United States District Court, S.D. New York
June 30, 2004.
JAVIER BARRERA and LYNN BURGOS, Plaintiffs,
BROOKLYN MUSIC, LTD., K-TEL INTERNATIONAL, INC., FRANK BABAR and JOHN and JANE DOES 1 through 10, Defendants.
The opinion of the court was delivered by: KEVIN FOX, Magistrate Judge
REPORT AND RECOMMENDATION
TO THE HONORABLE ROBERT L. CARTER, UNITED STATES DISTRICT JUDGE
In this action, plaintiffs Javier Barrera ("Barrera") and Lynn
Burgos ("Burgos") (collectively "plaintiffs") allege violation of
the Copyright Act of 1976, 17 U.S.C. § 101, et seq.
("Copyright Act"), against Brooklyn Music, Ltd. ("BML") and Frank
Babar ("Babar") (collectively "defendants"). Upon the defendants'
failure to answer or otherwise respond to the complaint or to the
amended complaint, your Honor referred the matter to the
undersigned to conduct an inquest and to report and recommend the
amount of damages, if any, to be awarded to the plaintiffs
against the defendants.
The Court directed the plaintiffs to file and serve proposed
findings of fact and conclusions of law and an inquest memorandum
setting forth their proof of damages, the costs of this action,
and their attorney's fees. The defendants were directed to file
and serve opposing memoranda, affidavits and exhibits, as well as
any alternative findings of fact and conclusions of law they deemed appropriate. The defendants were also directed to
state whether they wanted a hearing to be held for the purpose of
In support of their request for damages, the plaintiffs
submitted: (1) an inquest memorandum; (2) the declaration of
Barrera, attesting to the facts in the plaintiffs' inquest
memorandum; (3) the declaration of an expert in the area of
licensing stock photographic works, Gary Elsner ("Elsner"),
opining on the plaintiffs' actual damages ("Elsner Declaration");
and (4) the declaration of the plaintiffs' attorney, Nicholas A.
Penkovsky ("Penkovsky Declaration").
The defendants failed to respond to the Court's directive.
The plaintiffs' submissions aver that they are entitled to
$1,512,000.00 in actual damages and profits attributable to the
defendants' infringement, as well as to unspecified costs they
incurred in bringing this action. Additionally, the plaintiffs
seek an order permanently enjoining the defendants from further
distribution of the Green Silo #3 photograph ("Photograph"),
which is the subject of this action, and an order that the
defendants destroy any infringing articles in their possession.
For the reasons set forth below, I recommend that the
plaintiffs be awarded $27,000.00 in actual damages, and that the
plaintiffs' application for injunctive relief be granted.
II. BACKGROUND AND FACTS
Based on submissions by the plaintiffs, the amended complaint
filed in the instant action the factual allegations of which,
perforce of the defendants' default, must be accepted as true,
except as they relate to damages, see Au Bon Pain Corp. v.
Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) and the Court's
review of the entire court file maintained in this action, the
following findings of fact are made:
The plaintiffs are visual artists residing in the state of New
York. Defendant BML is a corporation organized and existing under the laws of the state of
New York, with its principal office in Kings County. K-tel
International, Inc. ("K-tel"), a defendant dismissed from the
action following a negotiated disposition of the claims asserted
against it, is a Minnesota corporation with an office in New York
County. At times relevant to this action, K-tel and BML were each
engaged in the business of producing, marketing, distributing,
and selling music recordings. Defendant Babar was BML's
In August 1997, the plaintiffs jointly created the Photograph.
It is an original abstract photograph of an aged agricultural
silo located in Vermont. The Photograph is part of a collection
of the plaintiffs' photographs that are available for sale to
collectors through art galleries. In November 1997, the
plaintiffs showed the Photograph to a designer as part of a
portfolio of the work the plaintiffs had created jointly. The
plaintiffs left the Photograph with the designer for review only;
they did not authorize its reproduction.
In an agreement dated June 24, 1997 (the "1997 Agreement"),
K-tel retained Babar as a consultant. At the conclusion of the
1997 Agreement's one-year term, K-tel, Babar and BML entered into
an agreement ("1998 Agreement") under which: 1) K-tel was to
provide funding of at least $60,000.00 per month to BML for a
period of two years; 2) Babar was to be employed exclusively by
BML; and 3) K-tel acquired certain options to purchase a
controlling interest in BML. In pertinent part, the preamble to
the 1998 Agreement states the following:
* * *
[. . .] K-TEL and BML have previously and will
continue to enter into agreements with regard to the
exploitation of BML Assets ("Other K-TEL Agreements")
including, without limitation, with regard to the
a) the distribution by K-TEL of albums produced,
recorded, owned or controlled by BML or artists with
whom BML has agreements; and b) the licensing by K-TEL of masters, entire albums
and musical compositions produced, recorded, owned or
controlled by BML; and
c) the representation of BML by K-TEL for the
purposes of licensing BML Assets to third parties.
Penkovsky Declaration, Exh. 2, sub-Exh. C, p. 1.
In late 1998, the plaintiffs discovered a compact disc entitled
"Digital Empire" ("CD") while at a record store. The CD featured
the Photograph on its cover. Shortly thereafter, the plaintiffs
learned that the design of the CD divider contained within the CD
package also incorporated the Photograph, and that BML had used
the Photograph on its website in order to promote sales of the
CD. None of these uses of the Photograph was authorized by the
On March 29, 1999, the plaintiffs sent a letter to the
defendants demanding that they cease and desist from any further
use of the Photograph. Thereafter, the plaintiffs registered
their copyright in the Photograph with the United States
Copyright Office, which issued the plaintiffs a certificate of
copyright registration on April 1, 1999. On March 23, 2000, the
parties to the 1998 Agreement terminated that agreement.
The plaintiffs commenced this action on December 8, 2000. They
contend that the defendants reproduced, published, displayed and
distributed the Photograph without authorization from the
plaintiffs, and also created derivative works from the
Photograph, all of which activity infringed the plaintiffs'
copyright in the Photograph, in violation of the Copyright Act.
Pursuant to 17 U.S.C. § 504(b) ("§ 504(b)"), the plaintiffs seek
actual damages and to recover any profits earned by the
defendants that are attributable to the infringement of the
Photograph. The plaintiffs claim that the appropriate measure of
their actual damages is a reasonable license fee for the
defendants' use of the Photograph. They maintain that amount is $72,000. The plaintiffs also contend that the appropriate measure
of the defendants' profit is the sum of the payments defendant
BML allegedly received from K-tel pursuant to the 1998 Agreement,
$1,440,000.00. The plaintiffs do not specify their litigation
III. CONCLUSIONS OF LAW
As noted above, upon the entry of a party's default in an
action, the party is deemed to have admitted all factual
allegations in the complaint, except as they relate to damages.
See Au Bon Pain Corp., 653 F.2d at 65. However, a court has
discretion to determine whether the facts alleged in a complaint
state a legally sufficient cause of action. See, e.g., In re
Crazy Eddie Sec. Litig., 948 F. Supp. 1154, 1160 (E.D.N.Y. 1996).
Additionally, the amount of damages must be established by the
plaintiff in a post-default inquest, "unless the amount is
liquidated or susceptible of mathematical computation." Flaks v.
Koegel, 504 F.2d 702, 707 (2d Cir. 1974). In conducting an
inquest, a court need not hold a hearing "as long as it [has]
ensured that there was a basis for the damages specified in the
default judgment." Transatlantic Marine Claims Agency, Inc. v.
Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997). The court
may rely on affidavits or documentary evidence in evaluating the
fairness of the sum requested. See Tamarin v. Adam Caterers,
Inc., 13 F.3d 51, 54 (2d Cir. 1993).
The Copyright Act states, in pertinent part: "an infringer of
copyright is liable for either (1) the copyright owner's actual
damages and any additional profits of the infringer, as provided
by [§ 504(b)]; or (2) statutory damages, as provided by
subsection [17 U.S.C. § 504(c)]." 17 U.S.C. § 504(a) ("§
504(a)"). Actual damages are primarily measured by "the extent to
which the market value of the copyrighted work at the time of the
infringement has been injured or destroyed by the infringement."
See Fitzgerald Publ'g Co., Inc. v. Baylor Publ'g Co., Inc., 807 F.2d 1110, 1118 (2d Cir. 1986). In appropriate circumstances,
actual damages may be taken to be a reasonable license fee that
is, the fair market value of a license authorizing defendants'
use of the copyrighted work. See On Davis v. The Gap, Inc.,
246 F.3d 152, 164-68 (2d Cir. 2001).
Typically, the plaintiffs sell prints of their work through art
galleries and do not sell or license their work for commercial
purposes. Since they were unfamiliar with the market for such
licensed work, the plaintiffs retained Elsner, to assess the fair
market value of a license to use the Photograph as the defendants
Fed.R.Evid. 702 provides:
If scientific, technical, or other specialized
knowledge will assist the trier of fact to understand
the evidence or to determine a fact in issue, a
witness qualified as an expert by knowledge, skill,
experience, training, or education, may testify
thereto in the form of an opinion or otherwise, if
(1) the testimony is based upon sufficient facts or
data, (2) the testimony is the product of reliable
principles and methods, and (3) the witness has
applied the principles and methods reliably to the
facts of the case.
Furthermore, the Supreme Court has explained that "the task of
ensuring that an expert's testimony both rests on a reliable
foundation and is relevant to the task at hand" is to be
performed by a court. Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579, 597, 113 S.Ct. 2786, 2799 (1993). Each step
of an expert's analysis must be reliable in order for the
expert's opinion testimony to be considered in a judicial
proceeding. Amorgianos v. National R.R. Passenger Corp.,
303 F.3d 256
, 267 (2d Cir. 2002). However, "[a] minor flaw in an
expert's reasoning or a slight modification of an otherwise
reliable method will not render an expert's opinion per se
inadmissible." Id. Although expert testimony should be excluded
if it is "speculative or conjectural," if it is "based on
assumptions so unrealistic and contradictory as to suggest bad faith," or if it is "in essence an apples and oranges
comparison," "other contentions that the assumptions are
unfounded go to the weight, not the admissibility, of the
testimony." See Boucher v. U.S. Suzuki Motor Corp.,
73 F.3d 18, 21 (2d Cir. 1996) (internal quotation marks omitted).
Elsner has extensive work experience in the stock photograph
industry,*fn1 extending over a period of more than
thirty-five years. As a senior executive for several stock
photography agencies and as the president of his own consulting
company, Elsner has handled more than three hundred copyright
infringement claims for both individual photographers and stock
photography agencies. By virtue of his knowledge and experience
in the field, the Court finds Elsner has sufficient knowledge,
skill and experience in the stock photograph industry to qualify
him to provide an opinion about a reasonable license fee for the
defendants' use of the Photograph.
The calculation of a reasonable license fee for use of a
photograph may be based on such factors as the type of use, size
of use, and circulation. See Baker, 254 F. Supp.2d at
353-354. In his analysis, Elsner also considers the type of media
in which the Photograph is reproduced, the size of the image of
the Photograph in relation to the materials in which it is used,
the geographic scope of the market in which the infringing use
was made, and whether the use of the photograph contains a
"credit line" that completely and accurately identifies the
author(s) of the photograph.
Based on these considerations and on his review of the
documents, photographs, and websites relevant to this action,
Elsner assesses that a reasonable license fee, assuming the use
of a complete and accurate credit line, would include: 1) $2,500 for
the use of the Photograph on the front and back covers of the CD,
assuming worldwide distribution of not more than 100,000 CDs; 2)
$3,500 for the use of the Photograph in advertisements of the CD,
including those in print and on the Internet; 3) $1,000 for the
use of the Photograph on the CD divider; and 4) $2,000 for the
four uses within the booklet that accompanied the CD.
Accordingly, Elsner computes a license fee of $9,000 ("base
license fee"). Elsner states that this figure should be augmented
to account for the fact that the defendants' uses of the
Photograph credit Barrera only partially with the statement
"Photography by Javier" and do not credit Burgos at all.
According to Elsner, it is customary in the music industry to
triple the license fee for a photograph if credit is not properly
given to the photographer(s). Augmented on this basis, the
license fee would be $27,000 ("augmented license fee").
The factors used by Elsner to compute the base license fee are
ones that reliably could be expected to determine the value of a
license for use of a stock photograph. Moreover, the inclusion of
a credit line would likely have significant value to a
photographer, in view of the additional notoriety and business
opportunities such credit might bring. Conversely, it is
reasonable to conclude that a photographer would charge a
significantly higher fee to a licensee who wishes to omit a
credit line from its usage of a photograph. Elsner's application
of all these factors was informed by his review of pertinent
materials in this action. Accordingly, the Court finds that
Elsner computed the base and augmented license fees through the
application of reliable principles and methods, and with
sufficient bases in fact.
Elsner opines that license fee should be augmented further by
$45,000, five times the base license fee to account for the
fact that the defendants' use of the Photograph was unauthorized.
He states that it is the custom and practice in the photography
industry for photographers and stock photography agencies to charge such an
additional fee when they discover an unauthorized use of
photographs whose copyrights they hold. Elsner further explains:
Most agencies will accept payment of a fee multiplied
by either three or four times the customary license
fee if the matter is immediately settled when
brought to the attention of the infringing party. On
occasion, a multiplier of not less than ten times the
customary license fee or an amount equal to the
limits of the statutory damages provided under
copyright law is demanded when litigation has to be
commenced in order to resolve the issues of the
Elsner Declaration, ¶ 11 (emphases added).
Since the plaintiffs have applied for actual damages, pursuant
to § 504(a) & (b), this additional $45,000 may only be awarded if
it represents compensation for an injury caused by the
defendants' infringing activities. The additional $45,000, which
allegedly reflects the fact that defendants' use of the
Photograph was unauthorized, cannot logically represent part of
the fair market value of a license authorizing such use.
Neither Elsner's declaration nor any of the other materials
before the Court identify any other injury cognizable under §§
504(a) & (b) for which the additional $45,000 would provide
compensation. The portion of Elsner's declaration quoted above
suggests that a photographer or stock photography agency might
demand such an additional fee in order to avoid the need to
resort to litigation to resolve an infringement dispute. However,
the injuries compensable through actual damages, as contemplated
by §§ 504(a) & (b), do not encompass the need to engage in
litigation. Other sections of the Copyright Act govern the
recovery of litigation expenses for copyright infringement
actions. See 17 U.S.C. § 412, 505 (providing for recovery of
litigation costs and a reasonable attorney's fee when certain
copyright registration requirements are met). It would be
inappropriate to circumvent the scheme put in place by those other provisions of the Copyright
Act by awarding such compensation under the rubric of actual
damages. The plaintiffs' application for damages includes a
separate request for the award of litigation costs, and that
request is addressed below. Accordingly, the Court finds that
there is no basis in the record before the Court for the
additional $45,000 in actual damages suggested by the Elsner
In light of the foregoing, the Court finds that the plaintiffs
have established actual damages of $27,000, the reasonable
license fee for the defendants' use of the Photograph.
Profits from the Defendants' Infringement
In addition to actual damages, a copyright owner electing to
seek damages under § 504(b) is entitled to recover "any profits
of the infringer that are attributable to the infringement and
are not taken into account in computing the actual damages."
17 U.S.C. § 504(b). The statute provides further: "[i]n establishing
the infringer's profits, the copyright owner is required to
present proof only of the infringer's gross revenue, and the
infringer is required to prove his or her deductible expenses and
the elements of profit attributable to factors other than the
copyrighted work." Id. However, for the purposes of § 504(b),
"gross revenues" includes only "gross revenues reasonably related
to the infringement, not unrelated revenues." On Davis, 246
F.3d at 160; see also Fournier v. Erickson, 242 F. Supp.2d 318,
327 (S.D.N.Y. 2003) (holding that in a copyright action
alleging that advertisements for one of defendant's software
product lines made infringing use of plaintiff's work, plaintiff
may offer evidence of defendant's gross revenues stemming from
sales of that software product line, but not from sales of
defendant's other products and services).
The plaintiffs contend that the monthly payments provided for
in the 1998 Agreement are gross revenues of BML attributable to
the defendants' infringement. However, under circumstances that are unclear from the record before the Court,
the 1998 Agreement was terminated by the parties prior to the end
of the two-year period during which contractual monthly payments
were to be made. This leaves considerable doubt about what
portion of the contractual monthly payments were actually made to
BML. Moreover, the plaintiffs have not established that monthly
payments made pursuant to the 1998 Agreement were gross revenues
reasonably related to the infringement, as required by On
Davis. While the amount of the payments is partly a function of
the amount of royalties due to BML from K-tel for sales of BML
albums licensed to K-tel, the 1998 Agreement suggests that the CD
was just one of many music albums that K-tel licensed from BML
since at least 1997. Moreover, the 1998 Agreement expressly
states that K-tel would continue to license and distribute
additional recordings owned by BML. More significantly, the
principal object of the 1998 Agreement was to grant K-tel certain
rights entitling it to purchase a controlling interest in BML.
The contention that the funding that K-tel was to provide to BML
in exchange for such rights represents gross revenues reasonably
related to the sale of the CD is not plausible.
For the foregoing reasons, the Court finds that any payments
made to BML by K-tel pursuant to the 1998 Agreement are not gross
revenue within the meaning of § 504(b). Accordingly, the
plaintiffs' application for an award of profits attributable to
the defendants' infringement of the Photograph should be denied.
Attorney's Fee and Costs
The Copyright Act authorizes the court, in its discretion, to
"allow the recovery of full costs by or against any party other
than the United States or an officer thereof." 17 U.S.C. § 505.
"Except as otherwise provided by [the Copyright Act], the court
may also award a reasonable attorney's fee to the prevailing
party as part of the costs." Id. However, with exceptions not relevant to this action, a plaintiff may not recover an
attorney's fee if "(1) any infringement of copyright in an
unpublished work commenced before the effective date of its
registration; or (2) any infringement of copyright commenced
after first publication of the work and before the effective date
of its registration, unless such registration is made within
three months after the first publication of the work."
17 U.S.C. § 412.
In this action, the defendants' infringement began no later
than 1998, prior to the effective date of the plaintiffs'
registration of their copyright in the Photograph, April 1, 1999.
Thus, if the Photograph was unpublished at the time the
infringement commenced, the plaintiffs are ineligible for
recovery of their attorney's fee. If, on the other hand, the
Photograph was published prior to the time the infringement
commenced, such publication would necessarily have occurred more
than three months prior to the effective date of the copyright
registration. In this case, too, the plaintiffs cannot recover
their attorney's fee.
Additionally, the record does not include any contemporaneous
time records, invoice(s) of the specific services provided or
charges levied by the plaintiffs' counsel, or any other basis
upon which the Court might evaluate the amount or reasonableness
of the plaintiffs' attorney's fee. In the Second Circuit, a party
seeking an award of an attorney's fee must support that request
with contemporaneous time records that show, "for each attorney,
the date, the hours expended, and the nature of the work done."
New York State Ass'n for Retarded Children, Inc. v. Carey,
711 F.2d 1136, 1154 (2d Cir. 1983). Attorney's fee applications that
do not contain such supporting data "should normally be
disallowed." Id. at 1154.
The record is also devoid of any evidence of the costs the
plaintiffs incurred in bringing this action. Accordingly the
Court has no basis upon which to fix the amount of costs that the
plaintiffs might recover. Accordingly, the plaintiffs' application for an award of costs
and an attorney's fee should be denied.
The Copyright Act provides that a court may "grant temporary
and final injunctions on such terms as it may deem reasonable to
prevent or restrain infringement of a copyright."
17 U.S.C. § 502(a). "Generally, a plaintiff must show the threat of [a]
continuing violation in order to be entitled to injunctive
relief." Peer Int'l Corp. v. Luna Records, Inc., 887 F. Supp. 560,
570 (S.D.N.Y. 1995). Injunctive relief may also include an
order that infringing articles in a defendant's possession be
destroyed. See, e.g., id.
In this action, the defendants' failure to respond to the
plaintiffs' assertion of their rights under the Copyright Act
suggests that there is a significant threat of continuing
infringement of the Photograph by the defendants. Therefore, the
Court finds that injunctive relief is warranted.
For the reasons set forth above, I recommend that: 1) the
plaintiffs be awarded actual damages in the amount of $27,000.00;
2) the plaintiffs' application for an award of profits, attorney
fees and costs be denied; 3) the defendants be permanently
enjoined from making any further infringing use of the
Photograph; and 4) the defendants be ordered to destroy any
articles in their possession that make infringing use of the
V. FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal
Rules of Civil Procedure, the parties shall have ten (10) days
from service of this Report to file written objections. See
also Fed.R.Civ.P. 6. Such objections, and any responses to
objections, shall be filed with the Clerk of Court, with courtesy
copies delivered to the chambers of the Honorable Robert L. Carter, 500 Pearl Street, Room 2220, New York, New
York, 10007, and to the chambers of the undersigned, 40 Foley
Square, Room 540, New York, New York, 10007. Any requests for an
extension of time for filing objections must be directed to Judge
Carter. FAILURE TO FILE OBJECTIONS WITHIN TEN (10) DAYS WILL
RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE
REVIEW. See Thomas v. Arn, 474 U.S. 140, 106 (1985); IUE
AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir.
1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992);
Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988);
McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).
* * *
The plaintiffs shall serve a copy of this Report and
Recommendation upon the defendants and submit proof of service to
the Clerk of Court.