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Davis v. Gap, Inc. - 246 F.3d 152 (2d Cir. 2001)

Rule:

In a copyright infringement case, the law exacts that the amount of damages may not be based on undue speculation. The question is not what the owner would have charged for use of the protected material, but rather what is the fair market value. In order to make out his claim that he has suffered actual damage because of the infringer's failure to pay the fee, the owner must show that the thing taken had a fair market value. But if the plaintiff owner has done so, and the defendant is thus protected against an unrealistically exaggerated claim, the United States Court of Appeals for the Second Circuit sees little reason not to consider the market value of the uncollected license fee as an element of "actual damages" under 17 U.S.C.S. § 504(b). Furthermore, the fair market value to be determined is not of the highest use for which plaintiff might license but the use the infringer made.

Facts:

Plaintiff On Davis was the creator and designer of nonfunctional jewelry worn over the eyes in the manner of eyeglasses. Defendant The Gap, Inc. was a major international retailer of clothing and accessories. Gap, without Davis' permission, used a photograph of an individual wearing Davis' copyrighted eyewear in an advertisement for the stores operating under the "Gap" trademark that was widely displayed throughout the United States. Thereafter, Davis filed a lawsuit against Gap in federal district court seeking a declaratory judgment of infringement and damages, including $ 2,500,000 in unpaid licensing fees, a percentage of Gap's profits, punitive damages of $ 10,000,000, and attorney's fees. The district court granted summary judgment for Gap on the grounds that Davis' claims for actual damages and profits under 17 U.S.C.S. § 504 (b) (1994) were too speculative to support recovery, or were otherwise barred by a prior ruling from the United States Court of Appeals for the Second Circuit. Furthermore, the district court held that Davis was not eligible for statutory damages or attorney's fees because he had not timely registered his copyright, and the Copyright Act did not permit recovery of punitive damages.

Issue:

Did the district court err in granting summary judgment for Gap? 

Answer:

Yes, in some aspects.

Conclusion:

The appellate court vacated the district court's ruling on declaratory relief because the lower court overlooked that aspect of relief. On the other hand, the court held that the district court properly precluded recovery based on Gap's profits since Davis' claim was too speculative. However, the court held that the district court erred regarding Davis' claim for damages based on Gap's failure to pay him a reasonable license fee. The district court properly concluded that Davis was not entitled to punitive damages under the Copyright Act. The court rejected Gap's fair use and de minimis use defenses.

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