Two recent court cases and related proposed legislation affect publicity rights for some of the more notable entertainment icons. This article also summarizes common questions about valuing publicity and privacy rights.
What is a Right of Publicity?
Although sometimes blurred by courts and commentators, the right of publicity and the right of privacy are different torts. The right of publicity:
1. Protects only entertainers, athletes, and other celebrities who have succeeded in becoming famous;
2. Is a property right to exploit a celebrity’s name, voice, image, or likeness;
3. Can survive the celebrity’s death, and benefits heirs or assignees;
4. Measures damages through a commercial determination of the fair market value of the misappropriated exploitation;
5. When addressed through common law, is a misrepresentation of endorsement through the tort of passing off.
In contrast, the right of privacy:
1. Protects everyone, including both celebrities and non-celebrities;
2. Protects one’s peace of mind and the right to be left alone without unwanted intrusions;
3. Is a personal right that cannot be assigned;
4. Ends when the person whose privacy is invaded dies;
5. Measures damages based on mental distress that result from the undesired intrusion.
Where a postmortem right of publicity does not exist, one might still allege that an unauthorized use represents a false endorsement claim under the Lanham Act. The Lanham Act prohibits the use of any name, symbol, or device that is likely to deceive or cause consumers to be confused as to the source, sponsorship, approval, or association. In a false endorsement case, the celebrity’s identity functions as a trademark. Consequently, a Lanham Act filing requires evidence of consumer confusion, an element that would not need to be present in a right of publicity claim.
California’s Postmortem Publicity Rights and Recent Changes
California probably has the most comprehensive right of publicity laws in the United States, which other states have used as a model. Numerous other states have laws to protect the publicity rights of celebrities, including Florida, Illinois, Indiana, Kentucky, Massachusetts, Nebraska, Nevada, New York, Ohio, Oklahoma, Rhode Island, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, and Wisconsin. Additional states address rights of publicity through common law.
Effective in 1985, the California Legislature enacted the Celebrities Rights Act to provide for a posthumous right of publicity that can transfer by contract, trust or testamentary instrument. The statute gave the right to all personalities who died on or after January 1, 1935 (within 50 years of the effective date of the statute), and provided that the posthumous right of publicity could be enforced for a period of 50 years after the personality’s death. The Legislature amended the statute in 1998 to:
1. Abrogate a court decision which limited the celebrity’s rights;
2. Distinguish between the permissible use of a celebrity’s likeness in works of art or entertainment, and those prohibited without consent in connection with products, goods and merchandise; and
3. Extend the protection period from 50 to 70 years, thus extending the right to all personalities who died on or after January 1, 1915 (within 70 years prior to the effective date of the 1985 statute).
This past May, two federal courts, one in California and one in New York, interpreted California’s post-mortem publicity rights statute as prohibiting publicity rights from passing under a deceased celebrity’s will if that celebrity died before January 1, 1985, the effective date of the statute. Both court cases involved the commercial use of images of Marilyn Monroe, who died in 1962. Both courts ruled that the statutory post-mortem rights to publicity established in 1985 could not be transferred by a testamentary instrument in 1962 (i.e., before the law was passed). In the California case, District Judge Margaret Morrow expressed concern that her ruling would take away the right of publicity from charitable institutions who had gained those rights through the residual clause of a will. Judge Morrow wrote, “Nothing in this order prevents legislatures from enacting right of publicity statutes so as to vest the right of publicity directly in the residuary beneficiaries of deceased personalities’ estates…”
SB 771 (Kuehl) accepts Judge Morrow’s invitation. This bill, sponsored by the Screen Actor’s Guild, abrogates these two recent court decisions by clarifying that a deceased celebrity’s right of publicity applies to individuals who died before January 1, 1985. If passed (which appears likely based upon support received to date), SB 771 will protect the publicity rights of celebrities who died before January 1, 1985. Effectively, this will support the economic interests of charitable interests and other non-relative heirs who have received these rights.
If passed, the law will strip the obvious economic value of these licensing opportunities from the photographers who (i) took the pictures of the celebrities, and (ii) would otherwise have a right to their exploitation. The photographer opponents to SB 771 claim that, if passed, the law would create a wave of lawsuits. In reality, the bill returns the law back to what was the status quo before the two recent lawsuits were decided in favor of the photographers.
California law does not apply outside where California has a nexus. This was interpreted in the Ninth Circuit in Cairns v. Franklin Mint Co., F.3d. (9th Cir, 2002). Pursuant to Civil Code Section 946, the court determined that the decedent must be a resident of California or a resident of another jurisdiction that has similar postmortem rights. In Cairns, the trustee of the Diana Princess of Wales Memorial Fund sued a California-based business that was selling a broad range of memorabilia without permission. The Court determined that, in the absence of any contrary law where the property is located, the rights of the owner’s residence apply, not where the claimed violation occurred. Since the Trust and the deceased person were not California residents, and the United Kingdom did not have a similar right of postmortem publicity, no violation of California Civil Code Section 3341.1 occurred.
How to Value Publicity and Privacy Rights
The rights being appraised vary considerably based on applicable state law. The appraiser must apply the factors described below to the licensing and enforcement opportunities that pertain to the celebrity’s residency.
Valuing Publicity Rights
An appraisal of publicity rights usually is based on the discounted cash flow of what is expected in the future. However, the cash flows are often difficult to estimate because they are (i) potentially long lasting, and (ii) subject to changing whims of what is popular. For cultural icons, the licensing potential continues past death. In some cases, death actually causes a bump in an entertainer’s popularity and the related licensing of their image and likeness.
Future technologies can have a big impact on the estimates of future exploitation. For example, current licensing of content showing dead celebrities is usually limited to reproductions of existing images and recordings. As future technology advances, the postmortem right to publicity is likely to have an even greater value. Technology that allows mixing new performances with existing (copyrighted) material of deceased celebrities already has been successful (for example, Forrest Gump in 1994). In the future, new techniques will expand to include the possibility of recreating dead celebrities in completely new productions. Copyright law protecting existing recordings will not likely prevent new animation showing a dead celebrity. Instead, the right of publicity is the likely means of limiting such new creations without fair value being paid for the new exploitation.
Licensing rates vary based on both the star’s popularity and the particular item (e.g., photographs, clothing, or reproductions) involved. Preferably, future licensing rates are estimated past on past results. For established celebrities, an average royalty rate is generally around 10 percent.
Some entertainers have a long licensing track record after death (e.g., Marilyn Monroe, Elvis Presley), while others do not. Accordingly, the discount rate used to measure future activities can vary considerably between entertainers. The appraiser’s decision on this key point involves substantial judgment.
Some licensing does not involve a percentage royalty rate multiplied by a revenue amount. This often happens in advertisements and packaging. In circumstances with this type of infringement, the damage analyst must allocate the economic value between infringed and non-infringed activities that are occurring simultaneously. The circulation or scope of infringement (e.g., how many impressions or copies of the infringed imaged were released) is also an important consideration. If the infringement is limited, a minimum insertion fee might be applicable.
Forbes annually reports a list of the top-earning dead celebrities. In 2006, the top 13 dead celebrities earned an aggregate of almost a quarter billion dollars. A star needed to make at least $7 million to make the list. Valuing these large profits requires uncommon experience and skill.
Valuing Privacy Rights
Privacy rights are valued differently because the starting premise is that the person facing the unwanted exposure would not have licensed the image in the first place. If approached in the same way as a publicity right (which is probably an incorrect starting premise unless the person is a celebrity), the fair market value can be determined through the up-front amount paid for a model (or artist) release. Generally, these amounts are quite modest.
Often, a plaintiff endeavors to seek disgorgement from the defendant that exploits an unapproved image. When the image was sold or licensed, disgorgement damages are simply the sales or license proceeds. Other situations do not involve outside licensing, as typically occurs in an internally generated advertisement. In this case, disgorgement of all profits from the advertised product is not proper, as the disgorged profits should pertain only to the misappropriated image, and not the product being advertised. On purely economic terms, disgorgement relates to an avoided fee for a model (or artist) release. As noted above, these amounts are generally quite modest.
For these reasons, plaintiffs in a right of privacy dispute should seek non-economic damages for mental distress. Unless unusual circumstances exist, these amounts are modest.
Our firm values a wide range of business interests and intangible assets. However, valuing celebrity rights is one of the most interesting appraisals we perform.