Free Response in Opposition to Motion - District Court of Arizona - Arizona

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MESCHKOW & GRESHAM, P.L.C.

Jordan M. Meschkow (AZ Bar No. 007454) Lowell W. Gresham (AZ Bar No. 009702) 5727 North Seventh Street Suite 409 Phoenix, Arizona 85014-5818 (602) 274-6996 (602) 274-6970 (facsimile) Attorneys for Plaintiff

GILES LEGAL, P.L.C.

Nancy R. Giles (AZ Bar No. 020163) 733 West Willetta Street Phoenix, Arizona 85007 (602) 252-1788 Attorney for Plaintiff

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA DAN COOGAN, doing business as COOGAN PHOTOGRAPHIC, Plaintiff, v. AVNET, INC., et al., Defendants. Case No.: CV-04-0621 PHX SRB

PLAINTIFF DAN COOGAN'S RESPONSE TO DEFENDANTS' MOTION TO PRECLUDE TESTIMONY OF PLAINTIFF'S EXPERT JEFF SEDLIK (Oral Argument Requested)

Plaintiff hereby responds to Defendants' Motion to Preclude Testimony of Plaintiff's Expert Jeff Sedlik. In an apparent last-ditch effort to minimize their damages exposure in this case, Defendants' Motion is their second attempt to bar Plaintiff from utilizing a damages expert, as they previously filed a Motion to Preclude Testimony of Plaintiff's Expert Richard Weisgrau, also pending before this Court. Defendants, however, have no basis to do so. The issues raised by Defendants, to the extent they have any merit at all, are issues for trial; Defendants have no valid argument that Sedlik's testimony should be summarily precluded. Moreover, Sedlik's report is reliable, and he is extremely qualified to render his opinions regarding Plaintiff's damages in this matter.
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This Response is based on the attached Memorandum of Points and Authorities and exhibits thereto, and the entire record in this case, incorporated herein by reference. MEMORANDUM OF POINTS AND AUTHORITIES I. BACKGROUND This case was filed March 29, 2004, and on October 24, 2005, this Court ruled that Defendants willfully infringed Plaintiff's copyrighted photographs, leaving damages and the liability of the individual defendants as the only remaining major issues in the case. See Opinion and Order of 24 October 2005, Document No. 100, pages 13 and 14. Throughout this case, discovery has been extended due at least in part to Defendants' continual refusal to identify each and every one of its infringing uses of Plaintiff's photographs: The original discovery deadline was July 19, 2005, which was extended to September 12, 2005, then extended to December 16, 2005, and again extended to January 31, 2006. Defendants then took to March 2006 to produce NEW information regarding more infringing uses 1 , necessitating that Plaintiff's expert reports be supplemented. On September 27, 2004, Plaintiff served written discovery requests on Defendants that included requests for any documents demonstrating or evidencing any and all of Defendants' uses of Plaintiff's copyrighted photographs, and the following interrogatory: · Interrogatory No. 4: State the date (month, day, and year) and circumstances concerning Defendants' first use and all subsequent uses of Plaintiff's Photographs of Roy Vallee and the manner and extent of such first and all subsequent uses, whether on an Avnet website, a third-party website, or in any report or publication. See Defendants' Responses to Plaintiff's First Set of Interrogatories and Plaintiff's First Request for Production of Documents, September 27, 2004, attached as Exhibit B to Document #108, incorporated by reference herein (hereafter IBRH). Since propounding this discovery in September 2004, Plaintiff has made numerous attempts to get Defendants to identify each of its infringing uses of Plaintiff's photographs. Despite Despite Defendants' assertions in the instant Motion at least the three mid-2001 prelicense email newsletters to over 8,100 recipients for a third round of infringement are new. Others exist. See Exhibit D to #180, at 2, with its Exhibit..
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numerous letters and discussions with Plaintiff, however, Defendants continue to avoid fully answering these discovery requests. When Plaintiff produced his expert reports on June 24, 2005, Defendants still had not identified all of their uses of Plaintiff's photographs. This failure to properly comply with discovery prejudiced Plaintiff by making such analyses a wasted effort. In the Expert Reports of both Richard Weisgrau and Jeff Sedlik, the expert preparing the Report was adamant that a calculation of actual damages was dependent upon knowing each infringing use and that, because Defendants' productions were deficient, the expert reports may require supplementation in the future if and when Defendants identified additional infringing uses. See Expert Report of Richard Weisgrau, attached as Exhibit B by Defendants' in documents 183-187 ("Weisgrau Report"), IBRH, at 7-15, and Expert Report of Jeff Sedlik, attached as Exhibit A by Defendants' in documents 183-187 ("Sedlik Report"), IBRH, at 15-16. After expert reports were disclosed on June 24, 2005, Defendants began planning to take Plaintiff's experts' depositions. See, e.g., Exhibit A, attached to document 191, IBRH (and part of a running discussion). Defendants soon let this plan go by the wayside, however, presumably when they realized that, due to their own deficient productions, Plaintiff's experts would have to supplement their reports. Plaintiff made numerous attempts to get Defendants to produce the documents they were hiding. See Plaintiff's Motion to Compel, Document 91, September 27, 2005, and document #94, both IBRH. Then, a year after first requested, on October 17, 2005, Defendants made a supplemental production at the instruction of this Court, but even this production still did not identify all of Defendants' infringing uses. Recently, on March 14, 2006, a year and a half after Plaintiff issued his first discovery requests to Defendants, and over eight months after the experts' first reports, Plaintiff received Avnet's Second Supplemental Response to Plaintiff's First Set of Interrogatories, attached as Exhibit D to Plaintiff's Motion in Limine, document 180,

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IBRH, in which Defendants purported to finally identify all of their multiple infringing uses of Plaintiff's photographs. Id at fn. 1. Plaintiff, immediately upon receiving Defendants' disclosures identifying additional infringing uses of Plaintiff's photographs, relayed the information to his experts so they could begin work on supplementary calculations in light of this newly revealed information. Plaintiff disclosed this expert's supplemental reports just one week after Defendants finally disclosed the information. Because of Defendants' unreasonably delays, there was no conceivable way Plaintiff could have had his expert calculations completed before Defendants' March 16, 2006 disclosure. In short, Defendants have sought to first deny Plaintiff's experts the information they needed to complete their damages calculations, and then to penalize Plaintiff for supplementing his expert's reports when Defendants finally produced the information. Moreover, Defendants absolutely set the stage to make it impossible for Plaintiff's experts to complete their reports until after the expert disclosure deadline passed. Defendants' tactics should not be condoned. Defendants should not profit from their wrongdoing, by way of exclusion of Plaintiff's expert, when they caused the delays. II. LAW A. Damages Determination

In copyright infringement cases, at any time before final judgment is rendered, the plaintiff may elect either statutory damages or actual damages, and profits. 17 U.S.C. 501(c)(1). In calculating actual damages, "Congress explicitly provides for two distinct monetary remedies - actual damages... and recovery of wrongful profits. These remedies are two sides of the damages coin - the copyright holder's losses and the infringer's gains." Polar Bear Prods. v. Timex Corp., 384 F.3d 700, 707-08 (9th Cir. 2004). In this case, Plaintiff has not yet made his damages election, because the exact amount of actual damages and decisions regarding wrongful profits are not yet available. These factors are the subject of Sedlik's Report and testimony and help make actual damages and wrongful profits such calculable. Sedlik's reports are based on sound legal principles.
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1.

Actual Damages

"Actual damages are usually determined by the loss in the fair market value of the copyright, measured by the profits lost due to the infringement or by the value of the use of the copyrighted work to the infringer." Polar Bear, 384 F.3d at 707-08 (quoting McRoberts Software, Inc. v. Media 100, Inc., 329 F.3d 557, 566 (7th Cir. 2003)); see also Mackie v. Rieser, 296 F.3d 909, 914 (9th Cir. 2002). 2. Infringers' Profits . . . a prevailing plaintiff in an infringement action is entitled to recover the infringer's profits to the extent they are attributable to the infringement. 17 U.S.C. § 101(b); Krofft, 562 F.2d at 1172. In establishing the infringer's profits, the plaintiff is required to prove only the defendant's sales; the burden then shifts to the defendant to prove the elements of costs to be deducted from sales in arriving at profit. 17 U.S.C. § 101(b). Any doubt as to the computation of costs or profits is to be resolved in favor of the plaintiff. Shapiro, Bernstein & Co. v. Remington Records, Inc., 265 F.2d 263 (2d Cir. 1959). If the infringing defendant does not meet its burden of proving costs, the gross figure stands as the defendant's profits. Russell v. Price, 612 F.2d 1123, 1130-31 (9th Cir. 1979), cert. denied, 446 U.S. 952, 100 S. Ct. 2919, 64 L. Ed. 2d 809 (1980). Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 514 (9th Cir. 1985). Defendants have refused and continue to refuse to produce documents showing any of their costs to be deducted from their sales; thus, for purposes of this case, all of Defendants' sales represent their profits. Id.; see also Plaintiff's Second Motion in Limine, document 209, IBRH (discussing in full Defendants' refusal to produce evidence of their deductions or other elements of profits). B. Expert Testimony

As set forth in Defendants' Motion, expert testimony is admissible if: (1) it assists the fact finder in understanding the evidence or a fact in issue; (2) the expert is qualified by knowledge, skill, experience, training, or education; (3) it is based upon sufficient facts or data; (4) it is the product of reliable principles and methods; and (5) it is the result of reliable application of the principles and methods to the facts of the case. Motion at 9 (citing Rule 702, FED. R. EVID.). Sedlik easily meets these requirements, which are the only requirements applicable to the issue of Sedlik's admissibility. Defendants do not dispute that Sedlik's report meets two of the above factors: (1) that
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the report will assist the fact finder in understanding the evidence or fact in issue; and (2) that the report is based upon sufficient facts or data. Defendants' Motion argues only that three of the above factors are lacking, arguing (1) that Sedlik is unqualified to render opinions in this matter; (2) that Sedlik's opinions are the product of unreliable principles, methods; and (3) that Sedlik unreliably applies his methods to the facts of this case. As demonstrated below, however, Defendants arguments are unsupportable. 1. Sedlik's Qualifications Are Extraordinary and Defendants' Arguments to the Contrary are Ludicrous.

Given Sedlik's extraordinary background and experience in photography, photography pricing, photograph copyrights, copyright infringement, damages for copyright infringements, loss of fair market value due to copyright infringement, and valuation of indirect profits for copyright infringement damages, Defendants' claim that Sedlik is unqualified to render an opinion in this case is ludicrous. Although Plaintiff believes Sedlik's Affidavit and Curriculum Vitae, speak for themselves, Plaintiff hereby responds to Defendants' contentions. See Affidavit and CV of Jeff Sedlik ("Sedlik Affidavit"), both attached hereto as Exhibit A. During a career in professional photography spanning more than twenty years, Sedlik has been actively engaged in licensing the copyrights in his photographs to a diverse range of clientele. As a result of this experience, he has significant expertise in copyright licensing and matters relevant to copyright licensing. Id. He served for two years as the National President of the Advertising Photographers of America (APA), the leading trade association for advertising photographers. Id. In that capacity, he regularly consulted with the United States Copyright Office, including the Register of Copyrights and the General Counsel of the Copyright Office on matters related to copyright law and related regulations. Id. He was also directly involved in drafting APA industry standard forms related to copyright licensing. Id. He formerly served as the chair of the Legal and Legislative Committee of the APA's Los Angeles Chapter. Id. He currently serves as APA National Chief Advisor on Licensing and Copyright. Id. In that capacity he advises
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the APA on copyright related matters, and meets with legislators and government agencies (including the Register of Copyrights and the General Counsel of the Copyright Office) on copyright matters related to photography. Id. Sedlik also is President/CEO of the Picture Licensing Universal System ("PLUS") Coalition, in which capacity he creates and maintains international standards for photography copyright licensing. Id. PLUS is comprised of trade associations and stakeholders representing publishers, advertisers, ad agencies, stock agencies, illustrators, photographers and artists' representatives, working cooperatively to create the standards. Id. Sedlik, who co-founded the Coalition, has been actively involved in this initiative for five years. Id. Sedlik also is a Professor of Photography at the Art Center College of Design in Los Angeles, where he has been a faculty member for more than a decade. Id. Among other subjects, he teaches copyright law, copyright licensing, valuation of copyright infringement damages, business administration, and related issues. Id. He has also served on the Intellectual Property committee at the Art Center for a number of years, advising the college and its students on matters related to licensing and copyright. Id. Additionally, Sedlik has served in an advisory capacity to stock photography agencies, advising them as to contractual terms, copyright, licensing and other issues. Id. Sedlik speaks regularly at photography industry conferences and workshops on the subjects of licensing and copyright and attends seminars and workshops related to copyright, including meetings of copyright societies and CLE courses, though he is not an attorney. Id. In his capacity as a leading professional advertising photographer, he has served as an expert witness in several copyright matters and provided analysis to counsel in that capacity. Id. In the course of the aforementioned activities, spanning two decades, Sedlik's expertise on the subject of copyright and licensing as related to photography is virtually unmatched and certainly refutes Defendants' ridiculous argument that he should be

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precluded due to lack of qualifications. Id. This expertise includes the subject area of actual damages. Id. Defendants attempt to argue that Sedlik "is not qualified to offer opinions about the causal connection between the infringements and Avnet's profits[]" because "he has no background in marketing, public relations or corporate valuation." Motion at 16. First, even if Sedlik did not have a background in "marketing, public relations or corporate valuation[,]" he would be qualified to offer an opinion as to copyright infringement damages as they relate to these matters. Even hypothetically assuming Sedlik is not an expert in corporate valuation, this does not mean he is not an expert in calculating indirect profits damages. More importantly, however, Sedlik's expertise clearly encompasses relevant subjects. For example, Sedlik teaches classes on copyright, photography business relations, licensing, negotiating, causal nexus, indirect profits, direct profits, calculating damages, valuation of damages and profits, including the usually available deductions, and elements of profit to factors other than the copyrighted work.2 The latter two are no longer available to Defendants. See document 209. 2. Sedlik Utilized Reliable Principles and Methods, and Reliably Applied Them to the Facts of This Case. a. First Prong of Actual Damages: Loss of Fair Market Value

"Actual damages are usually determined by the loss in the fair market value of the copyright, measured by the profits lost due to the infringement or by the value of the use of the copyrighted work to the infringer." Polar Bear, 384 F.3d at 707-08 (quoting McRoberts Software, Inc. v. Media 100, Inc., 329 F.3d 557, 566 (7th Cir. 2003)); see also Mackie v. Rieser, 296 F.3d 909, 914 (9th Cir. 2002). Sedlik expressly states that his Sedlik's Affidavit does not include these matters because he is currently out of the country teaching on the above-referenced subjects at Oxford University. He can attest to these matters directly or in affidavit after his return on June 30, 2006. Moreover, Defendants' sweeping statements about Sedlik's qualifications are unsubstantiated, as Defendants opted not to take Sedlik's deposition to further explore his extensive qualifications.
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methodology for determining Plaintiff's actual damages is what a willing buyer would have been reasonably required to pay at the time of the infringement. See "Supplemental" Report of Jeff Sedlik, at 9, attached hereto as Exhibit B (emphasis in original). Based on his vast experience and knowledge of the photography industry, Sedlik's Report sets forth several factors which bear on the amount a willing buyer would be reasonably required to pay under the circumstances: In the photography marketplace, each photographer sets his/her own fees, based upon criteria defining the scope of a license. These criteria include the type of media in which the photograph will be reproduced, the size of reproduction, the region of distribution, the duration of the license, and other factors. Quality and scarcity of the photograph are also primary considerations. Ex. B at 11. Sedlik also explains that photographers add an additional premium to their licensing fees when infringement is at issue: In the same way that a mortgage lender adds a risk premium to the interest rate of a loan applicant with a history of bad credit, a photographer adds an infringement premium when computing fees quoted for licenses granted to clients with a history of infringement. Ex. B at 10. Sedlik applies the aforementioned framework to the circumstances in this case in order to calculate the actual damages at issue. As a starting point in his actual damages calculation, Sedlik obtained license fee quotes from Corbis, a leading stock agency. Ex. B at 13. Defendants argue that the Corbis prices are inadmissible hearsay, and Sedlik may not rely upon the prices to prove the value of Plaintiff's photographs. Defendants go on to wholly defeat their own argument by admitting that an expert "is permitted to rely on materials, including hearsay, in forming the basis of his opinion" Motion at 8 (citing Fed. R. Evid. 703). Thus, Defendant's argument is puzzling at best, and flies in the face of Rule 703. Defendants are free to object to any hearsay evidence being improperly introduced at trial in this case; however, by Defendants' own admissions, reliance upon hearsay does not constitute grounds for exclusion of expert testimony and, indeed, is specifically permitted under Rule 703, Fed. R. Evid.
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Defendants next argue that Sedlik's calculations are unreliable because they are based on current stock photograph values, not the market value of Plaintiff's photographs at the time of the infringement. As explained in his Report, however, Sedlik utilizes stock photograph values as a starting point to value Coogan's photographs of Vallee. Ex. B at 16-17. Sedlik then applies a 2.4% discount to current Corbis prices to properly reflect the market value of the Corbis photos from 2001-2004 (the time of the infringement). Id. To determine the 2.4% discount rate, Sedlik computes the difference between the current value of stock photographs and the value of those images in 20012004 from Getty Images, a fully competitive stock agency. Id. Sedlik explains that ascertaining exact values from 2001-2004 from Corbis is impossible, as Corbis does not release such information. Id. Thus, Sedlik used the discount rate from Getty Images, a public company, which is the best and most applicable indicator available under the circumstances. Id. If Defendants have better data, they may introduce it; but this is still not grounds for exclusion. Defendants improperly cite to Baker v. Urban Outfitters to support their argument that Sedlik's opinions are inadmissible because they are based on the "`sort of `apples and oranges' comparison'" rejected by courts as irrelevant. In Baker, the plaintiff brought a copyright infringement action against defendant for the unauthorized use of plaintiff's stock photograph. Baker v. Outfitters, Inc., 254 F. Supp. 2d 346, 350 (S.D.N.Y. 2003). However, plaintiff's expert only had experience dealing with commissioned works. Id. At 354. Here, the court found that she was unqualified to testify as to the value of stock photography. Id. Even assuming the expert was qualified to testify as to stock photography the court found the valuation flawed as she calculated damages utilizing the value of commissioned work as a starting point rather than the value of stock photography. Id. at 354-55. Thus, the court found that the expert was comparing "apples and oranges" (i.e. comparing the value of generic stock photography to commissioned work) and precluded her testimony.

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Such is not the case with Sedlik. First, as shown, Sedlik is qualified to render opinions as to the value of both commissioned and stock photography. Second, because Avnet did not commission Coogan to take the photographs of Vallee (Coogan was so hired by Upside Magazine one year prior to the contract), the photographs are considered stock photography. Thus, Sedlik's approach to utilize the prices of stock photographs from Corbis to value the stock photographs at issue here is a logical and acceptable approach and cannot be characterized as comparing "apples and oranges." Even if Coogan's photographs of Vallee are considered commissioned work, which they are not as related to Avnet's use, Sedlik's methodology for valuing the photographs is unlike the approach the Baker expert employed. Sedlik began his valuation of Coogan's photographs taking the value of a generic stock photograph as a starting point. The value of a generic stock photograph is much lower than the price of a commissioned work. Thus, if Coogan's photographs are considered to be commissioned work, Sedlik's baseline computations are reliable, are not inflated, and do not suffer the same flaw as the Baker expert. In another inexplicable argument, Defendants point out that while Sedlik's analysis is based upon generic images, Plaintiff's images in this case were not generic and are, therefore, worth even more than the opinion rendered by Sedlik. See Ex. B at 11. In other words, Sedlik's opinion, in the interest of neutrality and reliability, errs on the side of 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's photographs. To accurately remedy as much of the gap as possible, Sedlik uses a multiplier of three to arrive at the final calculation. See Ex. B at 11-12. Defendants incorrectly argue that this multiplier of three is "arbitrary." Sedlik did not select a multiplier of three at random. He has more than 20 years of experience working in the photography industry and is familiar with the difference in valuation between generic photographs and executive portraits of a Fortune 500 CEO. Indeed, Coogan himself typically utilizes a multiplier of three for proprietary photographs,
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consistent with Sedlik's approach. See Coogan Invoice #2002-1212, page 2, Paragraph B, attached as Exhibit 2 to the Complaint and Amended Complaint, IBRH. This type of opinion is exactly the way in which Sedlik's expertise assists the trier of fact in understanding the industry practices. Defendants' next argument, apparently meriting only three sentences, is unclear and misguided. Defendants claim that Sedlik utilized inaccurate license duration criteria on the Corbis website which were unrelated to the actual uses in this case in order to ensure that Avnet did not benefit from any "discounts." First, these willful infringers "cannot expect to pay the same price in damages as it might have paid after freely negotiated bargaining, or there would be no reason scrupulously to obey the copyright law". This finding has been applied to both actual damage cases (infra) and to statutory damage cases. See Montgomery v. Noga, 168 F.3d 1282, 1999 U.S. App. LEXIS 3739 (11th Cir. 1999), citing Iowa State University Research Foundation, Inc. v. American Broadcasting Cos., 475 F. Supp. 78, 1979 U.S. Dist. LEXIS 10499 (S.D.N.Y. 1979). Second, had Defendants accurately represented Sedlik's report on this issue they would have noted his rationale for employing a monthly, rather than yearly, license. Sedlik states: In computation of actual damages, Avnet is not entitled to discounts of any sort, such as discounts for quantity or extended license periods. For this reason, and based upon other reasons indicated above, I have computed Avnet's actual damages based upon monthly license periods where applicable, rather than specifying longer license periods for which Avnet might enjoy the benefit of an unearned discount for extended use. When considering the annual total of my computations for monthly licensing fees, the annual total may be quite high relative to average annual fees for similar use. However, that comparison is irrelevant to the determination of actual damages in this matter, as Coogan would have reasonably required Avnet to pay monthly, not annual fees, as explained above. Ex. B at 12. Sedlik's analysis speaks for itself. 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 when in fact, they had no license at all at the time of the infringement.
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Defendants should not be rewarded by receiving discounts for a hypothetical extended license they never procured in the context of assessing actual damages for their copyright infringement. Defendants also argue that Sedlik applied three additional fees to the value of the Corbis photographs without any basis and offered "no basis whatsoever" for the duration of the fees. Again, Defendants' arguments are simply without merit. Sedlik explains, in detail, the circumstances warranting the application of additional fees for the calculation of actual damages. First, as mentioned, Sedlik's Report details the reason photographers charge an additional premium for photographs when dealing with a known infringer. Accordingly, Sedlik notes: After Coogan discovered Avnet's initial infringing uses of Coogan's photographs ... [and] prior to the commencement of Avnet's additional infringing use of Coogan's photographs, Coogan viewed Avnet as a known infringer of Coogan's works ... Had Avnet then approached Coogan at the that time with a request to license additional use (rather than proceeding to commit additional infringements without notice), it is reasonable to conclude that in determining the fees for Avnet's future use of Coogan's photographs, Coogan would have reasonably required Avnet to pay licensing fees that contemplated not just the scarcity of Coogan's photographs of Vallee, but that also contemplated Avnet's propensity to infringe in the future, based upon Coogan's past experience with Avnet's infringements. ... Coogan reports that his premium under the circumstances would have been 25%. Based on my knowledge and experience, it is my opinion that a 25% premium when quoting new license fees to a past infringer is not only reasonable, but surprisingly low. However, in reliance on Coogan's standard, I will apply this 25% premium in my actual damages computations. Ex. B at 9-11. Second, Sedlik explains his damages calculations which include $80,000 for

23 Avnet's unauthorized sub-licensing of Coogan's photographs to a third party: 24 25 26 27 28 Avnet encouraged and facilitated unlicensed third party use and infringement of Coogan's photographs by placing the photographs in areas designated for downloading from Avnet's web site, and by otherwise providing Coogan's photographs to third parties. Coogan's contract with Avnet prohibited sub-licensing. Coogan is entitled to additional actual damages equal to the fee that Coogan would have reasonably required from Avnet for a license to sublicense Coogan's photographs to third parties for unlimited and unknown use. Based upon
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my personal knowledge and experience, the reasonably required fee for such use if licensed from Coogan at the time of infringement would be $20,000 per photographs, per year for the years 2001 through 2005. ... Though the use occurred over a five year period, as the exact end date of use is unknown, I have computed the sub-licensing damages based upon four, not five years of use. ... I conclude that actual damages of $80,000 are appropriate for Avnet's unauthorized sub-licensing of Coogan's photograph, expressly prohibited in Coogan's contract with Avnet. Ex. B at 14-15. Finally, Sedlik applies a $2,000 annual fee per photograph for Coogan's loss of ability to license "first use" of the photographs in various media: The value of such lost sales is difficult to approximate with certainty, but based on my knowledge and experience, a reasonable approximation of the effect of such lost sales to Coogan resulting from Avnet's use is $2000 per year per photograph over the next ten years, and $10,000 in total per photograph thereafter over the remainder of the copyright life or the photograph, for a total of $30,000 per photograph, or $90,000 in total for Coogan's three photographs. Ex. B at 16. It is preposterous for Defendants to argue that Sedlik has "no basis whatsoever" for the additional fees at issue here. 3 Sedlik bases the actual damage calculations, including the additional fees as well as the duration applicable, on his extensive

16 knowledge and experience within the field. In his 20 years of experience, Sedlik has 17 amassed extensive expertise in copyright and licensing as related to photography. Thus, 18 he is exceptionally qualified to render opinions as to the valuation and calculation of the 19 aforementioned additional fees here. In fact, Defendants would be hard-pressed to find a 20 more qualified expert in this area. Defendants may rebut Sedlik's calculations at trial; 21 22 23 24 25 26 27 28 Defendants' citation to Barrera v. Brooklyn Music to argue that Plaintiff may not add a 25% premium to compensate for Defendant's prior infringement is misleading. In Barrera, the $45,000 premium represented an additional fee characterized as a cost of litigation. It did not represent the fair market value of the photograph, thus the court disallowed the premium. Here, the 25% premium is not included for the purposes of alleviating the cost of litigation. Rather, it represents the additional fee Coogan would have charged Defendants for legal use of the photograph after he discovered Defendants initially infringed on his copyright but prior to the second round of infringements. Exhibit B at 9-11. In short, it represents the fair market value of the photograph at the time of Defendant's infringement and is allowable under the circumstances.
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however, they have no basis to argue here that Sedlik should be excluded or that his calculations are unreliable. b. Second Prong of Actual Damages: Infringers' Profits The second prong of actual damages analysis provides for recovery of "any profits of the infringer that are attributable to the infringement." Polar Bear, 384 F.3d at 710 (citing 17 U.S.C. § 504(b)). As noted, in establishing the infringer's profits the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his deductible expenses. Id. at 711. The copyright owner need only show a causal nexus between the infringement and the gross revenue. Id. The infringer then has the burden of apportioning the profits that were not the result of the infringement. Id. Sedlik's Report establishes that Avnet earned gross revenues of $52,093,000,000 during the infringement period, which Defendants do not dispute. See Ex. B at 4. Thus, Sedlik's Report satisfies Plaintiff's initial burden to prove Avnet's gross revenues. See 17 U.S.C. § 504(b); Frank Music, 772 F.2d at 514; Polar Bear, 384 F.3d at 711. Defendants argue that Sedlik failed to establish a causal nexus between the infringement and Avnet's profits. Defendants, however, are wrong: Sedlik established the causal nexus in his Report: Avnet used photographs of Vallee to enhance Vallee's reputation, for the ultimate benefit of Avnet. Images of Vallee appear in Avnet's annual reports, advertisements, editorials, brochures, web sites, emails and other materials. Based upon Avnet's continued use and prominent display of Coogan's portraits of Vallee in its internal and external marketing and communications materials for at least four years, Avnet's actions confirm that in using Coogan's photographs, Avnet would enhance Vallee's reputation as CEO, enhance Avnet's internal and external reputation, and contribute significantly to Avnet's success and profitability. Corporate reputation not only drives sales, but contributes up to 50% of a company's value as perceived by the investment community. (citation omitted). Corporate reputation is derived from a combination of perception and performance. ... Up to 50% of a company's reputation is attributable to the reputation of the CEO. When a company's CEO has a favorable reputation, investors are up to 95% more likely to purchase stock in that company, and 52% more likely to pay a premium for that company's services (citation omitted). CEO reputation also has a profound effect on employee recruitment, morale and retention, and in turn, innovation, productivity and efficiency. (citation omitted). All of
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these factors contribute to the success and profitability of a company. Based upon my personal knowledge and belief, including my twenty years working in the advertising industry, teaching advertising at the college level, and assisting corporations in building their brands and selling products and services using visual marking tools, I conclude that a nexus exists between Avnet's use of Coogan's photography of Avnet CEO Vallee and profits earned by Avnet resulting directly or indirectly from CEO reputation, corporate reputation and performance. Ex. B at 6-8. (Emphasis added). As shown, Sedlik provided a detailed explanation as to

6 the causal nexus between the use of Coogan's photographs and Avnet's profits despite 7 Defendants' arguments to the contrary. 8 Defendants also claim that Sedlik did not offer opinions as to the amount of 9 Avnet's profits caused by the infringement. Defendants are correct on this point. Sedlik 10 did not offer such opinions as it is not Plaintiff's burden to do so. See 17 U.S.C. § 11 504(b); Frank Music, 772 F.2d at 514. As explained, once Plaintiff establishes the 12 infringer's gross revenues and demonstrates the causal nexus between the revenue and 13 the infringement, the burden lies with the Defendant to apportion the profits not arising 14 from the infringement. Id. While Defendants are free to make these arguments and 15 rebuttal points at trial, there is already enough of a causal nexus between the 16 infringement and Avnet's profits shown to make this an issue for trial. 17 18 19 20 21 22 23 24 25 26 27 28 C. Sedlik's Testimony is not Cumulative of that of Richard Weisgrau. Defendant's final argument that Sedlik's testimony should be precluded on the basis that it is cumulative and redundant of Plaintiff's expert Richard Weisgrau is unfounded. The reports speak for themselves and demonstrate that the experts reached their conclusions utilizing distinct bases, methodologies, and calculations. For example, the two experts employed different baseline valuation techniques in their damages calculations. Weisgrau bases his calculation upon the criteria applied by the stock agency Getty Images to price licenses for images while Sedlik bases his calculations upon the criteria applied by the fully competitive stock agency Corbis. Further, the Sedlik Report discusses additional premiums and fees applicable as a result of the infringement which Sedlik utilizes to calculate the damages assessment. Sedlik also offers testimony regarding the causal nexus between the infringement and Avnet's
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gross revenue, which is essential testimony. In addition, Weisgrau's report discusses the importance of utilizing photography as a branding tool in general and the role Coogan's photographs played in Avnet's brand management efforts specifically, and was submitted after Avnet's December 2005 outright admissions to "public relations" use of the photography in December 2005 and Allen Maag's deposition testimony that all editorial use is public relations use on January 12, 2006. Weisgrau also explains the importance of public relations to Avnet, the value of Avnet's annual report, and the manner in which the use of Coogan's photographs enhanced both. In short, Plaintiff's experts offer distinct opinions regarding the amount of damages at issue in this matter, and Defendants are merely grasping at straws to find any way to preclude the testimony. However, both expert reports will assist the trier of fact in understanding the damages at issue in this case. These reports are neither cumulative nor redundant, and accordingly, Sedlik should be permitted to testify as a damages expert for Plaintiff. Moreover, even if somewhat cumulative, which they are not, it should be Plaintiff's choice as to which expert to use, and for what issues, as well, as each expert's opinion encompasses myriad issues. III. CONCLUSION For the foregoing reasons, Plaintiff respectfully requests that Defendants' Motion be denied in full.

Respectfully submitted this 2nd day of June, 2006,

s/Jordan M. Meschkow Jordan M. Meschkow MESCHKOW & GRESHAM, P.L.C. 5727 North Seventh Street Suite 409 Phoenix, Arizona 85014 ATTORNEYS FOR PLAINTIFF

Nancy R. Giles GILES LEGAL, P.L.C. 733 West Willetta Street Phoenix, Arizona 85007 ATTORNEY FOR PLAINTIFF

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Case 2:04-cv-00621-SRB 8050-0131-214-1

CERTIFICATE OF SERVICE I hereby certify that on 2 June 2006 I electronically transmitted the attached document to the Clerk's Office using the ECF System for filing and transmittal of a Notice of Electronic Filing to the following ECF registrants: Jordan Green FENNEMORE CRAIG 3003 North Central Avenue, Suite 2600 Phoenix, Arizona 85012-2913 Attorneys for Defendants and Nancy R. Giles GILES LEGAL, P.L.C. 733 West Willetta Street Phoenix, Arizona 85007 Attorney for Plaintiff

/s Jordan M. Meschkow

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