IP Law Daily, COPYRIGHT—S.D.N.Y.: No such thing as ‘unrealized profits’ when it comes to artwork, a prominent federal court rules, (Sep 12, 2023)

By Matthew Hersh, J.D.

The Manhattan court declined to extend a disputed line of cases involving architectural designs.

The owner of an allegedly infringing piece of art would not be required to pay over to the copyright owner the so-called “unrealized profits” that he might realize in the future if he were to sell the work, the federal district court for Manhattan has held. The court, in refusing to extend to artworks what it branded a “unique line of cases” involving architectural drawings, also found that the copyright owner had not made the factual showing necessary to show that he was entitled to a cut of profits from an art gallery’s sale of other works that were exhibited along with the allegedly infringing work (Graham v. Prince, September 11, 2023, Stein, S.).

The court’s opinion arises out of a long-running dispute between photographer Donald Graham, artist Richard Prince, and the Gagosian Gallery. The New York-based photographer Graham, as described in his website, is “an internationally recognized portrait, fashion and fine art photographer” who works in the worlds of fashion, movies, music, magazines and advertising. Richard Prince, born in the Canal Zone (his biography explains that his parents worked for the OSS, the precursor for the CIA) and now also New York-based, is a widely recognized photographer and painter and mainstay of the so-denominated “appropriation art” movement. The Gagosian is a network of art galleries, named for its art dealer owner Larry Gagosian, located throughout the world but most prominently in New York City.

The lawsuit arises out of the photographer’s claim that the artist infringed on his copyright in a photograph entitled Rastafarian Smoking a Joint when he created and sold a work featuring that photograph. That work, called Untitled (Portrait of Rastajay92), was displayed in the Fall of 2014—along with a number of works—at the Madison Avenue location of the gallery, along with a series of non-infringing works with a similar aesthetic. (The gallery’s owner purchased the “Rastajay92” work—as the court labeled it—for himself right before the Exhibition opened).

The photographer sued the artist and the gallery—and the gallery’s owner to boot—for copyright infringement. (The lawsuit, filed in 2015 and since amended, now covers well over 200 entries in the Manhattan court’s docket.) The court refused to dismiss the lawsuit on the grounds of fair use in a 2017 order. (IP Law Daily covered that decision here). Earlier this year, in a decision IP Law Daily covered here, the court denied summary judgment—this time after discovery—on the fair use question. (That order also applied to a separate case against the same defendants, then pending before the same judge, filed by photographer Eric McNatt).

The court then turned its attention to the next motion up. In that motion, the gallery and its owner moved for partial summary judgment dismissing the photographer’s claim for indirect profits as well as what the photographer termed “unrealized profits.” That motion led to this opinion.

Indirect profits. The court granted the gallery’s motion. Under the Copyright Act, a successful plaintiff is entitled to recover actual damages “and any additional profits of the infringer.” But the profits at issue in this motion did not involve the gallery’s sale of the allegedly infringing artwork itself. (The gallery and its owner appeared to acknowledge, the court noted, that the gallery would be required—if it lost the lawsuit—to pay over the profits it realized from the direct sale of the artwork to the owner.) Rather, the issue here was that the gallery sold other works—but not the photographer’s—in connection with the 2014 exhibition. Was the photographer entitled to a bite of the gallery’s profits from those sales? The court found that he was not.

The court’s opinion considered, and rejected, two arguments by the photographer. The first was that the infringing work was essentially “contained within” the other marketed works, in the same way that an anthology of poems might contain a single poem that was purloined. Were that in fact the case, the court noted, the photographer might well have the right to the profits generated from the inclusion of the infringing work within the larger compilation (and the burden would fall to the gallery to apportion the profits arising from the infringing work as opposed to the other included works). But the photographer’s contentions on this point, the court noted, “ignore the reality that each of the [other works] was sold as a discrete and separate item, totally independently of each of the others and of the sale of Rastajay92.” The demand for profits was therefore not one for direct profits from the sales, but was more appropriately treated as a demand for “indirect profits”—a form of profits that involve “a more attenuated causal link between infringement and a defendant’s revenues.”

Nor could the photographer satisfy that more demanding standard for indirect profits, the court held. Under governing precedents, the court noted, a copyright owner “bears the initial burden of demonstrating a causal nexus between the infringement and the appropriate gross revenues.” Here, the court found, the photographer failed to demonstrate this causal nexus. The gallery and its owner had “never credited Rastajay92 for the success of their sales” of the other works, the court noted, nor did Rastajay92 “figure prominently” in the gallery’s promotion of those works. Indeed, relative to the total amount of promotion for the other works, the court observed, “there was precious little that included Rastajay92, and none that did so prominently.” Given this absence of proof that exposure to Rastayjay92 affected the sales of the other works, the court concluded, the claim for indirect profits would fail.

Unrealized profits. The court also granted summary judgment on the photographer’s claim for so-called “unrealized” profits earned by the gallery’s owner. This decision required less analysis. The photographer’s theory was that even though the gallery owner had not yet disposed of the allegedly infringing artwork, he might well in the future—at which point he would earn profits that should rightly belong to the photographer. To be sure, the court noted, there appeared to be “a unique line of cases” in which unrealized profits might be paid over in the case of architectural works. But the court would decline to extend this disputed line of cases “beyond its cabined context” to award unrealized profits to the photographer here.

The Case is No. 15-CV-10160.

Attorneys: David James Kappos (Cravath, Swaine & Moore LLP) for Donald Graham. Richard Aframe Edlin (Greenberg Traurig, P.A.) for Richard Prince. Matthew Seldin Dontzin (Dontzin Nagy & Fleissig LLP) for Gagosian Gallery, Inc. and Lawrence Gagosian.

Companies: Gagosian Gallery, Inc.

MainStory: TopStory Copyright NewYorkNews GCNNews