How a Facelift Cost the U.S. Postal Service $3.5 Million

Mistakes—Even Hilarious Ones—Are Inevitable. What You Do After Often Matters More.

In 2008, the U.S. Postal Service was looking to update its “Forever” stamps. For an entire year, Forever Stamps bore the image of the Liberty Bell, and the public was just tired of it. I know I was. Then again, when I’m mailing off a bill, I don’t really pay much attention to the image on the stamp. It just has to be solid and patriotic, you know? Not like those weird commemorative stamps. The Liberty Bell was a good choice, but after a year, weren’t we just all just a little bit over it?¹OK, OK. To be fair, the population wasn’t actually necessarily bored of the Liberty Bell stamp by 2008; the USPS just foresaw that they would become bored soon.
The Citizens’ Stamp Advisory Committee²Did you know there’s such a thing? was being completely boring about this. They wanted to use the U.S. flag, which had been used millions of times before. Fortunately, someone had the good idea of also using the Statue of Liberty. They decided to call the new stamp the “Lady Liberty Stamp,” because it was shorter than her real name (“Liberty Enlightening the World”) and because alliteration is always cool.
While the U.S. flag had been done many, many times, the Statue of Liberty had been done several times, too. The USPS wanted a fresh new take on Lady Liberty. It hired PhotoAssist to locate different images of the Statue of Liberty. PhotoAssist provide advice, images and “rights-and-permissions expertise,” when you need the right image for your project. “Above all,” it provides “peace of mind.” PhotoAssist located a number of images of Lady Liberty. After reviewing these, the USPS decided that the fresh new take would be to focus on her face. Soon, the number of images was narrowed to just three.
There was a problem with one of the three images. I mean, you know that, or else I wouldn’t be writing about this. In fact, you probably already know what kind of problem: a copyright problem. And because you’re smart, you can already guess the problem: even though the Statue of Liberty is in the public domain, the photograph isn’t, and the USPS didn’t get permission to use the photograph.
I’m here to tell you that, if that was your guess, it was a very good guess, but the truth is much more hilarious. The USPS did get a license from the photographer of the image it chose. The photographer isn’t the plaintiff in this case. The problem was that the statue in the photograph wasn’t the Statue of Liberty. Or, at least, not really. It was an image of the replica that sits outside of New York-New York Hotel in Las Vegas. You know, this one:

OK, you think: but if this is a replica, then there’s no copyright in it because making exact replicas isn’t creative. To obtain copyright in a replica, the sculptor would need to make it a “derivative work” adding something creative to it. In which case, it wouldn’t be a replica anymore.
That’s an accurate statement of the law! But I’m afraid this “replica” isn’t exactly the same as the original (other than being smaller). The sculptor didn’t think the original Statue of Liberty’s face, which is so stoic and severe, was a good fit for Las Vegas. Las Vegas is fun, right? And the Statue of Liberty might be inspiring, but she isn’t, you know, fun. Also, she isn’t pretty. Well, let’s just hear how the sculptor described it:

Well, I felt since this was going to be for a new hotel in Las Vegas, I felt it just needed to be a little more appropriate for the hotel. I knew that the facade of the hotel would look similar to the skyline of New York, but it wouldn’t duplicate it. Everything is out of proportion… . It was just a feel. And I just thought that this needed a little more modern, a little more contemporary face, definitely more feminine, just something that I thought was more appropriate for Las Vegas.

The sculptor also testified that he thought the original face was “a little harsher. It wasn’t as welcoming. It was a little more masculine.” He wanted it to be “softer.” Not all changes were intended, however. Some were the result of the materials he was working with.
You know what? I think he succeeded! “Lady” Liberty indeed!

Anyway, guess which one the USPS chose? It paid Getty Images a flat $1500 fee for a license to the image, which was less than the USPS has budgeted. Budgets were tight, and the USPS was under pressure to roll out the new stamps.

Never Would’ve Used It. But Now That We Have, We LOVE It! (Isn’t that Right?)

But that’s OK! After the public roll-out, a sharp-eyed citizen quickly noticed that the stamp showed the Las Vegas replica rather than that dowdy old one in New York Harbor. The USPS could fix the mistake before things got out of hand.
But the USPS didn’t fix the mistake. Having confirmed its error, the
USPS decided that it kind of liked the image it chose. In fact, even if it had known the truth in advance, it still would’ve chosen the Las Vegas replica image. “We were looking for a different treatment of this icon that has been on 23 different stamps,” USPS’s spokesperson explained. Can’t argue with that.³One might perhaps speculate that this was revisionist history that had more to do with internal politics than with anything else.
The USPS’s legal department supposedly looked into “what licenses must be executed.” If so, then apparently none of the USPS’s legal brain trust thought about contacting the sculptor, who didn’t discover what happened for a year. He found out from his wife, who excitedly told him, “Our statue is on the stamp!” After sharing in her excitement⁴I’m assuming., he contacted a lawyer and applied to register his changes to the Statue of Liberty with the U.S. Copyright Office. For some reason, this took nearly two years, whereupon he promptly sued the USPS, in the U.S. Court of Federal Claims.⁵Which is where you must file lawsuits seeking money damages against the U.S. Government. It’s actually pretty busy but doesn’t see that many copyright cases. The court recently issued its final judgment and opinion, ruling in the sculptor’s favor, in the amount of about $3.5 million.
The USPS wasn’t in a great position. Not only did it make millions of copies of the sculptor’s work, and sell them to the public for money, but it had to admit that it chose the Las Vegas replica image precisely for the feminine changes he made to the original. The USPS only had two real cards to play: fair use (not very good!) and low damages (better). Neither worked.

My Fair Lady Liberty

Let’s start with the fair use defense. It’s… not good, though the court’s analysis made it seem a closer question than it was. The court found, for factor one, that the USPS’s use was very commercial. There was no attempt to even argue that the use was “transformative.” The court called factor two a push: the sculptor’s contributions must have been significant because they’re what attracted the USPS, but his work is still mostly a reproduction. For factor three, the court found this weighed against fair use because, although the USPS used only a small portion of the overall sculpture, the portion it used was where almost all of the sculptor’s contributions were. The court found the fourth factor weighed in favor of fair use, since the sculptor had never tried to exploit his contributions to the Las Vegas replica.
The court naturally concluded that the USPS’s use of the Las Vegas replica wasn’t a fair use. It could have just done a weighted totaling up like this: heavily against + neutral + moderately against – moderately in favor = no fair use. Instead, having performed a factor-by-factor analysis, it went off-script and held the use wasn’t fair because the sculptor’s case was so strong that fair use wasn’t possible:

On balance, we find that defendant has not proven its use to have been fair. The Postal Service’s use of the image on its “ship of the line” or workhorse stamp, printing billions of copies and selling them to the public as part of a business enterprise—whether for use to send mail or to be retained in collections—so overwhelmingly favors a finding of infringement that no fair use can be found.

Uh, no. The question of fair use is separate from the question of infringement. It’s possible for an overwhelming case of infringement to fail because of fair use.⁶There is some overlap between infringement and fair use. More expressive works are more likely to be infringed than factual ones—their copyright is “thicker.” And the more you take, and the more central the taking is to the underlying work, the more likely you are to infringe. Acuff-Rose Music had a stone-cold case of infringement against 2 Live Crew, but 2 Live Crew still won because its use was a fair one. Similarly, a close case of infringement doesn’t mean the fair use defense is any stronger. Imagine (to take random example) that I appropriated a “constellation” from your song to make my hit song. It’s a close call! It has to go to a jury, and on appeal, the verdict is upheld only 2 to 1! Is my use any more likely to be fair than if I had simply reproduced your song note for note? (And, for that matter, are your damages reduced?)

We Sell Them But Only Make Money if You Don’t Actually Use Them.

Anyway, this bobble aside, the court reaches the obviously correct decision on fair use. And surely the USPS knew it wasn’t likely to work. That’s why it put most of its effort into controlling damages. So, let’s talk about damages in copyright cases for a moment.
Copyright law recognizes two broad categories of damages: statutory damages and “actual damages and profits.” I’ve blogged a lot about statutory damages, but the quick run-down is this. For each work infringed (not each act of infringement!), the copyright owner is entitled to between $750 and $30,000, but only if the work in question was timely registered. If the infringement was “willful,” the ceiling goes up to $150,000, and if the infringement was “innocent,” the floor drops to $200. In this case, statutory damages were not available because the sculptor waited far too long to register the Las Vegas replica. As a rule, if you registered the work only as a reaction to the infringement you’re suing about, you’ve almost certainly registered too late.⁷Exception: you registered the work within three months of publishing the work. Anyway, since only a single work was infringed—just millions upon millions of time—the sculptor wasn’t likely to be interested in statutory damages.
That leaves the sculptor with “actual damages and profits.” The reference to “profits” is to the infringer’s profits, to the extent attributable to the infringement. This connection can be very hard to prove, and the sculptor seems to have realized this, because he didn’t even try to disgorge the USPS’s profits. Not only does the USPS lose a lot of money (but more on that below), but it’s hard to attribute the artwork on the stamps to their use. Most people just need a stamp, you know?
“Actual damages” can include any type of damages recognized by regular old tort law. This, too, can be very hard to prove in copyright cases, but the sculptor had an angle. Taking a page from patent law, he proposed that he should recover the amount the USPS would have paid him for a license had it known that it needed a license from him. This is known as a “reasonable royalty,” and it’s an exercise in imagination. We pretend that the USPS and the sculptor were put in touch with each other for licensing negotiations before the stamp designs were settled on. Then we imagine how those negotiations would have worked out, assuming that both sides are trying to maximize their benefit.
Does this sound fuzzy to you? That’s OK! Damages can be fuzzy. Here’s why: having decided that the plaintiff’s rights have been violated, we’re not going to want to let the wrongdoer off the hook just because we aren’t very certain about the amount of damages.
But there’s a problem beyond just fuzziness. The USPS loses money every time someone uses a stamp. Worse, the USPS’s art budget is only so big, so there’s only so much money it could have spent to license the image. The USPS only had $5000 to spend on the art for this stamp. Further, there were those other alternatives the USPS could have chosen if it couldn’t get the deal it wanted. They weren’t as good, true, but they weren’t terrible alternatives, either. It argued, therefore, that the damages would have been only $5000.
That ignores the other end of the equation, though. Would the sculptor have taken a measly $5000? He could have walked away much more easily than the USPS, after all. The USPS needed an image of the Statue of Liberty, and it loved this one.
We return to the main problem, though. The USPS doesn’t make money from the stamps. Wait. That’s not 100% accurate. The USPS loses money from stamps that are used. But it makes a tidy profit from stamps that aren’t used. Collectors buy stamps and take them out of circulation. You might be surprised that there’d be much interest in a “workhorse” stamp, but there are always anomalies, which are potentially valuable collector’s items. (Don’t believe me?) Stamps get lost, thrown away by accident, and so forth.
The USPS is keenly aware that many of its stamps are never used. It’s a source of revenue, and they’d be fools not to take advantage. That’s why there are so many commemorative stamps. The USPS can’t do too much to increase the number of lost stamps, but it can make stamps too pretty to use.
There wasn’t a lot of this “retainage” for the Lady Liberty Forever Stamp, but when you sell 10.5 billion of them, it doesn’t take much. The court estimated that nearly $71 million worth of Lady Liberty Forever Stamps were never used, which is almost pure profit. Before it commissioned the Lady Liberty Forever Stamp, the USPS knew it would be making some money this way, though it couldn’t be sure how much. Retainage for commemorative stamps were fairly predictable because there have been many, but Forever Stamps were still pretty new, so it was unclear how much they’d appeal to collectors.
The court held that the parties, in the imaginary license negotiations, would have hit upon the following compromise. The USPS would have paid the sculptor the budgeted $5000 for a license, plus a running royalty on never-used stamps. That way, the USPS wouldn’t be taking a risk, but the sculptor would get something if the stamps turned out to be a hit with the collectors (or were just really easily lost). The court settled on a royalty rate of 5%⁸Based on a lot of expert testimony, but I suspect its real appeal is simply that it’s a low-ish but round number.. Applying that to $71 million gets you about $3.5 million. Not bad!

Mistaken Identity

Bizarrely, this is the second time in recent years that the USPS has been forced to compensate a sculptor for the unauthorized use of sculpture. The previous case, Gaylord v. United States, involved the eerie Korean War Veterans Memorial, installed on the National Mall. The USPS evidently felt that, since the U.S. had paid the sculptor for his work, the U.S. owned the copyright in it, and the USPS wouldn’t need a license. That was a mistake in legal apprehension (i.e., the scope of rights).
In this case, there was a mistake of identity. It’s tempting to laugh at the USPS. I mean, it is pretty funny: the idea that Lady Liberty packed up, moved to Las Vegas and got a facelift. But the error was pretty to make. One rarely has much cause to study the Statue of Liberty’s face. And when confronted with three options, it went with the prettiest version. And what, exactly, was PhotoAssist doing? Wasn’t knowing the provenance of the images it supplied its job? If anything was inexcusable, it was the USPS’s bizarre decision to double-down on its choice, once its mistake was pointed out. Surely, lawyers were not consulted. The correct thing to have done was seek out the sculptor, beg him for a license, and be prepared to move to a new design if necessary (or at least convincingly pretend to be so prepared during licensing negotiations).
Is it troubling that we seem to prefer the “fake” Las Vegas replica’s face to the real Lady Liberty’s? The sculptor had softened her features, partly because the materials he used allowed that, and partly because severity has been out of style since the end of the Neo-Classical period. I joke when I say the Las Vegas version is prettier, but mostly, she’s just more serene. “Welcoming,” in the sculptor’s words. In his testimony, he sounded surprised that the Statue of Liberty doesn’t look all that welcoming. Isn’t she supposed to be welcoming? Isn’t she the Mother of Exiles? Well, not originally. Originally, she was a message to tyrants and slaveholders.⁹She stands on broken chains. She’s not serene. She’s steadfast, purposeful. But we associate her now with immigration, so we think of her has welcoming, perhaps a bit maternal. That’s what the sculptor captured.
Thanks for reading!