Every time I recount this tale, I hear the character in the film The War of the Roses, Gavin D'Amato, saying "[w]hen a man who makes $450 an hour wants to tell you something for free, you should listen."
The Genesis Of The CaseThe background of the case is relatively straightforward. In January 2006, Kawasaki Motors Corp. U.S.A. engaged Sarasota, Florida-based Roaring Toyz (www.RoaringToyz.com) to customize two ZX-14 motorcycles as part of its introduction of the new model motorcycle. The customized motorcycles were to be displayed together with standard production models during Daytona Bike Week. Although Roaring Toyz did the custom work, it commissioned Ryan Hathaway, an independent artist, to create custom artwork that ultimately appeared on the motorcycles. By late February 2006, Roaring Toyz had nearly finished the customization of the two motorcycles. At about the same time, Kawasaki was completing preparations for the ZX-14 World Press Introduction, which was scheduled to take place in Las Vegas during the last few days of the month.
Kawasaki requested photographs of the customized motorcycles, and the Roaring Toyz marketing director, using a point-and-shoot digital camera, created and sent the requested photographs. After seeing the marketing director's photographs, Kawasaki decided that they wanted better quality photographs of the customized motorcycles so that they could include them in the media kit distributed at the World Press Introduction.
While Roaring Toyz had relationships with a number of photographers in the motorcycle industry, it was trying to promote Todd Latimer, a photographer in Safety Harbor, Fla., who was friendly with some of the people at Roaring Toyz (previously, Latimer had worked as a glamour photographer, but a variety of factors prompted him to look for new subject matter; Roaring Toyz used its contacts in the motorcycle industry to help Latimer receive magazine assignments, including an assignment from 2 Wheel Tuner, to cover the customization of the ZX-14 motorcycles). Roaring Toyz called Latimer and requested that he photograph the customized motorcycles so that Kawasaki could include the images in its media kit. Latimer drove to the Roaring Toyz shop for a photo shoot that started late in the evening and went through to the very early hours of the next morning so that images could be sent to Kawasaki the next day, the deadline for the press kit.
After completing the shoot in the very early hours of the morning, Latimer demanded that Roaring Toyz pay him $800, which was paid (Latimer later claimed that the $800 related to something other than the overnight shoot). Later that morning, Latimer e-mailed photographs of the customized motorcycles to the Roaring Toyz marketing director, who forwarded the images to Kawasaki. In a follow-up e-mail, Latimer asked the marketing director to convey to Kawasaki that Latimer also would like a photo credit, if possible. Kawasaki included five of Latimer's photographs in the media kit together with 110 other images of standard production models.
Realistic expectations would have opened the door to an early settlement, which would have maximized returns by obtaining fair value for the use of the images while avoiding protracted and expensive litigation.Some months later, Latimer opened a copy of Cycle World magazine, published by Hachette Filipacchi Media U.S., Inc. (a subsidiary of the world's largest magazine publisher) and discovered that it included two of his images from the overnight shoot together with an article discussing the new motorcycle. A Cycle World representative received Kawasaki's media kit at the World Press Introduction. At about the same time, a number of other magazines published articles about the new motorcycles, including 2 Wheel Tuner, which published photographs from the assignment they had given Latimer.
Around the time he discovered his images published in Cycle World, Latimer registered the copyright for the images from the overnight shoot. However, the images were registered too late to take advantage of the three-month grace period following first publication.
Eventually, Latimer found a law firm willing to pursue the case, and they sued Kawasaki, Hachette, Roaring Toyz and the Roaring Toyz owner for copyright infringement. Although not entitled to recover attorney's fees or statutory damages, Latimer sought an award of each defendant's profits.
Copyright Damages In A NutshellThere are three types of damages commonly associated with copyright infringement cases: statutory damages, actual damages and infringer's profits.
Statutory damages, available only in instances where a registration was obtained prior to the commencement of infringement (or if infringement commences after first publication, provided the registration is obtained within three months of first publication), are generally awarded when no actual damages are proven, or when actual damages and profits are difficult or impossible to ascertain. Courts have wide discretion to award statutory damages, restrained only by the limits set by statute: not less than $750 or more than $30,000 per work infringed, and courts have discretion to increase statutory damage awards up to $150,000 if the court finds that the infringement was willful. However, more often than not, courts will attempt to award a figure that has some connection to reality. Since Latimer didn't timely register his copyrights, he wasn't entitled to an award of statutory damages.
Actual damages can be measured a number of ways, but where the copyright owner and infringer don't occupy the same market—as is commonly the case with photographs—the preferred approach is to award a reasonable royalty: the amount that a hypothetical licensor and honest licensee would have negotiated at arm's length for the actual usage at issue in the case. Thus, if you find a photograph used without consent in a magazine, the reasonable royalty might be determined using industry-standard tools like FotoQuote or publications such as Jim Pickerell's Negotiating Stock Photo Prices. It's also important to realize that most courts won't permit the use of multipliers when determining a reasonable royalty (as one court explained, you can't determine the actual value of the rights involved by adding a multiplier).
Finally, Copyright Law authorizes courts to award a defendant's profits provided those profits are attributable to the infringement and provided those aren't taken into account when computing actual damages. While the attribution requirement can be easy to satisfy in cases where someone is selling copies of a copyrighted work—e.g., copies of a photographic print—it can be exceedingly difficult and even impossible to satisfy in cases where a copyrighted work is used in advertising, which promotes some unrelated product or service. Where the copyrighted work is used to indirectly generate profits, a claim of indirect profits is only viable where the copyright owner can establish some nexus between the infringing conduct and the defendant's profits. Even in jurisdictions more favorable to copyright owners, the copyright owner still must establish something more than a purely speculative connection between infringement and profits.
Settlement Efforts And SetbacksBy the latter half of 2007, when my involvement in the case started, the case already had cost each side several hundred thousand dollars in fees and costs with no end in sight.
As a photographer, I encouraged my clients to offer what was considerably more than reasonable given the usage involved. Using FotoQuote, I confirmed the usage values that I expected based upon my own work in the industry. The photographer retained to serve as an expert in the case independently arrived at roughly the same figure (as did Latimer's expert, who admitted roughly the same figure in deposition). Unfortunately, the amount offered was several orders of magnitude less than what it appeared Latimer and his lawyers expected to receive from the case.
After settlement efforts failed, Latimer's attorneys continued to pursue the case into 2008 as though they were holding a winning lottery ticket. Then their case suffered a major setback: About two months before trial, the court granted judgment in favor of Kawasaki, finding that Latimer had granted Kawasaki an implied license. The court also granted judgment in favor of Hachette, finding that Hachette's use of the photographs constituted fair use. Latimer requested that the court reconsider its decision and even submitted an affidavit claiming he didn't know his photographs had been forwarded to Kawasaki until after Kawasaki received them. The court disregarded the affidavit as a sham and, again, ruled in favor of Kawasaki and Hachette. Latimer appealed.
The Appeal: A Tale Of Two Implied LicensesIn April 2010, Latimer received good and bad news from the federal appeals court. The good news was the reversal of the judgment in favor of Kawasaki and Hachette. The bad news was that the appeals court agreed with the lower court that Latimer's actions gave rise to an implied license in favor of Kawasaki.
In a decision that garnered the attention of lawyers and photographers alike, the federal appeals court explained that "[a]n implied license is created when one party (1) creates a work at another person's request; (2) delivers the work to that person; and (3) intends that the person copy and distribute the work." While payment is conspicuously absent from the factors giving rise to an implied license, some courts have ruled that payment can render the implied license irrevocable. Absent payment, it may be possible to terminate even an implied license (although terminating the license doesn't enable a copyright owner to seek damages for copyright infringement for pre-termination use of a copyrighted work).
In an interesting twist, the appeals court found not one, but two, implied licenses. When confronted with the more difficult issue of whether Latimer's photographs constituted unauthorized derivative works, the appeals court sidestepped the issue by finding a second implied license. The court found that since Hathaway, the independent artist, knew Kawasaki was going to use the customized motorcycles for promotional purposes, he also had to know that the customized motorcycles would be photographed. Thus, Hathaway was deemed to have granted an implied license that was broad enough to include Latimer and anyone else who might photograph the customized motorcycles bearing his artwork.
As if the implied license findings weren't bad enough, the appeals court also found that Latimer's affidavit was properly disregarded as a sham. And while the appeals court reversed the finding of fair use, it did so only on procedural grounds; the lower court was given a green light to permit the procedural issues to be corrected and for Hachette to assert fair use again.
Post-Appeal: Going From Bad To WorseBack before the lower court with the prospect of a trial on the horizon, Latimer's fortunes didn't improve. The court considered whether Latimer had enough evidence to proceed to trial on his claim seeking an award of Kawasaki's and Hachette's profits. After reviewing the evidence, in September 2010—a little more than a month before the case was set to go to trial—the court concluded that "Latimer...failed to meet his burden to show a reasonable relationship between the profits he seeks and the alleged infringement of his copyrighted photographs." Although Latimer was permitted to pursue his claim for actual damages—what most likely would be a reasonable royalty—he had lost the ability to seek an award of profits.
The court's decision limiting any potential damage award to actual damages effectively ended the case. At that point, the attorneys knew it was highly unlikely that they could recover enough to make going through trial worth their time and effort, much less the time already invested in the case. Latimer also faced the possibility that the defendants might be entitled to recover their attorney's fees from him by virtue of his seeking an award of profits without any evidence to support the claim. (Given the amount of attorney's fees incurred over a three-year period, it's very likely that any fee award would have eclipsed any judgment Latimer might have been able to obtain.) All of these pressures created a situation where Latimer had no choice but to settle and end the case.
Lessons To Be LearnedAs with any morality play, there are lessons to be taken away from the case. For starters, the case underscores the importance of using agreements. Even when time is short and there's no time for a formal contract, any sort of letter agreement or e-mail confirming the terms of an agreement are better than nothing and may be sufficient to avoid having a court determine after the fact that a license was granted by implication. Likewise, transmitting a clear set of restrictions or limitations when transmitting the images may help limit the scope of any implied license.
As important as it is to use agreements and document relationships, and to understand the consequences of delivering images to someone in the absence of any documentation, it's far more important to maintain realistic expectations. Had the case been evaluated from the point of view of what would have been reasonable based upon the actual use and prevailing law, a reasonable settlement might have been possible very early in the action.
As Jonathan Harr pointed out in his book A Civil Action, certain types of cases are riskier than others, and when certain types of cases go to trial, a "plaintiff can expect to lose, on average, two times out of three." So why does anyone do it? They don't. "Like most people, plaintiffs' lawyers don't like to take chances with their own money," writes Harr. "They either settle or drop the vast majority of cases before trial."
The statistics bear out Harr's assessment that most cases never go to trial. According to federal court statistics, of the approximately 4,500 copyright infringement cases filed in the U.S. in 2005, only 40 or so (or about 0.9%—less than 1%—of cases) went to trial. The rest either settled or were resolved prior to trial.
Realistic expectations would have opened the door to an early settlement, which would have maximized returns by obtaining fair value for the use of the images while avoiding protracted and expensive litigation. Instead, the litigation continued to the point where the out-of-pocket costs exceeded the amount that anyone could have reasonably hoped to gain from the case. Where parties fail to maintain realistic expectations, nobody wins.