Free Reply to Response to Motion - District Court of Arizona - Arizona

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FENNEMORE CRAIG, P.C. Jordan Green (No. 001860) Lawrence Palles (No. 020263) 3003 North Central Avenue Suite 2600 Phoenix, Arizona 85012-2913 Telephone: (602) 916-5000 Email: [email protected] Attorneys for Defendants Avnet, Inc., Roy Vallee, and Allen Maag UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA DAN COOGAN, Plaintiff, v. AVNET, INC., et al., Defendants. No. CV2004-0621 PHX SRB DEFENDANTS'REPLY IN SUPPORT OF THEIR MOTION TO PRECLUDE TESTIMONY OF PLAINTIFF' S EXPERT JEFF SEDLIK

Defendants' Motion to Preclude Testimony of Plaintiff' Expert Jeff Sedlik should s be granted because: 1. Plaintiff fails to demonstrate that the disclosure of Mr. Sedlik' opinions s more than nine months late was justified or harmless; 2. Plaintiff fails to demonstrate that Mr. Sedlik' methods and conclusions s meet the reliability requirements of Fed. R. Evid. 702 and Daubert. 3. Mr. Sedlik' enhanced goodwill theory fails, as a matter of law, to establish s a causal nexus between the infringement and Avnet' profits; and s 4. Mr. Sedlik' testimony would be unnecessarily cumulative of Plaintiff' s s other damages expert, Richard Weisgrau. ...
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ANALYSIS A. Plaintiff Has Failed To Demonstrate That The Late Disclosure Was Justified Or Harmless.

In order to defeat a motion to preclude Plaintiff must show that his failure to disclose was substantially justified or harmless. Fed. R. Civ. P. 37(c)(1); Yeti by Molly, LTD v. Deckers Outdoor Corp., 259 F.3d 1101, 1107 (9th Cir. 2001) ("Implicit in Rule 37(c)(1) is that the burden is on the party facing sanctions to prove harmlessness."). Plaintiff argues that "there was no conceivable way Plaintiff could have had his expert calculations completed before Defendants' March 16, 2006 disclosure." See Response at p. 4. This argument fails. Plaintiff and Mr. Sedlik possessed ample information for Plaintiff to make a timely disclosure, as demonstrated by the facts enumerated in Defendants' Motion. See Motion at pp. 2-3. Plaintiff does not dispute any of the facts, instead he attempts to distract the Court with a lengthy and irrelevant recitation of Defendants' alleged discovery violations. See Response at pp. 2-4. Similarly, Plaintiff does not even attempt to argue that the late disclosure was harmless. See Response. He does not deny that the late Sedlik disclosure unfairly

attempted to cure defects in Mr. Weisgrau' timely disclosed Report. Id. Since Plaintiff s has not shown that the late disclosure was justified or harmless, the Court should preclude Mr. Sedlik' testimony at trial. s B. Mr. Sedlik' Opinions Are Unreliable. s 1. Inadmissible hearsay. See Response at p. 9. As

Plaintiff misstates Defendants' hearsay argument.

explained in Defendants' Motion, an expert is permitted to rely on materials, including hearsay, in forming the basis of his opinion if the materials are of the type "reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject." See Motion at pp. 10-11, citing Fed. R. Evid. 703. Rule 703 does not authorize
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admitting hearsay on the pretense that it is the basis for expert opinion when the expert adds nothing to the out-of-court statements other than transmitting them to the jury. Id. (case citations omitted). Mr. Sedlik' testimony is inadmissible because he merely acts as s a conduit to introduce hearsay (the Corbis prices), to prove the value of the photographs. This is an impermissible use of expert testimony. Id. 2. Valuations based on current stock photography values, unrelated to the market value of Plaintiff' photographs at the time of the s infringement.

Plaintiff claims that Mr. Sedlik' application of a 2.4% discount to current Corbis s prices cures his failure to use pricing applicable at the time of the infringement. See Response at p. 10. Mr. Sedlik derived the 2.4% discount from Getty Images' (a

competing stock photography website) historical pricing data and applied the discount to the current Corbis prices. See Exhibit D at p. 16-17.1 Mr. Sedlik offered no evidence to establish any link between current or past pricing from the competing websites. 2 Id. Plaintiff argues that Mr. Sedlik' use of the Getty Images pricing "is the best and most s applicable indicator under the circumstances" because Corbis does not release pertinent data regarding prior years' pricing and sales. See Response at p. 10. He states, "if Defendants have better data, they may introduce it; but it is still not grounds for exclusion." Id. Plaintiff' argument must be rejected. The use of inaccurate data is not excused in s the absence of accurate data, simply because it "is the best and most applicable indicator under the circumstances." Defendants are not obligated to offer "better data," it is Plaintiff' burden to prove that Mr. Sedlik' testimony is based on reliable methods, s s
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All Exhibits with alphabetical designations referenced in this Reply were previously filed with Defendants' Motion to Preclude Testimony of Plaintiff' Expert Witness s Richard Weisgrau on April 10, 2006.
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Further, Mr. Sedlik provided no foundation for the source or accuracy of the Gettyimages pricing data.
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principles and application to the facts of this case. See Bourjaily v. United States, 483 U.S. 171, 175 (1987). 3. Damages calculated using pricing for dissimilar photographs.

Plaintiff argues that Mr. Sedlik' calculations are reliable despite his use of generic s photos unlike Plaintiff' as the basis for his valuations. See Response at p. 10-11. He s claims that "Sedlik' opinion, in the interest of neutrality and reliability, errs on the side of s caution in valuing the photographs, by arriving at a valuation that is based on generic photographs and is, therefore, less than the true value of Plaintiff' photographs." See s Response at p. 11 (emphasis in original). Plaintiff' argument ignores the fact that the s generic photos and Plaintiff' photos have different values. Mr. Sedlik' computations are s s unreliable whether his price is too low or too high. Even if erring on the low side could cure the problem, Mr. Sedlik' valuations are still unreliable. Without establishing how s much "less than the true value of Plaintiff' photographs" Mr. Sedlik erred, Plaintiff s argues that Mr. Sedlik used a multiplier of three "to accurately remedy as much of the gap as possible." Id. After application of the three times multiplier, it is impossible to determine whether Mr. Sedlik' valuation is higher or lower than the actual market value s of Plaintiff' photos, or the amount of the difference in values. s 4. Valuations based on inaccurate criteria unrelated to the duration of uses in this case.

Plaintiff argues that Mr. Sedlik' use of inaccurate license duration criteria is s appropriate because "it is unreasonable for Defendants to expect that damages calculations for copyright infringement should include a discount they ` might have' received from procuring an annual license rather than a monthly license." See Response at p. 12. Mr. Sedlik acknowledged that his use of inaccurate time periods resulted in prices that are "quite high relative to average annual fees for similar use." See Exhibit D at p. 12. Whether Defendants were entitled to any "discounts" or not, the law is clear:
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actual damages must be computed based on the use the infringer made, not the highest use for which a plaintiff might license the work. See On Davis v. Gap, Inc., 246 F.3d 152, 161 (2nd Cir. 2001); Baker v. Urban Outfitters, Inc., 254 F. Supp. 2d 346, 357-59 (S.D.N.Y. 2003). Mr. Sedlik' use of licenses with durations unrelated to the infringing s uses, for whatever reasons, results in inaccurate valuations. 5. Application of inappropriate fees.

Defendants argued that Mr. Sedlik applied three additional fees without legal basis. See Motion at pp. 13-14. In response, Plaintiff quotes at length from Mr. Sedlik' Report s regarding his reasoning for the fees and extols Mr. Sedlik' qualifications. See Response s at p. 14. However, Plaintiff fails to offer any citation to legal or other authority for the applicability or reasonableness of the fees. See Response at pp. 13-14. Mr. Sedlik' s reasoning does not constitute a legal basis for application of the fees and is insufficient to satisfy the reliability requirements of Fed. R. Evid. 702. General Electric Co. v. Joiner, 118 S. Ct. 512, 518 (1997) ("[N]othing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence which is connected to existing data only by the ipse dixit of the expert. A court may conclude that there is simply too great an analytical gap between the data and the opinion proffered."). Further, the "first use" fee is inappropriate on its face. Mr. Sedlik applied a $2,000 annual fee per photograph for 10 years, for the loss of the ability to license "first use" of the photographs. See Response at p. 14. A "first use" fee is not applicable because Avnet previously used the photos pursuant to the one year license agreement with Plaintiff.3 Since each photograph has had its "first use," Plaintiff could not have later charged a "first use" premium, even in the absence of Avnet' infringements. s ... ...
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The "first uses" by Avnet do not include any infringements.
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Mr. Sedlik' Testimony Regarding Avnet' Profits Is Inadmissible. s s 1. Mr. Sedlik Is Not Qualified To Offer Opinion Testimony Regarding Avnet' Profits. s

Defendants challenged Mr. Sedlik' qualifications with regard to profit damages s only.4 See Motion at p. 16. In response, Plaintiff fails to offer any evidence that Mr. Sedlik is qualified to offer opinions regarding Avnet' profits or a causal nexus between s the infringement and Avnet' revenue. See Response at p. 8. Despite Mr. Sedlik' lack of s s any relevant background in marketing, public relations or corporate valuation, Plaintiff claims he is "qualified to offer an opinion as to copyright infringement damages" because he teaches classes on copyright issues.5 Id. Plaintiff has not met his burden of

demonstrating that Mr. Sedlik is qualified to offer opinions on issues that have absolutely nothing to do with his area of expertise-photography. See Bourjaily v. United States, 483 U.S. 171, 175 (1987) (proponent of the expert testimony bears the burden of establishing its admissibility, by a preponderance of the evidence). precluded from testifying at trial. 2. Evidence Of Enhanced Goodwill Cannot Support A Claim For Recovery Of Avnet' Profits. s Therefore, Mr. Sedlik should be

Plaintiff claims that Mr. Sedlik' theory that the infringement enhanced Mr. s Vallee' reputation, increasing Avnet' goodwill and revenue establishes a causal nexus s s between the infringement and Avnet' profits. See Response at pp. 15-16. This argument s

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Although Defendants do not dispute Mr. Sedlik' qualifications related to actual s damages, as explained in their Motion and this Reply, Mr. Sedlik' opinions on actual s damages are inadmissible because they fail to meet other reliability requirements of Fed. R. Evid. 702 and Daubert. Plaintiff offers no support for this assertion, claiming that the information is unavailable because Mr. Sedlik is out of the country teaching at Oxford University. See Response at p. 8, n. 2. Mr. Sedlik' Curriculum Vitae does not identify any relevant experience or s qualifications, including class instruction on issues related to an infringer' profits. See s Plaintiff' Exhibit A to Response. s
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fails as a matter of law. 6 Enhanced goodwill alone is simply not a compensable element of an infringer' profits. See Defendants' Response To Plaintiff' Motion In Limine To s s Exclude Defendants' Evidence Related To Gross Revenue Of Avnet, Inc., Deductible Expenses From Gross Revenue, And/Or Its Profit(s) Attributable To Factors Other Than The Copyrighted Work at pp. 8-9 (case citations omitted). Evidence of enhanced

goodwill or market recognition is insufficient to support recovery of indirect profits. Id. Plaintiff' argument that Mr. Sedlik' identification of $52,093,000,000 in gross revenue s s satisfies Plaintiff' burden also fails as a matter of law.7 Id. at pp. 7-8. Although "gross s revenue" is not defined in the statute, it is well settled that it means the gross revenue associated with the infringement, not the infringer' overall gross revenue. Id. s Mr. Sedlik' opinions fail to establish a causal nexus between the infringement and s Avnet' profits as a matter of law. Therefore, Mr. Sedlik' testimony regarding profit s s damages should be precluded at trial. D. Plaintiff' Two Damage Experts Are Unnecessarily Cumulative. s

Plaintiff argues that Mr. Sedlik' testimony is not cumulative of Mr. Weisgrau' s s because their calculations are based on pricing from competing stock photo agencies and Mr. Sedlik applied additional fees. See Response at p. 16. However, comparison of the experts' reports reveals nearly identical methodologies and conclusions. To calculate actual damages, both experts priced generic stock photographs on stock photography websites, using similar criteria and applying similar fees and premiums. See Response at This issue is fully briefed in Defendants' Response To Plaintiff' Motion In Limine To s Exclude Defendants' Evidence Related To Gross Revenue Of Avnet, Inc., Deductible Expenses From Gross Revenue, And/Or Its Profit(s) Attributable To Factors Other Than The Copyrighted Work at pp. 8-9.
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This issue is fully briefed in Defendants' Response To Plaintiff' Motion In Limine To s Exclude Defendants' Evidence Related To Gross Revenue Of Avnet, Inc., Deductible Expenses From Gross Revenue, And/Or Its Profit(s) Attributable To Factors Other Than The Copyrighted Work at pp. 7-8.
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pp. 9-15; Plaintiff' Response to Defendants' Motion to Preclude Testimony of Plaintiff' s s Expert Richard Weisgrau at pp. 10-16. With regard to profit damages, both opine that the infringement enhanced Mr. Vallee' reputation, increasing Avnet' goodwill and revenue s s and conclude that Plaintiff is entitled to recovery of Avnet' gross revenues. s See

Response at pp. 15-16; Plaintiff' Response to Defendants' Motion to Preclude Testimony s of Plaintiff' Expert Richard Weisgrau at pp. 16-18. Although there is variation in the s details, the two experts offer nearly identical opinions based on nearly identical methodologies and are therefore unnecessarily cumulative. To the extent that their

opinions do differ, Plaintiff should not be permitted to offer two experts on the same issue. See Fed. R. Evid. 403; Cabrera v. Cordis Corp., 134 F.3d 1418, 1421-22 (9th Cir. 1998) (affirming exclusion of expert testimony as a "needless presentation of cumulative evidence"). II. CONCLUSION Plaintiff' expert disclosure nine months late was not justified and prejudiced s Defendants. Plaintiff failed to meet his burden of demonstrating the reliability of Mr. Sedlik' methods and conclusions. Mr. Sedlik' opinions regarding Plaintiff' actual s s s damages and Avnet' profits are inadmissible hearsay, fail to meet any of the standards s for admissibility of expert testimony pursuant to Fed. R. Evid. 702 and are unnecessarily cumulative of Mr. Weisgrau' timely disclosed opinions. Therefore, the Court should s grant Defendants' Motion to Preclude Testimony of Plaintiff' Expert Richard Sedlik. s DATED this 13th day of June, 2006. FENNEMORE CRAIG, P.C.

By s/Jordan Green Jordan Green Lawrence Palles Attorneys for Defendants
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CERTIFICATE OF SERVICE I hereby certify that on June 13, 2006, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for s filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Jordan Meschkow, Esq. Meschkow & Gresham, P.L.C. 5727 North Seventh Street Suite 409 Phoenix, Arizona 85014-5818 Nancy Giles, Esq. Giles Legal PLC 733 W. Willetta Street Phoenix, Arizona 85007

s/Jordan Green
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