The City of Toronto says the Royal Canadian Mint wants almost $48,000 in compensation after the city used the image of a penny in a prominent ad campaign, without proper authorization.

The ads, seen throughout the city in bus shelters and TTC vehicles as well as on buttons and bumper stickers, feature a blown-up picture of the penny. The ads are part of Mayor David Miller's push for one out of every six cents of GST revenue to be returned to the municipality where it was collected.

The city and the mint both acknowledged Thursday they are in negotiations over the 'One Cent NOW!' campaign, The Globe and Mail reports.

The city, as cited by The Canadian Press, says $10,000 of the amount sought by the mint is simply for using the phrase "one cent" in the campaign website and e-mail address, and another $10,000 for its use in the phone number for the campaign.

Lawyers for both sides have been corresponding, with the likely outcome being that the city will have to pay for its unauthorized use of the image.

A spokesperson for the mint told The Globe that after the ads started running, the federal agency told the city it had to have permission to use the image.

The city confirmed it did not ask permission before using the image.

The mint requires the following for the use of one of its products in advertising:

• That it be done in a manner that is tasteful and compatible with "public policy objectives of the federal government';
• That users pay a minimum $350 application fee and a royalty of between 1 and 2.5 per cent of the value of the campaign.

The city is arguing that it didn't pay for the campaign, since it has a deal for free advertising space with the company that controls advertising on the TTC.

But the mint's regulations state if there is no purchase price for the advertising, it will assess the value of the campaign at market value.

It is not clear whether a campaign demanding more money from the federal government is compatible with Ottawa's public policy objectives.