatue of Liberty. Although he was hired to clearly invoke the iconic New York im age, it was his testim ony that he i ntended to give the face a “fresh” look, updat ing and m aking her appearance m o re fem inine. He

c o n t r asted his result with the “harsher” and “m ore m asculine” look of t h e original. He also testified that he envisioned his m o ther-in-law as i nspiration for the new look and viewed her picture every night d uring the construction of the face o f the statue. Though he could not give detail as to specific e lem ents of the f ace, s u ch as the lips or eyes, that he set out to change, he believed that he achieved a “softer” and m ore fem inine final appearance.

Defendant m akes m

uch of the lack of contem poraneous statem ents

m ade by Mr. Davidson to m edia or e l sew h er e o f this currently-expressed intent. 1 4 Defendant a lso argues that plaintiff’s s t atem ents about the f em inine and contem

po r ary appearance that h e sought to evoke are m ere ideas unprotected by the Copyright Act. In the absence of definable features alien

1 3 The Ninth Circuit has cautioned, however, that when the derivative work is “instantly i d e n t ifiable” as em bodying the “underlying copyrighted [ m aterial] in “‘y et another form
, ” the conclusion that nontrivial differences exist c o u l d n ot be reached by a jury. Entm’t Research G rp., Inc. v. Genesis Creative Grp., Inc.
, 1 22 F .3d 1211, 1223 (9th C ir. 1997) (quoting Durham Indus., Inc. v. T

omy Corp.
, 630 F.2d 905, 909 ( 2d C ir. 1980)). In that case, the

c l a i m e d c o p yr i g h t w a s i n i n f l at able costum e s o f s e p ar at e l y c o p yr i g h t e d c ar t o o n characters. The circuit affirm e d the d i s t ri c t court’s finding that the only differences between the two w e r e a t tributable to the form as an inflatable

cos tu m e ra t h er than som e new original expression of c reativity. Id. at 1222. It was thus only utilitarian aspects of rendering a two-dim ensional im age into

a three dim ension inflatable plastic costum e t h at c o nstituted any difference. Id. at 1223. U t i l i t a r i a n aspects are not copyrightable. Id. ; 17 U.S.C. § 101.

1 4 D efendant a lso attem

pted to introduce at trial an article f rom a trade publication, Walls & C eilings, in whic h ou t of court statem e nts from Mr. Davidson were referenced. Plaintiff’s hearsay objection was sustained and the article was not adm itted. We note now, even if i t had been adm itted, it w ould not change our analysis.

18to the original, defendant finds the necessary m odicum o f originality m issing.

Defe n da nt also m akes m uch o f the fact that p laintiff could not identify the specific features that he intended to c hange in order t o render his statue’s face

m ore fem inine and softer. We f ind no such requirem ent in the law, however. The finder of f

act need only be able to observe a nontrivial e x p r e s s i on of artistic creativity.

We are satisfied that plaintiff succeeded in m ak ing the statue his o wn creation, particularly the face. A com pari s on of the two faces unm istakably shows that they are d ifferent. Although the record d oes n ot c o n t a i n m any pictures of the original, the m agazine cover provided by plaintiff which bears

a picture o f the original Statue of L iberty’s face is sufficient. The differences

are plainly visually observable, can be articulated, and are n ot m erely “ ideas.” Compare PX 2 33-301 with PX 231-17. We agree that Mr. Davidson’s statue evokes a s o fter and m ore fem i nine appeal. The eyes are d ifferent, the jaw l ine is less m assi v e a nd t h e whole face is m ore rounded. It was these characteristics that drew Mr. M cCaffrey to the im age. See Eden Toys, Inc. v. Florelee Undergarment Co.
, 697 F .2d 27, 3 4-35 (2d Cir. 1982) (finding that

m inor changes i n the illustration of Paddington Bear, described as g iving the bear a “different, c leaner look,” were nontrivial). We note as well that L ayne Owens, the m anager of s tam p developm ent, was of t h e view that “it’s quite
appa r ent that it had to be” of the Las Vegas replica. PX 85. His statem ent that “[ w] e were looking for a different treatm ent of this icon that has been on 23 different stam

p s,” P X 2 4 4 at 1, along with Mr. Betts’ sim ilar comm ents, indicate that there are evident differences fromthe original.

D e fe n d a nt argues that such apparent differences are b ut the result of

cam era angle, lighting, shadowing, and weathering and should be ignored for the purpose s o f t h e originality inquiry. We disagree. To the court, the differences in the faces are m eaningful and not trivial. Nor do w e find any secondary evidence to support d e f e n dant’s assertion. In contrast, the record is replete with s t atem e nts from the a c tors involved reaching the opposite conclusion: the two faces are distinct and these new facial f eatur es were appealing enough t o have induced Mr. McCaffrey to select the i m a ge of plaintiff’s s tatue and for the Po s t a l S ervice to have publically affirm ed its decision to feature M r. Davidson’s statue as a new take on a classic icon. We view such s t atem e nts and t estim ony as secondary evidence of what o ur ow n

com pari s o n r e veals. Mr. Davidson’s statue, although invoking an existing world-fam ous statue, is an o r i g i n a l, creative work, and a s such is the subject of a valid copyright registration.

19B. The Postal Service Copied Original Elem ents

Having determ ined that the face of p laintiff’s s c u l p ture is d istinct,

o r i ginal, and protected, we find that defendant’s u se was i nfringing

. A
necessary elem ent to any infringem ent claim is not j ust that th e work as a whole is original but also that the part copied by the defendant actually be original. H

arper & Row v. Na t i o n Enterprises
, 471 U.S. 539, 548 (1985). Defendant ar gues that infringem ent cannot be assum e d sim ply because the two works are found t o be different. The governm ent p oints to the f act that the Postal Service d id not notice the difference b etween the two faces itself until notified m onths after producing m any m illions of stam p s. The conclusion for defendant is that nothing original m ust have been copied. This is nonsense.

It is the face of the L as Vegas statue that is d isplayed on the o ffending

s t am p

. I t is the face that d istinguishes the two statues. All o f the testim o n y revolves around the two f aces and whether the Las Vegas lady’s face is different. Having found that it is, the conclusion that defendant’s u se infringed is inescapable. Mr. M c C a f frey d id no editing to the im age other than sizing it for display on a s tam

p and adding the n orm al stam p copy. We find that the Postal Service’s use of the im age copied all of the original elem ents described above. We n e xt turn to the q uestion of whether defendant’s infringing use was otherwise allowed as fair use under the statue.

II. Fair Use

Som e copying of protected m aterial is characterized by the Copyright A c t a s b ei ng fair use and thus excepted from the definition of i nfringem ent. This defense is laid out in 17 U.S.C. § 107 (2012):

Notwithstanding the provisions of sections 10 6 and 106A, the fair use o f a c opyrighted work

. . . is not an i n f r i n g em ent of copyright. In determ i n i ng whether the use m ade of a work in
any p articular case is a fair use the factors to be considered shall include—(1) the purpose and c haracter o f the use, i ncluding

w h e ther such use i s of a comm ercial nature or is for nonprofi t educational p urposes; (2) the nature of the copyrighted work; (3) the am ount and substantiality of the p o rt i o n used in relation to the copyrighted work as a whole; and (4) the effect of the u se upon the potential m arket for or value of the copyrighted work.

20There is no generally applicable definition of fair use, and therefore each c ase

m ust be decided on its own facts and unique ci r cu m stances. Campbell v. Acuff-Rose Music, Inc.
, 510 U.S. 569, 577-78 (19 94 )

. The courts have generally considered each of the four elem ents listed i n the statue as a pplicable in any particular case, and our review of the case law reveals that the law h as not strayed far from those four considerations. In any event, the parties have lim ited them selves to arguing the fou r enum e rated factors, and we are not aware of any other unique considerations to apply here.

A. Purpose and Character of the Use

The purpose and character of the u se is often the d ispositive factor in the fair use analysis. This factor em braces both how the work is used and to what end, i.e., w hether the work is som ehow transform ed by the new use and what is t h e user of the work doing with i t. If the work is transform ed by the

new use, the law w ill generally allow it under the fair use doctrine. See Campbell
, 510 U .S. at 579 (“the goal of copyright, to prom ote science and the arts, is generally f

urt hered by the creation of transform ative works”). The Court posed the q

u estion as “whether the new work m erely supersede[ s] the objects o f the original creation or instead adds som ething new, with a f urther
purpose o r different character, altering first w ith new e xpression, m eaning, or

m essage.” Id. Further, the statute requires courts to consider whether the end

use of the n ew work is “of a co mm ercial nature or is f or nonprofit or educational purposes.” 17 U.S.C. § 107. The f orm er suggesting that the u se is not protected by the statute.

The governm e nt does not argue that n ature of its use was transform ative. Instead it argues that the nature and character of i ts u se f avors

a finding of fair use “because, as a workhorse s tam p, the vast m ajority of the

revenues t o the Postal Service represent p aym ent of p ostage for the universal required service of m ail” and “not a s paym e n t for the art shown on the s tam p.” Def.’s Post-Trial Br. 23.

Plaintiff disagrees, pointing to the fact that USPS sold over $4 billion worth of the stam

ps bearing plaintiff’s work. Even using defendant’s expert’s

n u m b e r s , the P ostal Service m ade $140 m illion in pure p rofit from breakage f r om the Lady Liberty stam p and the flag stam

p com bined sales. This, i n plaintiff’s view, is a pur e ly c o mm e rcial use not i ntended to be protected by section 107’s fair use defense.

21We a gree. A s the Federal Circuit found in the Gaylord decision, where

the Postal Service had sold $17 m illion in stam ps, $5.4 m illion of which were retained by collectors and represented p ure profit t o the g overnm ent, “the
stam p clearly has a comm ercial purpose.” Gaylord v. United States
, 595 F .3d 1364, 1374 (Fed. Cir. 2010). The fact that a sm aller percentage of the overall sales total represented b reakage or r et a i n a ge does not m ake the u se

noncomm ercial. Despite the fact that it regularly operates at a l oss, the Postal Service is in business and seeks to operate at a profit, o r at least seeks to fully fund its operations through its own revenues received from sales. It offers the service of delivering m ail, which is, in a broad sense, i n com p et i t io n with private vendors offering s i m ilar services. The testim ony of the Postal S ervice’s own em

ployees m ade clear that the attractiveness of the im age played a key r ole i n s electing it in hopes o f attracting both overall higher sales and higher retention rates. T h e first factor strongly favors a finding of infringem ent.

B. Nature of the Copyrighted Work

The nature of the copyrighted work factor considers, to borrow a phrase from Justice Story, “the value of the m aterials used” to decide whether copyright prote c t i o n s hould be extended despite a claim o f fair use. Folsom

v. Marsh
, 9 F. Cas. 342, 348 (Cir. Court, D. M ass. 1841) (cited by the S uprem e court when considering this factor in Campbell
, 510 U.S. at 586 )

. Som e copyri g h t e d works w ill receive less p rotection in the face of a fair use claim than others, such a s when a work is derivative, as it is h ere. See Campbell
, 5 10 U.S. at 586 (“som e works a re closer to the core of intended copyright protection than others, with the consequence that fair use is m ore difficult to establish when the form er works are copied”). The c ourts consider questions such as “‘(1) whether the work is factual o r inform ational, and (2) whether the work is published or unpublished, with the scope of f air use involving unpublished works being considerably narrower.’” Blanch v. Koons
, 467 F .3d 244, 256 (2d Cir. 2006) (quoting Howard B

. Abram s, The Law of Copyright
, § 1 5:52 ( 2006)). I f a wo rk is expressive or creative, a use by another is l ess likely to be considered fair. See G aylord
, 595 F .3d at 1 374 (citing Blanch
, 4 67 F.3d at 257).

Here, defendant claim s that the d erivative n a tur e o f Mr. Davidson’s replica s t atue m e ans that i t is afforded o nly a “thin copyright.” Def.’s PostTrial Br. 23. Defendant points to the fact that the Postal Service was itself confused and did not recognize that p laintiff’s work was not the original New York statue and that the public did not imm ediately recognize the difference.

22The suggestion that the im a ge added nothing to the postage aspect of the s tam p is not credible, however. I f that were the case the P ostal Service would sim ply issue characterless stam

p s with nothing but the am o unt of postage. Nor w ould the Postal Servi ce invest so m uch effort in the i m a g es it utilizes. More particularly, in this case, it is clear that the creative elem ents o f plaintiff’s work are precisely what attracted the Postal Service’s interest.

Plaintiff counters that the c reative elem ents em ployed by Davidson that

we cited above in finding originality are precisely what m itigate against fair

use here. Plaintiff al s o suggests that the fact that statue has been a publicly displayed m onum ent since 1996, i.e., h as been widely published, cuts against fair use.

This factor favors neither party. A lthough we did find that the o riginal elem e nts of plaintiff’s statue w ere creative and expressive, its intended u se as

a replica m i tigates in favor of defendant. F urther, plaintiff’s argum ent that his work had been p u

blically displayed f

or over 10 years before the use i s not w ell founded. When a w ork i s p ubl i s h e d, a subsequent use is m ore likely t o be considered fair use. S

ee Blanch
, 467 F.3d at 256. In sum , we f ind this factor favors neither party. 1 5

C. The Portion Used

Also relevant to th i s inquiry is the s ubstantiality and portion o f the original work used. This is self explanatory. The m o re of the o r i g i n a l wo rk copied, the l ess likely the new use will be considered fair, and, if the p ortion copied is o f the critical core of expressive m aterial
, t h at use will n ot be fair. See, e.g. , Harper & Row Publishers, Inc. v

. Nation Enters
, 471 U.S. 539, 564- 66 (1985) (affirm ing that copying 300 words from President Ford’s m em o irs was infringing because those words went to “the heart of the book”).

H e re w e f

ind that this factor f

avors plaintiff. T he original an d expressive portion of p l aintiff’s statue was the face, which w a s a lm ost entirely captured (at least as from the vantage o f the p hotograph) by the stam p. This factor m itigates against the governm ent’s asserted defense.

1 5 In the Gaylord case, the F ederal Circuit affirm e d this court’s holding that the use of an im age of the Korean War Mem o rial w as not fair u se. Both
courts found for plaintiff on the second f actor. The case is distinguishable, however, because Mr. Gaylord’s m onum e n t was not a derivative work.

23D. The Effect of the Use

The fourth inquiry looks at the “effect o f the use upon the potential

m arket for or value of the copyrig h t e d work.” 17 U.S.C. § 107. Plaintiff adm its that this factor tilts in the governm ent’s favor a s plaintiff could cite no harm t o Mr. D avidson’s b usiness from the Postal Service’s use, and he h as shown no other interest in exploiting the work. We find th i s f a c tor f avors defendant.

E. The Use Was not Fair

On balance, we find that defendant has not proven its use to have been fair. The P o s tal Service’s use of the im age on its “ ship of the line” or workhorse stam

p, printing billions of c opies and selling them to the public as part of a b usiness enterprise—whether for u se to send m a il or to be retained in collections—so overwhelm ingly favors a finding of infringem ent that no fair

use c an be found. The governm ent’s c itatio n t o t h e fact that it only used the im a ge o n its workhorse stam p is ironic given that, a l though p roportionally the profit is low a s com

pared to that cited in G a

ylord
, the overall num

bers are vastly higher. D efendant c ollected o ver $4 b illion in revenue (both s t am ps, Lady Liberty and flag) from the u se o f Mr. Davidson’s statu e , a n d
, even though a very low portion o f the revenue represents profit, that num ber i s over $70 m illion for the Lady L i b e rt y stam p alone. Som e portion of that is owed
to plaintiff as dam ages. Further, the p ortion used w as entirely of what we consider to h ave been the original work contributed by Mr. D av idson. The
governm e nt’s only r eal d efense is that its use d i d n ot particularly harm plaintiff’s business as an industrial sculptor. That m ay b e t r u e , but w e also
note that it certainly did n o t b e n e fit h im

. The Postal Service offered neither public attribution nor apology. 1 6

III. Dam ages

Having reached the conclusions a bove, we consider the extent of

com pensation owed M r. Davidson u n der 28 U.S.C. §1498(b). The statute states that, when the court finds infringem ent, it should award “reasonable and

1 6 The Postal S ervice issu e s p ub l ic inform ation notices when a new stam p is offered to the p ublic with inform ation a b out the art used on the s tam p. E v e n a f t e r the error was found, USPS d eclined t o update its inform ational bulletin with Mr. Davidson’s nam e.

24entire com pensation as dam ages for such infringem e nt.” The Federal Circuit explained in its second Gaylord opinion that this m easure is the s am e as under the Copyright Act’s provision for actual dam ages, 17 U

. S.C. § 405. 1 7 678 F .3d 1339, 1343 (2012). The court found in that c ase that the m easure of dam ages

was the fair m arket value of a license t o use plaintiff’s work as defendant did. Id. T his assum es a willing buyer a n d a w illing seller negotiating at arm ’s length. Id. Assum ing this f r a m e w ork, the m atter is l eft to the trial court’s discretion to c raft an a

ppropriate r e m edy. Gaylord v. United States
, 777 F .3d 1363, 1369 (Fed. Cir. 2015).

Much of the trial t e s t i m o ny c o n s i s t e d o f th e r e s p e c t i ve experts’ opinions

on the value of a non-exclusive license for work such a s the sculpture infringed here, a s w ell as testim ony of fact w itnesses as t o w h a t t h e Postal S e rv ice’s practice was in valuing, p aying and selling licenses when it did s o properly. Defendant also offered a survey expert whose work s ought to dim the im p act of the r etention num

bers (those stam

ps representing pure profit to USPS). We begin wi th t h e r e le vant fact testim ony and then consider that of the experts.

A. USPS’s Own Licensing Practices

The Postal Service has both an art departm ent for acquiring the rights
to im ages u s ed o n its s ta m p s ( “ i n

- licensing”) and a separate departm ent for selling the rights to use the im age of stam ps (out-licensing). Both are relevant to our inquiry.

1. What USPS Pays for Art

Defendant’s overall approach to a h ypothetical negotiation was that, because it h a s never paid m ore than token am ounts for the use of im ages, the
court should cap dam ages at the m ost the Postal S ervice ever voluntarily pays, i.e., $5,000. The testim ony of M r. G icke r , M s

. B r own, and Ms. Handwerger

was unequivocal that USPS never paid m ore than $ 5,000 for an im age to be used on stam

p. T h e am ount was typically in the $1,000 to $2,000 range. Mr. M c C a f frey t estified that i n 2008 the average was $3,000 if an artist was

comm issioned to illustrate an im age for use on a stam p, and th e c ap was $5,000. Tr. 751-52. And it is the c ase that som e entities will give USPS a n o1 7 Other types of dam ages, such as punitive, are not available against the
governm e nt.

25fee license f o r u s e of their art on stam ps. Two such exam

ples given at trial

were that of the W alt Disney Corporation and the estate o f A ndy Warhol. A s plaintiff p oints out, h o wever, such use com es with attribution, which am ounts to free publicity. M r. Gicker explained that m ost artists consider it an honor
to have their work used on a stam p and view the visibility and publicity to be

a highly valuable intangible benefit. Tr. 908-909; see also JX 13 at 2 17 (Sidney B row n ’s t e s t i m o ny). Plaintiff, of course, w a s not given that option.

Ms. Brown testified that the m arket for art and photos available to the Postal Service is a m

pl e

. S e e JX 13 at 111-12. This is especially so for patriotic im a ges because they are widely available f r o m stock photography

com panies. Tr. 9 80 (Gicker). T his presum ably helps k eep the price down for
any single im age desired by USPS. E ven if the Postal Service cannot find the
exact im age it desires, it can comm ission photographers to produce the im age. These arrangem ents also do not exceed $5,000. Tr. 761-63 (McCaffrey); Tr. 904-906 ( Gicker). A l l the relevant USPS witnesses stated that a r unning royalty rate was unheard o f and a “non-starter.” JX 12 at 857 (stating that such
an arrangem ent was a non-starter).

2. What USPS Dem ands to License Its Own Art

We heard the test im o ny o f Am ity Kirby, who is the s e nior licensing specialist at U SPS. S he has worked there for approxim ately 10 years, of which
two or three h ave been as the senio r licensing specialist. She currently is responsible for all of the licensing that the P ostal Service does of its intellectual property. Prior to t h i s p os ition she w orked in licensing for the Sm ithsonian Institute. She told the c ourt about he r experience out-licensing im a ges of s tam

ps for c omm ercial usage by other entities and testified that it is USPS practice to c opyright its stam ps and stam

p b oo k le t covers. When an entity ap p r oaches USPS wanting to use the i m age of a stam p comm ercially, the Postal Service requires a license agreem ent, e ither fixing a flat fee o r a running royalty. See Tr. 1036. I f, for e xam ple, an author or group w anted to

use the im age of a stam

p in a t e xtb o o k a nd the run was lim ited to 100,000 copies, the Postal Service would likely ask for a flat fee. T r. 1037. On the other hand, if a com

pany approached Ms. Am ity with a request to use a s tam p

on one m illion t ee shirts for s al e to the public, she would seek a r unning

26royalty. 1 8 Tr. 1037-38. The higher the distribution, both as to total units and

channels of distribution, the likelier that U S P S w o u l d dem and a r unning royalty. 1 9 S he also testified that nonprofit uses have in the past resulted in nonfee agreem ents. Tr. 1042. Her departm e nt considers stam p im ages to be art. Tr. 1047.

It was her testim ony that, during the relevant tim e period, USPS practice w as to license out its own intellectual property at a rate of 8% of total
gross sales by the m anufacturer of the product. 2 0 Tr. 1057 (referencing 2006). Today that num

ber is 10%. T r. 1060-61. USPS m ight deviate from that

num ber, but 10% is the rate that it tries to achieve today.

Ms. Kir b y a l s o e x p l a i n e d t h a t c o m p a n i e s f requently seek to b uy a package of im ages from USPS to u s e o n what she c a lled a “program ” organized around som e them e. For exam p le, Ms. Kirby stated that one frequent subject of out-licensing is the Postal S ervice’s popular “love” stam ps with rom antically them ed im ages. A license covering several im ag e s w ould
t ypically involve a r

unning royalty. Tr. 1063. She further testified that a license f or a single im age w as m ore likely to result in a flat fee a greem ent. Id. The exam ple she used was again a textbook displaying the im age of a single
stam p

. That s ort of a l icense would, however, b e c al culated on the total anticipated im ages being produced by the licensee. T r. 1068. In that sense, it is an attem

p t to reverse engineer the result of what a running royalty rate m ight ultim ately produce. It was her general observation th at th e Postal Service

1 8 She also testified that, if a gr o up w a n t e d t o print a sm all run of tee shirts bearing the im age of a stam p for an event, that would r esult in a flat fee
arrangem ent. Tr. 1039 (stating that the average was $3,000 to $5,000).

1 9 As Ms. A m ity explained, a “running royalty” re fers to a per-use royalty and is em

p loyed for extended periods of use. Tr. 1054.

2 0 PX 157 is an exam

ple of just one such license agreem ent w ith an 8 % running roya l ty fee based on total gross sales of vintage m etal signs bearing im a ges of U SPS stam

ps. Plaintiff also introduced an exam ple of an agreem ent with a puzzle m anufacturer in which USPS n e go t ia t e d a 5% r unning royalty

on im ages of its o w n work and 3% i f th e i m age included s om eone else’s intellectual property; the exam ple being a stam

p bearing the im a ge of a Disney character. PX 158. P X 159 was an exam ple o f a license for the m anufacture of gold foil stam

p replicas. The rate was again 5%, but the contract included

a m inim um guarantee of $50,000 to the Postal Service.

27would try t o “negotiate the best that we can ge t, ” b e c a use her job i s t o m ake the Postal Service m o ney. Tr. 1070.

B. Expert Testim ony on the Value of a Hypothetical License

B o th p a r t i e s p r e s e n t e d t e s t i m o ny f

r o m b u s i n e s s v a l u at i o n e xp e r t s w h o s e expertise is in the valuation of intellectual property. P laintiff’s e xpert considered the m arket for artwork broadly speaking, while defendant’s e xpert centered on USPS’s o wn history in buying the rights t o art. Predictably, the results are disparate. Defendant also presented t estim ony from an e x p e rt on public s urveys. T his individual conducted s u c h a survey regarding the retention o f the Lady Liberty stam p and attached flag stam

p, inquiring as t o the

num bers re t a ined and the reasons f or retention. We outline each expert’s testim ony below. 2 1

1. Mr. Timm ins

Plaintiff p resented the testim ony of Jim Timm ins, an expert in valuing intellectual p roperty, including copyrights. He is currently the owner and

m anaging partner of T eknos Associates, a Silicon Valle y business valuation and finan ci a l advisory firm

. His firm ’s prim ary work is t o “provide

. . . business valuation services to com pani e s , venture capital firm s and others interested i n the field for tax com pliance, financial r eporti n g , t ra nsaction support, and occasionally litigation support.” T r. 1138. His firm specializes i n “ t e c hn o l o g y

- d

r i v e n c o m p an i e s , ” v a l u i n g t

h e i r s ecurities and o th e r i n t an g i b l e assets, such a s patents, copyrights, and tradem arks. He has provided opinions in roughly 60 court cases around the country.

2 1 Defendant also offered the testim ony of Daniel Piazza, a c u r ator of philately at the Sm ithsonian National P ostal Museum
, h is “dream job.” A lthough he is extrem ely k nowledgeable and a fascinating expert i n th e h i s t o r y

o f p o stage and stam

p collecting in general, we did not find his testi m o n y particularly helpful in reaching a conclusion as to what the m arket value of a license would have been for Mr. Davidson’s copyright in 2 010. Mr. Piazza’s

m ost relevant testim ony w a s t ha t the Lady Liberty stam p was not highly sought after as a collectible. That fact was not seriously d isputed, and plaintiff’s expert m ade no a t t e m pt at specially capturing dollars a ssociated with collectors other than by a ssigning a royalty rate t o unredeem ed s tam ps g e n e r a l ly
, of w hich the num ber of s tam

ps retained in collections is but a subset.

28Prior to nine years with his own com pany, Mr. Timm ins worked for 10
years on Wall Street d oing investm ent banking. It was at these firm s that he began valuing businesses. He then m oved to Silicon Valley, where he spent the next 15 years at a venture capital firm
, working on bringing com panies to initial public o f

fering. I n this position, he a gain valued business assets, including intellectual property and was involved i n negotiating the purchase and sale of such rights. Tr. 1142. I ncluded in that e xperience was the licensing of copyrights. T r. 1143. He holds a bachelors degree from the University of Toronto and a m asters o f business adm i nistration (“MBA”) f rom Stanford Un iversity. He does not have any prior experience valuing a copyright for art.

His ultim ate conclusion w as that the license for Mr. Davidson’s statue should have generated a running royalty ra t e o f 1.5% for the Lady Liberty
stam p s used to send m ail and a 5% rate for stam ps retained and not redeem ed

as postage. He also opined that the c onvoyed sales o f the flag stam p should be covered b y a 0.75% rate for flag stam ps used to send m ail and 2 .5% for those n ot redeem ed as postage. Philatelic products, sold strictly for collectors, according t o Mr. Timm ins, were entitled to a 10% royalty rate. 2 2 He applied these r a te s a g a i n s t U S P S ’ s o w n r ec o r de d s a le s a n d e s t im a ted retention/break a g e f

igures. The end result o f which was a license v alued at approxim ately $53,013,154. 2 3

In r ea c h i ng these conclusions, Mr. Timm ins considered the f actors influencing b oth sides’ positions, such as tim ing, duration, exc l usivity, and territory. It was his opinion that the Postal Service in 2 010 was under pressure t o release a new Forever workhorse stam p and that viable alternatives
, considering both t im e and cost, were not available to USPS. See T r. 1 177-83. Mr. Timm ins then co n s i d e r e d c om parable licenses in the m arketplace to inform his opinion, centering on licenses for artwork. That search re v e a led

2 2 Philatelic products are collectible item s p roduced for sale other than for use as s tam

ps. The parties agreed that $29,515 of such products had been sold by USPS associated with the two stam ps at issue.

2 3 As an alternative, plaintiff’s post-trial brief suggests a m ixed license of $1,000,000 for m ail use stam ps, a running royalty of 10% for unredeem ed
stam p s, and 5% for t h e f

lat stam ps n ot redeem ed. Plaintiff o ffered $11,645,411 a s the sum that those num bers wo u l d g enerate. See Pl.’s PostTrial Br. 35.

29running royalty rates ranging from 2.5% t o 10%, with an average of 6 .5%. Tr.

1211-21.

Mr. Timm i ns did not consider U S PS’s own policy of not paying m ore than $5,000 to b e a relevan t f a c t a n d did not view it a s a reflection of the bargaining positions o f the parties. Tr. 1207. He thus did not factor it into his conclusion o ther than to reject it a s a com parator in his b a s k e t of sim i lar transactions. He did, however, consider Mr. Davidson’s lack of history licensing his artwork. This, he c oncluded, put plaintiff in a weaker n egotiating position, Tr. 1261, although it would not preclude Mr. Davidson from insisting

on a running royalty. It sim ply drove down the rates Mr. Davidson m ight have achieved to below the m arket averages he found in his research. Mr. Timm ins also a ssum ed that the license agreem ent would p rovide no attribut i o n t o Mr. David s o n , wh i c h p r esum ably would be worth som e thing to Mr. D avidson.

2. Mr. Bokhart

Defendant offered the opinions of Christopher Bokh ar t

. H e w a s o f

f e red

a n d a c c e p ted a s an expert in the valuation o f intellectual property. He hold s

a bachelor of science degree in m anagem ent, with an em phasis in accounting from Purdue University. He is currently a certified public a cc o u n t a nt and is also certified in financial forensics and fraud exam ining. He began his career in 1982 doing b u s iness valuation and litigation support at a firm called Peterson Consulting, a spin-off from Arthur Anderson. He quickly becam e the “IP go-to” at his firm a s he gained experience valuing intellectua l p r o p erty. Tr. 1548. H e stayed at Peterson for six y ears, after which he and several others from the firm started their own business, the IPC Group. The IPC Group grew

over the years and eventually m erged with fo rm e r p artners of Peterson Consulting to form InteCap, which em ployed a bout 200 people. Mr. Bokhart' s work at both firm s focused on valuing intellectual property as part of business valuation and financial consulting.

InteCap has sin c e been acquired by an other larger consulting conglom erate, Charles Riv e r s Associates, where Mr. Bokhart is c urrently a vice president. He c ontinues to work in v aluing intellectual property, including copyrights, tradem arks, trade secrets, and patents

. His work involves both litigation supp ort and negotiation of license agreem ents and negotiations for purchase or sale of intellectual property. He testified that he has provided hundreds of opinions of valuation i n litigation. Tr. 1 551. He characterized h is n e g o tiation experience as “m ore than a handful of t im es.” Id. His work valui n g c opyrights has been prim arily outside of court. As an

30exception, h e provided opinion and expert testim ony for the governm ent in the

Gaylord case in this court.

Mr. Bokhart’s conclusion was that Mr. Davidson’s hypothetical license would have been worth n o m ore than $10,000. This conclusion w as inform ed by the facts that p l a in t i f f h as no history of m aking comm ercial use of his artwork and that the Postal S e rvice’s com parable licenses were all below $5

, 0 0 0

. H e testified that he exam ined hundreds of such licenses. H e also thought that USPS had v iable a l ternatives if an agreem ent for l ess than $10,000 could not be reached. In essence, he thought the com parable m arket

was only what USPS paid for sim i lar license s a nd t hat Mr. Davidson had suffered little harm

because “he never m ade an attem pt to earn a profit on or

comm ercialize him s elf.” Tr. 1657.

3. Dr. Isaacson

Defendant also offered the testim ony of D r. Bruce I saacson, an e xpert in the field of consum er s u rveys. Dr. Isaacson has a bachelor of science degree in e ngineering fr om Northwestern University, a M BA f rom Harvard Business School, and a doctor of business adm inistrati o n al so from Harvard Business School

. D r

. Isaacson’s career has focused on m arketing research
rega r d i n g consum e r behavior. H is tool is the consum e r survey. He h as provided surveys and testim ony for litigation in various f e d e r a l an d s t at e courts and the Tradem ark Trial and Appeal Board. He has al s o t e s t i f i ed before the Federal T rade Comm ission and t h e Be tter Business Bureau. H e is currently the president of MMR Strategy Group, a m arketi n g r e s e arch and consulting firm

. H e has been with MMR for 12 years. One of this firm ’s specialities is providing litigation surveys. He estim ated tha t h i s firm has conducted close
to 500 su rve y s w hile he has been with the com pany, “the vast m ajority of which [ he] would have been either involved with either d irectly m anaging or supervising those who were m anaging the survey.” Tr. 1273.

After fam iliarizing him self with th e particulars of this case, reading
court docum ents, deposition transcripts, and doing s om e research on the business of USPS generally, he conducted a s urvey. His survey looked at three different areas of inquiry: 1) whether a r esponden t h ad e v er purchased the Lady Liberty stam

p; 2) w h at percentage of those who had purchased a stam p intended to retain the stam p (i.e., not use it to send m ail) and how m any they intended t o retain; and 3) why they intended to keep it and not redeem it for postage. Tr. 1294. He testified that h e w as unsatisfied with the Postal Service’s own research as to retention rates because i t e ither d id n ot look

31specifically at this s tam p “o r it w as c onducted i n ways that were not necessarily consistent with those for a litigation survey.” Tr. 1 295. He d id not explain the inconsistency other than that USPS r etention figures of ten represent retention across all stam ps for a single year. 2 4 Id.

There were 1,790 r espondents who responded t o Dr. Isaacson’s survey. He testified that he used a “control stam p ” to w eed o ut people who m ight have been m is-rem em

bering the particular stam p referenced by the s u rvey, Tr. 1302-03, the results of w hich were to r em o ve 3% to 4% of the responses f rom the final tally. After c ontrolling for the false positives, the results were: 43% of respondents reported purchasing the Lady Liberty stam p; 18.5% of that
group have retained som e of these stam ps; 15.4% of respondents said that they still planned to use those stam ps to send m a il; 3.6% said that they intended to collect them ; and approxim ately just over 1% intended to give them away, sell them
, or m ake other use of the stam ps. Tr. 1318-20. He did n ot provide any data as to the flag stam

p.

These figures were exam ined i n som e detail on cross-exam ination. Using the sam e survey results but em ploying a m ethod suggested by plaintiff’s counsel o n cross-exam ination resulted in 4 6% of respondents still holding the Lady Liberty stam

p. See Tr. 1350-52. That result was reached by com paring the num be r of respondents who indicated that they had purchased the s tam p and the num

ber of persons w ho indicated that they still retained at least one of the stam ps. Tr. 1351. Dr. Isaacson stated that “you could do that” and that he did not dispute that percentage. Id. That figure was then applied to the total United States stam

p-buying population to e stim ate the num ber of people s t ill holding thi s s t am

p : just under 50 m illion. Tr. 1351-52 (Dr. Isaacson in
response to plaintiff’s counsel posting approxim ately 50 m illion: “That w ould be right

. . . .”). The total num ber of s tam

ps still retained was on average 10.1
per person. Tr. 1352. Multiplying those two num bers resul te d i n abo ut 4 94

m illion o f these stam

ps s till outstanding (still retained b y purchasers and not redeem ed) after five years. Id. Taking that f igure and com

p aring it t o the total of the Lady L iberty stam

ps sold, resulted in a r etention rate o f about 10%. Tr. 1355-56 (“Do you agree with that? . . . . The Witness: Yes.”).

2 4 I t is unclear whether Dr. Isaacson was a sserting th a t U S PS had no figures regardi n g on l y this stam p’s retention r ates. H e did state that he checked his own work against the Postal Service’s figures as a g eneral check on the reasonableness of his results.

32C. Plaintiff Has Proven Entitlem ent to Dam ages

The court i s left t o c raft a rem edy that best reflects what the fair m arket value o f a nonexclusive l icense fo r p laintiff’s ar twork would have been in 2010. The Federal Circuit h a s e n d o rsed the use of patent law tools to value licen s e s i n the c opyright context. See Gaylord
, 777 F.3d at 1367. These include the factors enum erate d i n G e orgia-Pacific Corp. v. U nited States Plywood C

orp. , 318 F. S upp. 1116, 1120-21 (S.D.N.Y. 1970). Courts are encouraged to consider objective indicia of the value of sim ilar work in the

m arket. See, e .g. , Jarvis v. K2 Inc.
, 486 F.3d 526, 533-34 (9th Cir. 2 007) (also cited in the third F ederal Circuit Gaylord decision). These considerations m ay b e i n form ed by the l icensor’s and licensee’s own history in sim i lar transactions, but these will n ot be em ployed as an artificial inflator nor d eflator of the f a ir m arket value at the tim e the negotiation w ould have taken place. Gaylord
, 777 F.3d at 1 3 6 8 (citing O racle Corp. v

. SAP AG
, 765 F.3d 1081, 1093 (9th C ir. 2014)). The court is not f oreclosed, however, from considering inform ation that com es to l ight a fter the hypothetical negotiation. See L ucent Techs., Inc. v

. Gateway, Inc.
, 5 80 F.3d 1301, 1 3 3 1 ( F e d. C ir. 2009). These facts are what the Sup r e m e C ourt long-ago dubbed the “book of wisdom .” Sinclair Refining Co. v. Jenkins Petroleum Process Co.
, 289 U.S. 689, 6 98 (1933).

The v alue reached by t h e court m ust assum e a willing buyer and a willing seller. Gaylord
, 678 F .3d at 1343. T h e F e d e r al Circuit applied this axiom in affirm ing this court’s dam ages award after rem an d in G aylord
, explaining that “the basic prem i se of th e h yp o t hetical negotiation

. . . w ould have been the opportunity for m aking substantial profits if the two sides were willing to join f

orces, which we m

ust a s sum e that they w ere.” 7 7 7 F

. 3 d a t 1368. We find that p r in ciple particularly a pt in this case where the
governm e nt , j u s t a s it did in Gaylord
, r elies o n its unique history i n p aying only $5, 0 0 0 for the rights to im ages on its s tam ps. As the Federal Circuit stated in the second Gaylord decision and then later explained in i ts third decision, such a holding would i gnore the o ther side of the bargain: plaintiff’s evidence of the value of such a licens e

. H aving infringed the copyright billions of tim es, d efendant cannot now shield itself from liability by claim ing that it would ha v e wa lked away from the deal. Gaylord
, 678 F.3d at 1343. We have to assum e a willing buyer as well as a willing seller. This m eans that the governm e nt cannot avoid accountability by arbitrarily im posing lim its on what it would have been willing to pay. I d. (citing Rite-Hite Corp. v. Kelley Co.
, 5 6 F.3d 1538, 1 555 (Fed. Cir. 1995) ([ W ] hat an infringer would prefer to

33pay i s n o t t h e m e asure of dam ages.”)). The rule i s rationality in view of the

evidence presented. See Gaylord , 777 F.3d at 1368.

We conclude that the m ost appropriate m easure o f d am ages i s a m i xed license w h i c h em

ployees a flat fee for the Lady Liberty stam ps u sed to send

m ail and a r

unning royalty for retained stam ps and philatelic products. See i d.
at 1344 ( “The trial c ourt’s analysis o f a hypot h e t ic al negotiation between [ p laintiff] and the Postal Service m ay lead it to conclude that different license fees are appropriate for the three categories of infringing goods . . . .”).

Given the s heer weight o f the num ber of these stam

ps anticipated to be produced and used a s postage, it would have m ade no e conom ic sense for the Postal Service to have paid a running royalty for s uch use, n or d o we think Mr. Davidson would have been i n a p o s i t ion t o dem and one. A s Mr. Stratton explained, the Postal Service’s revenues d o n o t m eet its expenditures. The
cost of carrying m ail and m aintaining the workforce t o d o so exceeds the
stam p sales and other revenue earned. In e s s e nce, each stam p redeem e d for service is a sm all c ontract o n which USPS will lose m oney. We thus conclude that paying a running royalty on top of the loss already b aked i nto each s tam p redeem ed for service is econom ically unreasonable and that fact would have been obvious to both p arties at the tim e of the hypothetical negotiation. In this respect we think it r elevant that other im a g es could have readily been obtained that would pe r f

orm the basic function of producing a workhorse stam p for actual p ostal use. Thus we find the nom inal and historically accurate sum p aid by the P ostal Service, nam ely $5,000, to be an appropriate flat rate for this use.

There is, however, a portion o f s t am ps sold on which the Postal Service

m akes m oney. The l aw presum es, a s noted above, that b oth parties w ould have entered the negotiation looking to m a xim i ze profit. USPS m akes alm ost entirely pure profit from stam p s never redeem ed for postage. It was USPS

em ployee testim ony that m a x im izing retainage and breakage was a l ways a goal. It was also the testim ony o f U SPS em ployees that the public expected

new stam ps and desired attractive im ages. To that end, M r

. M c C a ffrey selected the im age o f M r. Davidson’s work because it was just that: new, fresh, and attractive and thus l ikely to a t t r ac t buyer interest. A lthough a bevy of patriotic im ages was available, m arket considerations drew Mr. McCaffrey to

use Mr. D avidson’s im age. U SP S w a s u s ing his i m a ge to m axim ize its o wn profit, and i t i s n o t unreasonable t o conclude that plaintiff would have dem anded som e percentage of those stam ps, and o ther philatelic produc t s , representing profit to d efendant. It is also reasonable t o conclude that the Postal Service would have been willing to pay such a percentage since it

34reflects no r e a l additional risk. The royalty only attaches to purchases of

stam p s that would not engender additional cost. A s in Gaylord
, the m arket incentives were aligned on both sides of the deal to agree on a running royalty

on retained stam

ps. Gaylord
, 777 F.3d at 1370. Other than the Postal Service itself, neither party presented evidence of a sim ilar transaction where billions of co p i es of an i m age were produced for c omm ercial sale without a per-use royalty. We thus conclude that a running royalty is appropriate for these i tem s because it balances the risks and rewards for both parties. I d. at 1369.

We find that a 5% running royalty on unredeem ed and philatelic products is the correct figure. That f igure is supported by Mr. Timm ins’ work in researching c om

parable art licenses, Ms. Kirby’ s testim ony of the rates charged by USPS when it out-licenses its own a rt , and the USPS licenses introduced into evidence. Although Mr. Timm ins opined that, if the base was

m ade s m aller by excluding stam ps against which a running royalty would be applied, the rate would be h igher, we find that Mr. D avidson would n ot likely have achieved a higher r a t e g iven his lack o f experience in selling h is o wn intellectual property. 5 % is a r easonable figure supported by the average rates presented by Mr. Timm ins and USPS’s own out-licensing.

We do not, however, find that it is appropriate to apply this rate against the attached flag s tam

ps. We heard n o evidence as t o why those stam ps should be included in the base of stam ps against which the r oyalty should b e applied

nor did we h ear any l egal reason why they need be included. In the patent context, convoyed s ales are often included in the base, but the test i s generally whether the convoyed item is funct io n ally p art o f the sam e assem b ly or

m achine as the patented item

. See generally R i te-Hite Corp. v

. K e ll e y Co., Inc.
, 5 6 F .3d 1538, 1550 (Fed. C i r. 1995). H ere, the stam ps are printed and sold side by side in a s ingle booklet o f stam ps, b ut they are in e ssence entirely separate entities. The factors leading to the desirability o f t h e L ady Liberty im a ge do not autom atica l l y t ranslate into retention of the f lag s tam p and we

were presented with n o evidence of s uch a phenom enon. We thus d o not include the flag stam

ps in the base.

We are thus left with only the question of the quantum of base f or the retainage and breakage r ate to be applied a g a i nst. W e choose the Postal Service’s own 2015 e s t im ates as the m ost reasonable m easure for total sales and its e stim ate for breakage rates. T he parties stipulated that 4,948,761,166 of the Lady Liberty stam

ps were sold. The final year of sales was 2014. Total

am ount collected for those sales is $2,190,414,155. Stip. of Facts ¶ 28. The Postal Service estim ated the breakage rate f or all workhorse stam

ps during this

35tim e period to be 3 .24%. Id. ¶ 29. Thus plaintiff applies 3.24 % ag a i n st

$2,190,414,155 to arrive at a figure of $70,969,419 for breakage and r etention. This is sim ilar t o, and actually lower than, the figures t h a t Dr

. Isaacson’s

surv ey data m ight suggest. 2 5 We find that to be a c o nservative estim ate and appropriate for use here. We thus apply a 5% royalty rate against that figure, which results in a $3,548,470.95 sum

.

The parties agreed that the total revenue of p hilatelic p rodu c t s so l d

am ounted to $29,515. Apply i n g a 5 % rate, the royalty for those products equals $1,476. That num ber is a dded to the $3,548,470.95 alon g w it h the $5,000 f lat f e e for redeem e d stam

ps, f or a total unadjusted dam ages f igure of $3,554,946.95.

W e n o t e that plaintiff cites various contem poraneous or post fac t o circum stances as “book of w isdom ” indicato r s th at th e g o v e r nm e n t w o u l d h ave p a id at least $10,000,000 for this license. They are prim arily the c o st t o produce these s t am

ps and the n eed to r

ush them into print in tim e f or the 2010 Christm as m ailing season. Defendant counters with its own exam p le of a 9/11

comm em orative sta m

p that was rushed to p roduction as suggesting that Mr. Davidson would not h ave had USPS over t h e barrel, and thus the Postal Service w ould have had viable alternatives given the l arge s e lection of patriotic im ages available at stock photography repositories. W e do not find the cost to produce the stam ps or the c oncern about rushing p roduction as telling on w hat USPS would have paid. That cost, i n t h e hypothetical world of the n egotiation, would have been incurred a fter a n agreem ent would have been reached. A s to the need to hurry the p roduction, given defendant’s o wn

c o u n terexam

ple of viable alternatives available in short order, we find that these circum stances do not suggest a license fee higher than the one we have adopted. Nor, h owever, d o we find that the governm ent’s viable alternatives

s c enario n ecessitates a finding that it would not have paid m ore than $ 5
, 0 0 0

2 5 It is unclear from the record precisely how defendant wished the court to have used Dr. Isaacson’s retention rate estim ate. The 3 .6% f igure he p osited is higher than USPS’s own breakage rate ( 3.24%) across all workhorse stam ps for the years at i ssue, which was the figure u sed by Mr. T i mm i ns i n c rafting his dam a ges figure. Presum ably the governm ent does n ot wish us to apply the 3.6% rate against the $70 m illion in unredeem ed stam ps. To be f

air, w e

a s s u m e this testim ony was offered a s a m o re general w ay of disputing any claim that M r. Davidson’s work drove above-norm a l collection of the s tam p. That ultim ately did not end up playing into plaintiff’s dam age theory.

36in total for all usage. The econom i c incentives and realities cited above w ould

have driven both parties towards a ru n ning r oyalty i n the range that we have found.

CONCLUSION

Plaintiff has proven its entitlem ent to actual dam ages of $3,554,946.95, plus interest. T he p a rt i e s are directed to consult r egarding the quantum of interest and to f

ile a joint status report on or before July 27, 2018, inform ing th e court of their agreed-upon am ount or their respective positions as t o that figure.

s/Eric G. Bruggink ERIC G. BRUGGINK Judge

37