Terry v. Masterpiece Advertising Design

Filing 18

MEMORANDUM AND ORDER: granting 15 Motion for Default Judgment. Having previously reminded Terry's attorney of the need for an evidentiary basis on claiming copyright damages, and having previously ordered Terry to submit "all evidence ne cessary to support the amount of actual damages being claimed," Mar. 22, 2018 Order at 3, we conclude on the record before us that Terry is entitled to $1,560 in damages under 17 U.S.C. § 504(b). The Clerk of the Court is respectfully directed to terminate this case and any motions pending therein and to enter judgment accordingly. SO ORDERED. (Signed by Judge Naomi Reice Buchwald on 6/21/2018) (ama)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------X
CRAIG TERRY,
Plaintiff,
MEMORANDUM AND ORDER
- against 17 Civ. 8240 (NRB)
MASTERPIECE ADVERTISING DESIGN,
Defendant.
-------------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
Background
Plaintiff Craig Terry sued defendant Masterpiece Advertising
Design on October 26, 2017, alleging that Masterpiece infringed
Terry’s

copyright

in

Millville, New Jersey.

a

photograph

of

the

Levoy

Theater

Compl., Oct. 26, 2017, ECF No. 1.

in

Terry

alleged that Masterpiece, without having obtained a license or
Terry’s consent, used the photograph in an advertisement for Cape
Bank, a local bank based in South Jersey.

Terry timely served

process on Masterpiece, see Aff. of Service, Dec. 27, 2017, ECF
No. 7, but Masterpiece did not timely respond or otherwise defend
the action. The Clerk of the Court subsequently issued, at Terry’s
request, a certificate of default pursuant to Rule 55(a) of the
Federal Rules of Civil Procedure.

See Certificate of Default,

Dec. 29, 2017, ECF No. 10.
Terry then moved for default judgment in February 2018,
seeking $20,000 in actual damages under the Copyright Act, 17
1

U.S.C. § 504(b).

See Mot., Feb. 28, 2018, ECF No. 11. The motion

offered no basis for this claim for damages beyond his attorney
Richard Liebowitz’s “belie[f] that an inquest into damages would
be unnecessary because the Defendant’s choice to ignore these
proceedings should be construed against it in order to avoid a
lengthy and intensive inquiry into damages.”
Feb.

28,

2018,

ECF

No.

12.

Rejecting

Liebowitz Aff. ¶ 6,

the

rank

speculation

represented by this request, we explained the legal flaws in this
contention, denied the motion without prejudice, and directed that
any renewed motion for default judgment “include all evidence
necessary to support the amount of actual damages being claimed.”
Mar. 22, 2018 Order at 3, ECF No. 14.
default judgment.

Terry again moves for a

See Mot., June 11, 2018, ECF No. 15.

Discussion
“In light of [Masterpiece]’s default, a court is required to
accept all of [Terry’s] factual allegations as true and draw all
reasonable inferences in [his] favor.”
F.3d 79, 84 (2d Cir. 2009).

Finkel v. Romanowicz, 577

Nonetheless, “prior to entering

default judgment, a district court is ‘required to determine
whether the [plaintiff’s] allegations establish [the defendant’s]
liability as a matter of law.”

City of New York v. Mickalis Pawn

Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (alterations in
original) (quoting Finkel, 577 F.3d at 84).

Further, a default

“is not considered an admission of damages.”

Cement & Concrete

2

Workers Dist. Council Welfare Fund v. Metro Found. Contractors
Inc.,

699

F.3d

230,

234

(2d

Cir.

2012)

(quoting

Greyhound

Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d
Cir. 1992)); see also Au Bon Pain Corp v. Artect, Inc., 653 F.2d
61, 65 (2d Cir. 1981).

Rather, following a default, we “may

determine [whether] there is sufficient evidence either based upon
evidence presented at a hearing” held under Rule 55(b)(2) “or upon
a review of detailed affidavits and documentary evidence.”
& Concrete, 699 F.3d at 234.

Cement

But regardless of how the record is

developed, “[t]here must be an evidentiary basis for the damages
sought by plaintiff.”

Id.

Because Terry’s complaint adequately pleads that he holds a
copyright

in

the

photograph

of

the

Levoy

Theater

and

that

Masterpiece infringed his exclusive rights in the photograph under
the Copyright Act, see 17 U.S.C. § 106, Masterpiece’s default is
sufficient to establish its liability.
We accordingly turn to the question of damages.
“an

infringer

of

copyright

is

liable

for

either

Generally,
--

(1)

the

copyright owner’s actual damages and any additional profits of the
infringer, as provided by subsection (b); or (2) statutory damages,
as provided by subsection (c).”

17 U.S.C. § 504(a).

Terry has

elected to seek his “actual damages and any additional profits of
the

infringer,”

which

we

will

refer

to

as

§ 504(b)

damages;

§ 504(b) damages consist of (1) “the actual damages suffered by
3

[the copyright owner] as a result of the infringement” and (2)
“any

profits

of

the

infringer

that

are

attributable

to

the

infringement and are not taken into account in computing the actual
damages.”

Id. § 504(b).

Terry’s attorney has again averred “that an inquest into
damages would be unnecessary because the Defendant’s choice to
ignore

these

proceedings

should

be

construed

against

it,”

Liebowitz Aff. ¶ 6, June 11, 2018, ECF No. 16, though wellestablished case law and the law of this case make clear the
incorrectness of this belief.

As we have previously explained,

the proposition that Liebowitz offers “has no basis in law and
cannot be reconciled with Rule 55 of the Federal Rules of Civil
Procedure, which contemplates the possibility that a court, prior
to the entry of default judgment, will ‘conduct hearings’ when ‘it
needs to . . . determine the amount of damages.’”

Mar. 22, 2018

Order at 2 (alteration in original) (quoting Fed. R. Civ. P.
55(b)(2)).

The argument that “inquiry into damages is obviated by

the mere fact that a defendant has not defended the action (a
characteristic common to every action where a default judgment is
being considered) and that [plaintiff] is therefore entitled to a
damages amount constructed from whole cloth . . . would improperly
render Rule 55(b)(2) wholly superfluous.”
statutory interpretation authorities).

4

Id. at 2-3 (citing

The argument was meritless

when made as part of Terry’s first motion for default judgment; it
did not bear repeating as part of this second motion.
To his credit, Terry’s attorney does not appear to have
entirely ignored our prior order.

Though this second motion seeks

the exact same $20,000 amount in damages, Terry’s attorney has
submitted a declaration from Terry that sets forth the bases of
the $20,000 request.

See Terry Decl., June 11, 2018, ECF No. 17.

According to Terry, $10,000 is the licensing fee that he would
have

charged

for

the

infringing

advertisement’s

use

and

is

therefore a reasonable estimate of his actual damages, and an
additional

$10,000

in

profits is appropriate.

damages

corresponding

to

Masterpiece’s

Id. ¶¶ 8-10, June 11, 2018, ECF No. 17.

We consider each part of Terry’s claimed § 504(b) damages in turn.
A.

Actual Damages to the Copyright Holder

As to the actual damages portion, Terry asserts that he would
have

charged

“at

least

$10,000”

for

use

“in

connection

with

commercial advertising for the bank’s services” and represents
that

this

$10,000

figure

“is

commercially

reasonable

for

nationwide advertising use in connection with financial services.”
Id. ¶ 8.

In support of this assertion, Terry cites an image of

the Sunshine Cinema in New York offered by Getty Images that -when licensed for a full ad in print use, for up to five years and
5 million in circulation -- licenses for $9,565.

5

Id. ¶ 9 & ex. B.

In
damages,

calculating
the

lost

the

actual

license

fee

damages
to

reasonable enough place to start.

the

portion

copyright

of

§ 504(b)

holder

is

a

See Davis v. Gap, Inc., 246

F.3d 152, 166 (2d Cir. 2001) (interpreting “actual damages” in 17
U.S.C. § 504(b) to include “the owner’s loss of the fair market
value of the license fees he might have exacted of the defendant”).
But “[t]he question is not what the owner would have charged, but
rather

what

is

the

fair

market

value,”

id.,

so

Terry’s

representation that he would have charged at least $10,000 neither
begins nor ends the analysis. 1

Rather, “the owner must show that

the thing taken had a fair market value.”

Id. (emphasis added). 2

The proof that Terry provides falls far short of establishing
$10,000 as a fair market value.

An examination of the infringing

advertisement and the business that it promotes, Cape Bank, quickly
reveals the inaptness of these parameters associated with the
$9,565 fee that he cites in support.

As an initial matter, the

advertisement itself comprises about one-third of a page, with the

1

Terry’s assertion that restaging the photograph in question would cost
upwards of $6,000, Terry Decl. ¶ 6, is also an analytic nonstarter. If, for
example, Terry had a physical photograph that Masterpiece took without
permission and Terry were required to recreate the photograph in order to use
it, the cost of re-creation might well be a reasonable estimate of his actual
damages. But the photograph here is a non-rivalrous good in that Masterpiece’s
infringing use of the photograph does not exclude Terry from using the
photograph, so the cost of re-creation is hardly central to the analysis.
2 This requirement comports with common economic sense.
It might very
well be that at a price of $10,000, Terry would not have been able to sell any
licenses for use of the image. $10,000 per license multiplied by zero licenses
issued, of course, equals $0.

6

use of Terry’s photograph comprising one-sixteenth of the page at
most.

Compl. Ex. B.

Further, and more significantly, “nationwide advertising use”
(corresponding to up to 5 million in circulation) is plainly not
the

appropriate

question.

The

frame
one

of

reference

supported

for

instance

the
of

advertisement

infringement

is

in
an

advertisement that appeared in The Grapevine, Compl. Ex. B, “a
community newspaper delivered free to most residences in the City
of Vineland, NJ and throughout Cumberland County every Wednesday.” 3
Perhaps indicative of the target market, the advertisement in
question appears next to an advertisement listing the weekly
specials at Main’s Meat Market in Vineland and an event listing
including an elementary school fundraiser at the local mall’s
Chick-Fil-A. Compl., Ex. B. Notably, the infringing advertisement
emphasizes Cape Bank’s “LOCAL DECISION MAKING” and proclaims that
“It’s people like [the two bank officers pictured] who make us a
community

bank.”

Id.

“They’re

experienced,

knowledgeable,

accessible and local -- which means you don’t need to cross
multiple state lines to get answers.”

Id.

We don’t need to cross multiple state lines either (or even
the Hudson River) to get answers regarding Cape Bank’s business.
Cursory research into Cape Bank confirms the local decision making

3

See The Grapevine, About Us, http://grapevinenewspaper.com/about-us/
(last visited June 18, 2018).

7

that the advertisement touts.

As of December 31, 2015, Cape Bank

operated 22 branches across four counties in Southern New Jersey;
as the bank describes its business, its “primary market area
consists of Atlantic, Cape May, Cumberland and Gloucester counties
in New Jersey,” in which it held 8.5%, 11.6%, 18.3%, and 1.5%
market share, respectively. 4

A national bank Cape Bank was not,

and national in circulation the infringing advertisement was not.
While we reject the specific parameters that Terry has used
to price a license from Getty Images for the Sunshine Cinema
photograph, Getty Images’s pricing utility allows us to adjust the
usage

specifications

advertisement. 5

to

better

reflect

the

Cape

Bank

Maintaining all other parameters as Terry has set

them but adjusting the size parameter to reflect the size of the
advertisement in the record, adjusting the circulation to “up to
100,000” to better reflect the circulation of The Grapevine and
the population of Cape Bank’s primary market, 6 and adjusting the
duration to six months to better reflect the typical length of an

4

See Cape Bancorp, Inc., Form 10-K, Dec. 31, 2015, https://www.sec.gov
/Archives/edgar/data/1411303/000143774916027675/cbnj20151231_10k.htm
(last
visited June 18, 2018).
5 We accept -- at least in this case -- the validity of a comparison to a
photograph for which Getty Images manages intellectual property rights, though
there may be plenty of reasons that such a comparison is inapt. Notably, there
is no indication that Terry’s photograph was rights-managed by Getty Images or
that the prices of licenses managed by Getty Images are representative of the
fair market value of licenses more broadly.
6 As of the 2010 Census, Cumberland County had slightly more than 50,000
households and the four counties that Cape Bank identifies as its primary market
area had fewer than 300,000 households.

8

advertising campaign, Getty Images prices a license at $1,560. 7
Given that Terry relies on Getty’s pricing utility to support his
determination of a reasonable license fee, we conclude that it
offers a reasonable enough estimate here of the price “on which a
willing buyer and a willing seller would have agreed for the use
taken by the infringer” -- $1,560.
B.

Davis, 246 F.3d at 167.

Profits of the Infringer

Turning to the profits portion of § 504(b), Terry’s suggestion
that the Court should award $10,000 in additional profits fares no
better than his attorney’s suggestion that no inquest into damages
is necessary. While “courts must necessarily engage in some degree
of

speculation”

in

assessing

copyright

damages,

id.

(quoting

Stevens Linen Assocs. v. Mastercraft Corp., 656 F.2d 11, 14 (2d
Cir. 1981)), a § 504(b) damages award must rely on some “factual
basis rather than ‘undue speculation,’” Bus. Trends Analysts, Inc.
v. Freedonia Grp., Inc., 887 F.2d 399, 404 (2d Cir. 1989) (quoting
Abeshouse v. Ultragraphics, Inc., 754 F.2d 467, 470 (2d Cir.
1985)).

Section 504(b) places an initial burden of proof on the

copyright holder, see 17 U.S.C. § 504(b) (requiring that the
copyright owner “present proof . . . of the infringer’s gross
revenue”); Davis, 246 F.3d at 160 (“[T]he term ‘gross revenue’ [in
§

504(b)]

means

gross

revenue

7

reasonably

related

to

the

Getty Images, Price a Rights-Managed Image, https://www.gettyimages.com
/purchase/price-calculator/657077606 (last visited June 18, 2018).

9

infringement, not unrelated revenues.”), a burden that Terry has
not even attempted to carry.
Evaluating the economics of the situation, we conclude that
§ 504(b) damages in this case should be limited to the fair market
value of the licensing fee -- i.e., that the profits portion of
§504(b) damages should be $0.

Consider the advantage that the

infringer, Masterpiece, gained by using Terry’s photograph in an
infringing manner: most directly, Masterpiece saved the costs of
the licensing fee that it would have paid Terry, cost savings that
presumably accrued to Masterpiece as additional profit.

However,

the profits portion of § 504(b) damages may include only profits
that “are attributable to the infringement and are not taken into
account in computing the actual damages.”

17 U.S.C. § 504(b).

The additional profit to Masterpiece has already been accounted
for

in

calculating

Terry’s

actual

damages,

and

“the

double-

counting of profits and damages [is] expressly barred” by § 504(b),
Abeshouse, 754 F.2d at 470.
While it is conceivable that Masterpiece was able to secure
additional advertising business as a result of prospective clients
having viewed the infringing advertisement and been struck by its
brilliance, second-order effects of this type are too speculative
to warrant additional recovery in this type of case.

A comparison

to Davis, which also considered an advertising campaign with
infringing elements, see 246 F.3d at 156, is instructive.
10

In

Davis,

the

infringer

and

the

business

selling

the

products

advertised in the campaign were the same entity -- The Gap.
id.
of

See

Accordingly, the additional sales that Gap made as a result
customers

having

viewed

the

infringing

advertisement

were

properly considered in the § 504(b) analysis, even though the
Second

Circuit

concluded

that

insufficient.

See id. at 159-60.

is

business

not

the

being

advertisement; Cape Bank is.

the

plaintiff’s

proof

was

Here, by contrast, Masterpiece

advertised

in

the

infringing

If, as in Davis, Cape Bank had

designed the infringing advertisement, the additional business
that it received as a result would be far less speculative and
would be properly considered in the § 504(b) analysis.

But the

connection between the additional profits and the infringement in
such a scenario would be far less tenuous than the connection
between Masterpiece’s additional profits and its infringement,
which is the relationship that we must consider here. Accordingly,
we conclude that Terry has not established that the profits portion
of § 504(b) includes any amount not already taken into account in
calculating Terry’s actual damages.
Conclusion
Having previously reminded Terry’s attorney of the need for
an evidentiary basis on claiming copyright damages, and having
previously ordered Terry to submit “all evidence necessary to
support the amount of actual damages being claimed,” Mar. 22, 2018
11

Order at

3,

we conclude on the record before us

that Terry is

entitled to $1,560 in damages under 17 U.S.C. § 504(b).
The Clerk of the Court is respectfully directed to terminate
this case and any motions pending therein and to enter judgment
accordingly.
SO ORDERED.

Dated:

New York, New York
June ;!1__, 2018

£'ii<illih~

UNITED STATES DISTRICT JUDGE

12