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Terry v. Masterpiece Advertising Design

United States District Court, S.D. New York

June 21, 2018

CRAIG TERRY, Plaintiff,
v.
MASTERPIECE ADVERTISING DESIGN, Defendant.

          MEMORANDUM AND ORDER

          NAOMI REICE BUCHWALD, UNITED STATES DISTRICT JUDGE.

         I. Background

         Plaintiff Craig Terry sued defendant Masterpiece Advertising Design on October 26, 2017, alleging that Masterpiece infringed Terry's copyright in a photograph of the Levoy Theater in Millville, New Jersey. Compl., Oct. 26, 2017, ECF No. 1. 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 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.” Liebowitz Aff. ¶ 6, Feb. 28, 2018, ECF No. 12. Rejecting 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. Terry again moves for a default judgment. See Mot., June 11, 2018, ECF No. 15.

         II. 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.” Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) . 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 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.” Cement & Concrete, 699 F.3d at 234. 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. Generally, “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 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 [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 well-established 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.” Id. at 2-3 (citing statutory interpretation authorities). 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 damages corresponding to Masterpiece's profits is appropriate. 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. Id. ¶ 9 & ex. B.

         In calculating the actual damages portion of § 504(b) damages, the lost license fee to the copyright holder is a reasonable enough place to start. 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 ...


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