(CN) - After making millions with its postage-stamp depiction of a Korean War memorial, the U.S. Postal Service owes the memorial's artist much more than $5,000, the Federal Circuit ruled.
"The Column" is a group of 19 stainless steel sculptures, representing a platoon of soldiers that serves as the centerpiece of the Korean War Veterans' Memorial on the National Mall in Washington, D.C.
Artist Frank Gaylord designed and created the sculptures, which were dedicated with the rest of the Korean War Memorial in 1995.
A photograph of the memorial appeared on the 37-cent stamp that the U.S. Postal Service issued in 2002 to commemorate the 50th anniversary of the armistice that ended the Korean War.
More than 86 million stamps were issued, and the service also sold retail goods carrying the stamp image, and licensed these products to retailers.
Though the service licensed the photograph from photographer John Alli, Gaylord claimed that it never asked his permission to depict "The Column" on its stamp or any of its retail merchandise.
He sought damages of 10 percent on $30.2 million, plus prejudgment interest, in revenue allegedly generated by the sale of the stamps and the merchandise.
But after finding that the Postal Service had never paid more than $5,000 to license an existing image for use on a stamp, U.S. Court of Federal Claims Judge Thomas Wheeler declined to let Gaylord collect $3 million in damages.
Wheeler said the one-time royalty of $5,000 was "reasonable and just compensation" because the service had deprived him of the opportunity to negotiate.
He also noted that there was "no explicit waiver of sovereign immunity allowing such a recovery."
But the Federal Circuit's appellate panel balked at the agency's "self-serving" testimony about an in-house policy that prohibited it from paying ongoing royalties on stamps.
"The Postal Service itself licensed the stamp image to third parties for use on retail goods in exchange for a royalty of 8 percent of sales," Judge Kimberly Ann Moore wrote for a three-judge panel. "The Postal Service earned $17,831.93 under those agreements."
"This is completely consistent with the 8-10 percent royalty rate Mr. Gaylord typically earned for licensing his work to third parties to be used on retail goods," she added. "It is also similar to the 10 percent royalty Mr. Alli agreed to pay for selling prints of his photograph of The Column. Based on these facts, an ongoing royalty appears to be appropriate for retail goods depicting Mr. Gaylord's work, particularly those on which the Postal Service earned an 8 percent royalty."
On remand, Wheeler should also consider awarding ongoing royalties on revenue the Postal Service made through its sales of merchandise depicting the stamp. Pins, postcards, magnets, framed art, cancellation keepsakes and other collectibles generated $330,000 in sales, according to the court.
"The court should keep in mind that Mr. Gaylord's recovery is not limited to the Postal Service's actual profits," Moore wrote. "Indeed, the court may find that hypothetical negotiation between the parties would result in a higher ongoing royalty than the rate earned by Mr. Gaylord or the Postal Service under past agreements."
Gaylord can also collect prejudgment interest because "it is necessary to make his compensation complete," the decision states.