The case is Sedgwick Claims Management Servs., Inc. v. Delsman (decided July 17, 2009):
Defendant Robert A. Delsman, Jr. ... runs a "blog" in which he has strongly criticized the business practices of Sedgwick [Claims Management Services, Inc.] and its management. In addition, Defendant has mailed postcards styled as "WANTED" posters bearing the photographs of two of Sedgwick's executives, again with critical commentary. Sedgwick ... alleges that Defendant engaged in copyright infringement by using the two photos. In addition, Sedgwick alleges various state law causes of action, including defamation, based on the content expressed in the blogs....
Sedgwick provides insurance claim management services to its customers and their employees. The Company is an Illinois corporation and has its principal place of business in Memphis, Tennessee. David North is the Company's Chief Executive Officer and Paul Posey is its Chief Operating Officer. Sedgwick's clientele includes a number of recognizable companies, including General Electric. GE hired Sedgwick to manage and administer claims for its Long-Term Disability Income Plan, which is offered through Met-Life, Inc. ("Met-Life/GE Plan").
Defendant was previously employed by GE and purchased insurance under the Met Life/GE Plan. In or about February 2006, he submitted a claim for disability benefits. The status of his claim is not specified in the pleadings. However, Defendant, who claims he is disabled and has been unable to work for the last three years, apparently is highly dissatisfied with Sedgwick's handling of his claim. As a means of expressing his opinions regarding Sedgwick and its management, Defendant began (on an unspecified date) to publicly express his views through a web blog and a postcard mailing campaign called "Operation Going Postcard."
Defendant's blog is maintained at various URLs, i.e., www.Sedgwickcms.blogspot.com,www.gesupplydiscrimination.com and http:// gesupplyrexeldiscrimination.com. In these blogs, Defendant allegedly posted a number of "defamatory" statements in which he accuses Sedgwick of, inter alia, wrongfully denying benefits to claimants, violating various laws, and accusing Sedgwick and its "minions" (whom he calls "Sedgthugs") of having committed "Sedgcrimes." In addition, Sedgwick complains that Defendant used two copyrighted photographs, headshots of CEO North and COO Posey, and superimposed them on fugitive-style "WANTED" postcards. He also is alleged to have "morphed" the same two photos into pictures of Adolph Hitler and Heinrich Himler, respectively, and to have sent them to unspecified Sedgwick employees. Defendant allegedly obtained North's photo from a worker's compensation conference website, and Posey's photo from a Company press release announcing his elevation to COO.
In February 2009, Defendant launched Operating Going Postcard, which he described in his blogs as a campaign to "educate the consuming public" regarding the business practices of Sedgwick. According to Defendant, such negative publicity was a "good way to fight back against these despicable characters...." On February 9, 2009, Defendant sent one such postcard to CEO North. One side of the postcard incorporates North's picture into a "WANTED" poster which is captioned: "WANTED FOR HUMAN RIGHTS VIOLATIONS." To the right of the photo, the text reads: "Have you been threatened by this man or his minions? The time for change is at hand!" On the other side of the postcard, the following copy appears .... [Details omitted, but available in the opinion. -EV] ...
Sedgwick argues that the issue of fair use cannot be decided on a motion to dismiss, and that it should be allowed to conduct "further discovery." However, the Ninth Circuit has held that a defendant's "assertion of fair use may be considered on a motion to dismiss, which requires the court to consider all allegations to be true, in a manner substantially similar to consideration of the same issue on a motion for summary judgment, when no material facts are in dispute."
C. FAIR USE FACTORS
1. First Factor--Purpose and Character of the Use
The first fair use factor addresses "whether the new work merely 'supercedes the objects' of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning or message, in other words, whether and to what extent the new work is 'transformative.'" Among the various forms of "transformative use" is parody, which is a "'literary or artistic work that imitates the characteristic style of an author or a work for comic effort or ridicule, ...'" ...
Sedgwick argues that there can be no fair use [as to the unaltered photos on the postcards] where, as here, Defendant did not alter the photographs of North and Posey.... [But] the salient inquiry is whether the use of the photos, in the specific context used, was transformative.... "[M]aking an exact copy of a work may be transformative so long as the copy serves a different function than the original work[.]"
Here, there can be no legitimate dispute that Defendant's use of North and Posey's photographs was transformative. Both images originally were used by Defendant for promotional reasons. Defendant, however, used the photographs as a vehicle for criticizing the Company. Specifically, both photographs are superimposed on postcards that mimic "WANTED" posters. Above each picture is the heading, in a large font, which states: "WANTED FOR HUMAN RIGHTS VIOLATIONS." The copy accompanying the photographs criticizes Sedgwick and its management's alleged mistreatment of claimants and questionable practices, and urges the public to report any misdeeds to the U.S. Department of Justice and state Attorney Generals. When viewed in context, it is clear that Defendant used North and Posey's photographs for a fundamentally different purpose than they were originally intended by transforming them into a vehicle for publicizing and criticizing Sedgwick's alleged business practices. In view of the above, the Court finds that the first fair use factor weighs strongly in favor of fair use.
[Footnote: Given the transformative nature of Defendant's use of the photographs, the matter of whether the use was commercial is less significant. Nevertheless, the Court notes that there is no claim that Defendant used the photographs for commercial gain. Rather, all of the facts presented indicate that the photographs were used as part of Defendant's overall endeavor to educate, publicize and warn the public about Sedgwick. The lack of commercialism also weighs in favor of fair use.]
2. Second Factor--Nature of Plaintiff's Work ... Neither party makes any argument regarding this factor. The Court therefore considers the second factor to be neutral.
3. Third Factor--Amount of the Work Used.... [T]he reuse of an entire image may be reasonable if it serves the defendant's intended purpose.... [T]he Court concludes that this factor is neutral.
4. Fourth Factor--Effect of the Use on the Potential Market
The fourth and final statutory factor is "the effect of the use upon the potential market for or value of the copyrighted work." ... [Sedgwick] argues that "the fourth factor weighs in [its] favor because Delsman's alteration, public display of altered photographs and public distribution of the same have injured Sedgwick's potential ability to continue to use the photos of its CEO and CFO (sic) for future marketing purposes." However, the relevant question is not whether the work itself has lost value, but rather, whether the secondary use has usurped the commercial demand for the original. Here, there is no such demand, since there is no commercial market for them. And even if there were, Defendant's use of the photographs is sufficiently transformative that it would not be a "substitute" for the original.
Moreover, the possibility that Defendant's use of the photographs has undermined Sedgwick's ability to use them in the future is not remediable under the Copyright Act. As the Supreme Court explained ..., "when a lethal parody, like a scathing theater review, kills demand for the original, it does not produce a harm cognizable under the Copyright Act." The Court finds that the fourth fair use factor favors Defendant.
Taking all of Sedgwick's allegations as true, the Court finds that two of the fair use factors weigh strongly in favor of Defendant and two are neutral. Defendant's uses of the photographs of North and Posey are highly transformative and serve an entirely different function than originally intended. It was reasonable for Defendant to use the entire photograph in order to evoke the image of a "WANTED" poster. His use could not have had impacted the market for the photographs because no such market is alleged to have existed. But even if it did, Defendant's use was sufficiently transformative that it could not be deemed to be a substitute for the original. Allowing Defendant to use the photographs in the context of publicly criticizing and warning the public regarding Sedgwick's business practices is precisely the type of activity the fair use doctrine is intended to protect.
The fair use analysis strikes me as quite right. As to the state law claims, the court concluded that "Sedgwick fails to adduce any evidence to meet its burden of showing a probability of prevailing on any of its claims. Rather, Sedgwick simply recites the elements of each of its state law causes of action and cites to various allegations of the Amended Complaint." It therefore ruled for Delsman on those as well.
By the way, Delsman, who is apparently not a lawyer, represented himself -- something that rarely leads to victory, but did so this time.