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TABLE OF CONTENTS Page(s) TABLE OF CITATIONS .................................................................................................. ii SUMMARY OF ARGUMENT ...........................................................................................1 STATEMENT OF FACTS ..................................................................................................3 I. THE PARTIES .............................................................................................3 A. B. II. III. PARADOX ENTERTAINMENT INC..............................................3 RED SONJA LLC.............................................................................4

THE DISPUTE..............................................................................................6 THE TARTER REPORT............................................................................10 A. B. Mr. Tarter's Corrective Advertising Opinions.................................11 Mr. Tarter's "Opportunity Cost" Opinions. ....................................13

ARGUMENT.....................................................................................................................14 I. II. THE LEGAL STANDARD FOR ADMISSIBILITY OF EXPERT TESTIMONY. ...........................................................................14 THE DAMAGES OPINIONS IN THE TARTER REPORT DO NOT MEET THE STANDARDS FOR ADMISSIBILITY. .....................................................................................15 A. B. C. Mr. Tarter's Damages Opinions Are Not Causally Linked To The Complained Of Conduct. ......................................15 Mr. Tarter's Damages Opinions Consist Of Unsupported Speculation And Are Unreliable. ........................17 Mr. Tarter Is Unqualified To Render Any Opinion With Respect to Opportunity Costs. ..............................................20

CONCLUSION..................................................................................................................22

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TABLE OF CITATIONS Page(s) CASES A & H Sportswear Co. v. Victoria's Secret Stores, Inc., 166 F.3d 197 (3d Cir. 1999).........................................................................................15 Accu Pers. v. Accustaff, Inc., 846 F. Supp. 1191 (D. Del. 1994)................................................................................16 Advanced Med. Optics, Inc. v. Alcon Inc., No. 03-1095-KAJ, 2005 U.S. Dist. LEXIS 5803 (D. Del. Apr. 7, 2005) ..............17, 21 AstraZeneca LP v. Tap Pharm. Prods., No. 04-1332-KAJ, 2006 U.S. Dist. LEXIS 40620 (D. Del. May 18, 2006)........ Passim Augustine Med., Inc. v. Mallinckrodt, Inc., No. 01-387-SLR, 2003 U.S. Dist. LEXIS 6079 (D. Del. Apr. 9, 2003) ......................18 Benjamin v. Peter's Farm Condo. Owners Ass'n., 820 F.2d 640 (3d Cir. 1987).........................................................................................18 Calhoun v. Yamaha Motor Corp., U.S.A., 350 F.3d 316 (3d Cir. 2003).........................................................................................21 Callaway Golf Co. v. Dunlop Slazenger, 384 F.Supp.2d 735 (D. Del. 2005)...............................................................................16 Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993)............................................................................................... 14-15 Elcock v. Kmart Corp., 233 F.3d 734 (3d Cir. 2000)............................................................................. 14, 17-18 Gen Elec. v. Joiner, 522 U.S. 136 (1997).....................................................................................................19 Go Med. Indus. Pty, Ltd. v. Inmed Corp., 471 F.3d 1264 (Fed. Cir. 2006)....................................................................................20 Gumbs v. Int'l Harvester, Inc., 718 F.2d 88 (3d Cir. 1983)...........................................................................................18 Heller v. Shaw Indus., 167 F.3d 146 (3d Cir. 1997).........................................................................................17

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In re Paoli R.R. Yard PCB Litig., 35 F.3d 717 (3d Cir. 1994).....................................................................................14, 20 In re TMI Litig., 193 F.3d 613 (3d Cir. 1999).........................................................................................20 Izumi Prods. Co. v. Koninklijke Philips Elecs. N.V., 315 F. Supp. 2d 589 (D. Del. 2004)....................................................................... 18-19 Joint Stock Soc. v. UDV N. Am., Inc., 266 F.3d 164 (3d Cir. 2001).........................................................................................15 Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137 (1999).....................................................................................................14 Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400 (9th Cir.), cert. denied, 510 U.S. 815 (1993).......................................15 Oddi v. Ford Motor Co., 234 F.3d 136 (3d Cir. 2000).........................................................................................17 PBM Prods., Inc. v. Mead Johnson & Co., 174 F. Supp. 2d 417 (E.D. Va. 2001) ..........................................................................16 Waldorf v. Shuta, 142 F.3d 601 (3d Cir. 1998).........................................................................................21 Xoom, Inc. v. Imageline, Inc., 323 F.3d 279 (4th Cir. 2003), cert denied, 2003 U.S. LEXIS 6260 (2003) ................16 Zazu Designs v. L'Oreal, S.A., 979 F.2d 499 (7th Cir.1992) ........................................................................................16 STATUTES 15 U.S.C. § 1117................................................................................................................15 OTHER AUTHORITIES Fed. R. Civ. Proc. Rule 26 .................................................................................................20 Fed. R. Evid. 702 .........................................................................................................14, 20

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SUMMARY OF ARGUMENT Defendant, Paradox Entertainment, Inc. ("Paradox") manages various literary rights and character-based properties owned by it or its wholly-owned subsidiaries. Since 2003, one of those properties has been Conan (aka "Conan the Barbarian"), a character created by renowned fiction author Robert E. Howard. On February 6, 2006, Paradox announced it acquired the remaining literary works and characters in the Robert E. Howard library (the "REH Library"), including the character Red Sonya, which first appeared in 1934. Plaintiff, Red Sonja LLC, has certain rights to Red Sonja, a character first introduced by Roy Thomas in the mid 1970's, and that is loosely based on the Robert E. Howard Red Sonya character. Far from being "one of the more insidious cases of unfair competition and trademark infringement ever knowingly advanced by a competitor," this case boils down to Paradox's issuance of two press releases (i.e., its acquisition of the REH Library and its development of a movie based on Howard's western "Vultures of Wahpeton"), its posting of an errant article written by a third party about the REH Library acquisition, and its inclusion of a two sentence statement on its website noting that Paradox "builds brands" and referring to Red Sonya and other characters as "successful brands."1 Paradox has never sold or offered for sale any products based on the Red Sonya

1

In its Complaint, plaintiff also alleged unfair competition relating to Paradox's purported efforts to obtain trademark protection on the word "HYBORIA" and purported attempts to interfere with plaintiff's contracts in connection with developing a movie feature Red Sonja. Plaintiff has not, however, asserted any damages in connection with those claims.

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character. Nor has Paradox ever licensed or offered anyone a license to use the Red Sonya character for any purpose. From Paradox's February 6, 2006 initial press release announcing its acquisition of the REH Library until the filing of this lawsuit on April 25, 2006, plaintiff never alerted Paradox to any possible confusion involving the Robert E. Howard Red Sonya character owned by Paradox and plaintiff's Red Sonja character and never asked Paradox to take any action to avoid potential confusion. Nor did plaintiff take any corrective action to mitigate purported confusion. It simply filed this suit. Immediately upon hearing of the suit on April 27, 2006, Paradox issued a statement clarifying that "Red Sonja® (with a `j') is owned by Red Sonja LLC" and that Paradox had no intent of commercially exploiting its Red Sonya. Although admitting that Paradox's statements that it did not intend to exploit Red Sonya "cut off the claim to future damages," plaintiff has submitted a report from Fred B. Tarter seeking between $417,240 and $442,240 in damages for future corrective advertising and "opportunity costs" that plaintiff has purportedly incurred since it announced its Red Sonja movie on May 2, 2006 (after Paradox's unambiguous April 27, 2006 clarification). The opinions in Mr. Tarter's report (Ex. 1) are speculative, conclusory and unsupported. Mr. Tarter does not assess any confusion purportedly caused by Paradox or tie such confusion to any damage. He instead simply assumes "market confusion" without citation to any surveys or research or facts. Mr. Tarter opines that the total costs of corrective advertising over a three to six week period "would be $192,240" but offers no support for his opinion of the amount of advertising needed or his final calculation. He "estimates" the cost of a "good advertising agency" at between "25,000 - $50,000"

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but does not substantiate that claim or explain what it is that such an agency would have to do in the instant case. He then speculates that plaintiff lost licensing opportunities because confusion "frequently results in potential licensees not willing to enter a licensing arrangement" but he identifies no licensees who have been confused and no particular lost licensing opportunities. Instead, he simply assumes (without any stated

basis or rationale) that Red Sonja "would generate approximately 1/3" of what Conan generated in advances and notes that he "would set the loss approximately at $200,000." During discovery, Red Sonja refused to articulate how it had been damaged, instead leaving that for its expert, Mr. Tarter, to show "the impact of confusion and how long it lasts, what its remedy impact is, and what the costs are." But Mr. Tarter's approximations, unsupported opinions and speculations are unfounded and unreliable. They can not form the basis of admissible testimony at trial. Mr. Tarter's expert report should be stricken, and plaintiff should be precluded from offering evidence of damages at trial. STATEMENT OF FACTS I. THE PARTIES A. Paradox Entertainment Inc.

Defendant Paradox manages character-based properties owned by it or its wholly-owned subsidiaries. Those properties include more than 1,000 fantasy, horror, science fiction, and western stories and characters. One of those is the fictional

barbarian, Conan (aka "Conan the Barbarian"). Originally created in 1932 by author Robert E. Howard, known as the father of the "sword and sorcery" genre, Conan has since appeared in numerous books, comics, television programs, and video games, as

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silver "metal bikini." (Ex. 5). As explained by Roy Thomas, it was "best to make [RED SONJA] a bit more of a `new' character" so that "Red Sonya-with-a-`y' would continue to exist, pristine and untouched . . . while Sonja-with-a `j' was a blank slate, on which [he] could write and Barry [Smith] could draw whatever we would."2 (Id.). In 1977, RED SONJA was first featured in her own comic book series, entitled RED SONJA. (D.I 1 ¶ 20; see also Ex. 6 (Pl.'s Resp. to Def.'s Interrog. #3)). In 1985, RED SONJA was made into an unsuccessful movie, which has and which has resulted in royalties. (Ex. 2 at 207-09).

Throughout the 1990's, RED SONJA appeared as a feature comic in only three publications, the last of which was in 1999. (Ex. 6 (Pl.'s Resp. to Def.'s Interrog. #3)). In 2005, after nearly six years of hibernation, RED SONJA returned to the retail market when Dynamic Forces (a.k.a Dynamite Entertainment), began publishing a monthly RED SONJA comic book series. (Ex. 4 at 64; 74; Ex. 6 (Pl.'s Resp. to Def.'s Interrog. #1)). In December 2005, Red Sonja also sold an option to Emmett/Furla Films for a second RED SONJA movie. (Ex. 7 (G. Furla Dep.) at 22). That movie option was assigned to Nu Image Films for production and development, and announced on May 2, 2006. (Ex. 4 at 99; Ex. 8 at 68-69). RED SONJA is registered under U.S. Trademark 1,397,608 for "publications, namely comic books, magazines and novels." (See D.I. 1 at Ex. R).

2

Emphasis added unless otherwise noted.

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II.

THE DISPUTE Upon finalizing its purchase of the REH Library, on February 6, 2006,

Paradox issued a press release, announcing that it had successfully acquired the remaining characters and stories in the REH Library. (Ex. 9). That announcement focused entirely on Robert E. Howard and his career. Consisting of more than 400 words, it provided a brief biography of Howard, quotes from Paradox executives, and names of authors who have been inspired by Howard's stories, including a testimonial from author Stephen King. The text of the release makes no mention of Red Sonya. The only mention of that character was in the corporate information paragraph describing Paradox's Swedish parent company, Paradox Entertainment AB ("Paradox AB"), which stated: "The company owns all stories and characters created by pulp author Robert E. Howard, among others, Conan, Kull, Bran Mak Morn, Solomon Kane, and Red Sonya. Paradox also owns the self-developed Mutant Chronicles. . . ." (Id.). The next day, the press reported on REH Library acquisition. (Ex. 10; see also, D.I. 1, at Ex. T). An article in Variety, correctly stated that Paradox, "which owns literary rights to Robert E. Howard's Conan character, has purchased the rest of the pulp fiction scribe's library, some 800 other literary properties." (Id.). That article also

correctly noted that Red Sonya was one of the characters controlled by Paradox. (Id.). The Hollywood Reporter, also discussed Paradox acquisition of "the rights to the library of author Robert E. Howard, the creator of `Conan Barbarian,'" but mistakenly noted that "[t]he [REH] library includes female sword-wielder Red Sonja." (Id.). The Variety and

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Hollywood Reporter articles were posted for a short time on Paradox's website.3 (Ex. 3 at 189-90). Other articles, including those in Newsarama and ICV2.com (cited in Red Sonja's Complaint), correctly reported on Paradox's acquisition of the REH library, and explained the differences between Howard's "Red Sonya" and Plaintiff's RED SONJA. (D.I. 1 at Exs. V; W). For instance, the February 7, 2006 Newsarama article, quoted in Red Sonja's Complaint as evidence of "confusion," (id. at ¶ 46), repeatedly explains: · "As for how [Paradox's acquisition of the REH Library] impacts the Howard properties most relevant to comic fans, namely, Dark Horse's Conan and Dynamite Entertainment's Red Sonja series, the short version is, it doesn't." "Paradox does on [sic] the rights to Red Sonya, while the Red Sonja Corporation retains the rights to Red Sonja." "As explained previously, Red Sonja is controlled by the Red Sonja Corporation, a wholly separate company, distinct from the REH Estate." "[Paradox] controls not only Conan, but all associated characters from the Hyborian world. Except Red Sonja."

· · ·

(Ex. 11). On April 21, 2006, Paradox issued another press release, which focused on Paradox's development of movie based on a Robert E. Howard western, "Vultures of Wahpeton." (Ex. 12; see also D.I. 1 at Ex. Z). As in the previous release, the text of the "Vultures of Wahpeton" release never mentioned Red Sonya, but listed it in the corporate information paragraph about Paradox AB. (Id.). In the April 21 release, however, Red

3

The website also included a two sentence snippet under the title "WE BUILD BRANDS," which noted that Paradox's "portfolio consists of such successful brands as Conan, Solomon Kane, Kull, Mutant Chronicles, Bran Mak Morn, Red Sonya etc." (Id. at Ex. Y).

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Sonya was erroneously listed as "Red Sonya®," even though it is not a trademark and Paradox has never sold products or licensed any use of Red Sonya. (Id.; Ex. 13 at 165). Four days later, without ever having contacted Paradox to advise it of purported "confusion" caused by the February 6 and April 21 press releases or the posting of the erroneous Hollywood Reporter article,4 Red Sonya sued Paradox asserting this to be "one of the more insidious cases of unfair competition and trademark infringement ever knowingly advanced." (D.I. 1 at 1). The Complaint, replete with conclusory, unsupported allegations of misconduct by Paradox, ignores the fact that Paradox has never used, licensed, or sold Red Sonya in connection with any product or service. Instead, it claims that, by announcing the purchase of the REH Library on February 6, 2006, Paradox "intentionally" caused confusion in the marketplace, (id. ¶41), and "sat complicit" as that announcement "was misinterpreted by various newspaper, magazine and online sources" (id. at 4). It further alleges that Paradox "intentionally and purposefully caused confusion" by "actual and intended promotion, advertising, marketing and sale of their [nonexistent] products using" Red Sonya. (Id. ¶ 74). Immediately upon learning of the lawsuit on April 27, 2006, Paradox set out to avoid any possible confusion, by issuing a release that remains on the Paradox website to this day. (Ex. 14 (DEF230); Ex. 3 at 188-90). That release stated, that while Paradox did not "believe that there should be any such confusion," it "would like to do all that [it] can to clear up any that might exist." To that end, it explained (Ex. 14):
4

Arthur Lieberman, president of Red Sonja never contacted Peter Sederowsky, the CEO of Paradox's CEO at the time this suit was filed (Ex. 2 at 345).

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The Red Sonya (with a "y") character was created in 1934 by Robert E. Howard. Howard's Red Sonya of Rogatino first appeared in the Howard story The Shadow of the Vulture. She was a 16th century Russian woman fighter who participated in the battle against the Turks in Vienna. She had absolutely nothing to do with Conan, or the Conan world of Hyboria. * * * The Red Sonja (with a "j") character was created by Roy Thomas in 1974 and was set in Conan's Hyborian Age. This Red Sonja was the heroine of the 1985 Film entitled Red Sonja and is featured in the current Dynamite Comic books. * * * Red Sonja® (with a "j") is owned by Red Sonja LLC which is not affiliated with either Paradox Entertainment, Inc., or Conan Properties International LLC. * * * At the moment neither Paradox Entertainment, Inc., nor Conan Properties International, LLC has any intention of using the Red Sonya (with a "y") character in any stories set in Hyboria, or otherwise, nor has it granted any of its licensees permission to use the Red Sonya character. Thus, no later than April 27, 2006, Paradox made clear the relationship between the Robert E. Howard character Red Sonya and the later developed Roy Thomas Red Sonja character of plaintiff, and stated that it did not intend to use the Red Sonya character. Arthur Lieberman, president of plaintiff, has acknowledged that, Paradox's statement that it did (Ex. 2 at 356:14-20). On May 2, 2006, five days later, the development of the second RED SONJA movie was announced. (Ex. 15).

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III.

THE TARTER REPORT During discovery, Paradox sought to uncover the bases of plaintiff's

damages claim. It served an interrogatory (no. 19) asking Red Sonja to "[i]dentify in detail the factual basis for [its] contention in the Complaint that Plaintiff has been damaged in the amount of at least $5,000,000 through Defendants actions, and identify all documents substantiating the same." (Ex. 6 (Pl.'s Interrog. #19)). Plaintiff responded "that to answer such question now is premature as it needs to await expert discovery." (Ex. 6 (Pl.'s Resp. to Def.'s Interrog. #19)). Thereafter, Paradox asked plaintiff's president about any damages suffered by Red Sonya as a result of the allegations in the Complaint. He testified that he wanted but that he had (Ex. 2 at 348; 351). He further testified that Paradox would

(id. at 351), and that

(Id. at 382). Similarly, Red Sonja's vice president, Luke Lieberman, testified he (Ex. 4 at 121). On April 2, 2007, Red Sonja submitted a report from Fred. B. Tarter relating to damages. (Ex. 1).5 According to his report, Mr. Tarter made little effort to
5

Mr. Tarter's purported background is in "the purchase, sale and barter of advertising and media time" (id at 4). That includes experiences in promotional mail advertising, publishing a newspaper in Puerto Rico, broadcasting radio "in Europe, Asia, the former Soviet Union, and the Middle East," "book-packaging," and publishing a children's magazine for "Burger King Kid's Club." (Id. at 2-3). (continued . . .)

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gather facts or data in forming his opinions. Instead, he "reviewed the complaint . . ., along with each of its exhibits," reviewed unspecified "`Red Sonja' and `Red Sonya' internet searches" and "interviewed Arthur Lieberman." (Id. at 4). Mr. Tarter also

apparently read four pages of Arthur Lieberman's deposition, which he quotes in his report. (Id. 4-6). Nowhere in his report, does Mr. Tarter refer to any independent

investigation, survey, or examination as to whether there is confusion in the marketplace or if any alleged confusion was caused by Paradox. Mr. Tarter simply assumes confusion and that any confusion is due to Paradox. Mr. Tarter then offers his unsupported

"estimate[s]" for costs of corrective advertising and "set[s] the loss" for unspecified missed opportunities "approximately at $200,000." (Id. at 8-10). A. Mr. Tarter's Corrective Advertising Opinions.

Mr. Tarter first measures damages based on the purported cost of corrective advertising "to correct the impression that the industry has as to who owns the title to the intellectual property `Red Sonja.'" (Id. at 7). Mr. Tarter's speculations as to future corrective advertising are not based on any actual corrective advertising efforts by Red Sonja. Plaintiff has never made any efforts at "corrective advertising" or even issued any press release in an attempt to correct purported confusion. (Ex. 2 at 351). Moreover, Mr. Tarter fails to identify what the stated "industry" consists of, what impression those in the unknown "industry" have concerning the ownership of Red Sonja or whether any such impression was caused by Paradox. Mr. Tarter notes that (. . . continued) None of those experiences, however, have involved commercializing character based properties, licensing activities, or valuing harm caused by "use" of a trademark.

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he came up with his conclusion by "review[ing] the various ways in which one could approach this, and based on [his] experience, [he] believe[s] the issues are rather clear cut." (Id. at 7). He never, however, identifies the "various ways" considered nor what "issues" are clear cut. Mr. Tarter then speculates that Variety, Hollywood Reporter, Daily Variety and Publisher Weekly are the magazines that "can best be used" to reach unidentified "decision makers" in the entertainment and publishing industries. (Id.). He then offers his "beliefs" as to how those publications could be used (id. at 8): I believe the most effective approach would be to run a full page advertisement on both Monday and Friday for a three week period. Monday, because that is the day when weekend box offices are released, and Friday, because that is a heavy weekend `issue.' This approach must be finetuned for Variety Magazine and Publisher's Weekly as they are published weekly; however, it is possible to simply take out six consecutive ads. Therefore, if one were to run ad advertisement six times per magazine (two each for three weeks and six consecutive ads in Variety and in Publisher's Weekly), the total cost would be $192,240. Mr. Tarter, however, nowhere offers any factual support for his "beliefs" as to the amount of advertising needed or the purported cost of that advertising. Indeed, there is not a single fact presented to support his conclusion that six ads is the magic number to "correct" any confusion or that the costs of such advertising "would be $192,240." (Id. at 8). Nor is there a shred of support for his assertion that in addition "[a] good advertising agency must be used . . . at an estimated cost of $25,000 $50,000." (Id. at 9). And though he notes that "obviously the message is of equal importance and careful and thoughtful consideration must be given to the `editorial' content of the message," he does not provide any clue as to what the ads should say or what the advertising agency would be called on to do for the "estimated" cost. (Id.)

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B.

Mr. Tarter's "Opportunity Cost" Opinions.

Mr. Tarter's second measure of damages is lost "opportunity cost," or the "loss of money due to . . . market confusion" and "uncertainty as to ownership." (Id. at 9). Mr. Tarter notes (id.): Such word travels quickly in the entertainment and publishing industry and confusion as to ownership, frequently results in potential licensees not willing to enter in a licensing arrangement due to concern of then having to compete with another entity claiming to also have the right to licensee [sic] such property and that the licensee may be the subject of litigation. Mr. Tarter does not identify any "potential licensee" who was concerned about the ownership of the Red Sonja character, nor does he identify any "potential licensee" who was unwilling to enter into a licensing arrangement due to potential litigation over claims of ownership. Instead, he simply offers the conclusory opinion that the public announcement "of a `Red Sonja' movie would, in [his] experience, have at least generated some licensing interest." (Id. at 10). That fact that it did not, in this cases, is in Mr. Tarter's unexplained and unsupported belief "not due to the lack of popularity of the `Red Sonja' character." (Id.). Mr. Tarter then caps off his opinion with the conclusion (id.): Assuming an 18 month delay and assuming that the property ­ Red Sonja ­ would generate approximately 1/3 (conservatively) that the Conan the Barbarian property generates in advances (Red Sonja's audience is similar, but not as well known), I would set the loss approximately at $200,000. The bases for the two assumptions used to "approximate" damages are left wholly unexplained and unsupported.

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ARGUMENT Plaintiff's damages case is based upon the Tarter Report. The opinions offered in that report, however, do not meet the standards for admissibility under the Federal Rules of Evidence as set forth by the Supreme Court in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). The opinions lack reliability and consists solely of unsupported conclusory opinions, speculation and conjecture as to damages. I. THE LEGAL STANDARD FOR ADMISSIBILITY OF EXPERT TESTIMONY. The admissibility of scientific expert testimony is governed by the Federal Rules of Evidence, and in particular Fed. R. Evid. 702, which provides: If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case. The Supreme Court in Daubert v. Merrell Dow Pharms., Inc., held that a trial judge must act as a "gatekeeper," assuring that all proffered expert testimony "both rests on a reliable foundation and is relevant to the task at hand." 509 U.S. 579, 589 (1993). This gatekeeping role applies to all expert testimony, including damages experts. Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 148-49 (1999); Elcock v. Kmart Corp., 233 F.3d 734, 745 (3d Cir. 2000). The Third Circuit has construed the Federal Rules as embodying "three distinct substantive restrictions on the admission of expert testimony: qualifications, reliability, and fit." Elcock, 233 F.3d at 741; In re Paoli R.R. Yard PCB Litig., 35 F.3d

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717, 741-43 (3d Cir. 1994). Ultimately, "[t]he party offering the expert testimony has the burden of proving admissibility." AstraZeneca LP v. Tap Pharm. Prods., No. 04-1332KAJ, 2006 U.S. Dist. LEXIS 40620, at *14 (D. Del. May 18, 2006) (citing Daubert, 509 U.S. at 592 n.10). II. THE DAMAGES OPINIONS IN THE TARTER REPORT DO NOT MEET THE STANDARDS FOR ADMISSIBILITY. A. Mr. Tarter's Damages Opinions Are Not Causally Linked To The Complained Of Conduct.

Monetary recovery for violations of both registered and unregistered trademarks is governed by § 35 of the Lanham Act. 15 U.S.C. § 1117; A & H Sportswear Co. v. Victoria's Secret Stores, Inc., 166 F.3d 197, 209 (3d Cir. 1999). Trademark damages cannot be based on speculation or conjecture, but "must be established with reasonable certainty." Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1407 (9th Cir.), cert. denied, 510 U.S. 815 (1993) ("Many courts have denied a monetary award in infringement cases when damages are remote and speculative."); see also Joint Stock Soc. v. UDV N. Am., Inc., 266 F.3d 164, 184 (3d Cir. 2001) (damages claim based on the profits plaintiff "would have made . . . if it had not faced the defendants' allegedly false designation of origin and false advertising" was "extremely speculative"). To recover damages under the Lanham Act, a plaintiff must prove the fact and the extent of damages. A & H Sportswear, 166 F.3d at 209 (noting "absent proof of actual harm, injunction adequate remedy"). That is, a plaintiff must first establish that there has been a Lanham Act violation, and then must prove actual harm and a causal link between it harms and the actionable conduct. A & H Sportswear, 166 F.3d at 209 (denying damages because plaintiffs did not prove any "lost profits or other pecuniary

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harm proximately caused by Defendants' use [registered mark]"); Astrazeneca, 2006 U.S. Dist. LEXIS 40620, at *15 ("[T]o recover damages for false advertising under the Lanham Act, a plaintiff must show that there is a causal link between the actionable conduct and the damages."); Accu Pers. v. Accustaff, Inc., 846 F. Supp. 1191, 1215-16 (D. Del. 1994) (holding plaintiff was not entitled damages because it did not prove the "the actual harm it suffered as a result of the alleged infringing acts by defendant"); see also Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 286 (4th Cir. 2003), cert denied, 2003 U.S. LEXIS 6260 (2003) (denying plaintiff damages under the Lanham Act because "there [wa]s no evidence of actual damages or a causal link between actual damages and [Defendant's] actions"). Similarly, although prospective corrective advertising damages may be awarded, "there must be an economic rationale" to grant such relief. Callaway Golf Co. v. Dunlop Slazenger, 384 F.Supp.2d 735, 740 (D. Del. 2005). To justify damages for prospective corrective advertising, besides showing that the defendant caused the confusion that injured its mark, a plaintiff must also demonstrate that corrective advertising is justifiable "as a surrogate for plaintiff's damages" and "is the least expensive way to proceed." Id. at 741 (citing Zazu Designs v. L'Oreal, S.A., 979 F.2d 499, 506, 509 (7th Cir.1992); PBM Prods., Inc. v. Mead Johnson & Co., 174 F. Supp. 2d 417, 420 (E.D. Va. 2001)). Here, Mr. Tarter offers no causal link whatsoever between any alleged "use" by Paradox and his damages calculations. He does not attempt to analyze: (1) whether there is "market confusion;" (2) whether Red Sonja was actually harmed by any alleged "confusion;" and if so, (3) to what extent any injury is attributable to Paradox's

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alleged "use" of the Red Sonya name.

Instead, Mr. Tarter simply notes the

"inevitability" of confusion and assumes that "[s]ignificant confusion has been created ... in the minds of the decision makers in Hollywood and the [unspecified] related industries." (Ex. 1 at 7, 9). Nor does Mr. Tarter offer any "economic rationale" to

support an award of prospective corrective advertising or any opinions that his prospective corrective advertising "is the least expensive way to proceed." B. Mr. Tarter's Damages Opinions Consist Of Unsupported Speculation And Are Unreliable.

An expert's opinion is reliable only "if it is based on the methods and procedures of science rather than on subjective belief or unsupported speculation; the expert must have good grounds for his or her belief." Elcock, 233 F.3d at 745 (citation omitted); see also Advanced Med. Optics, Inc. v. Alcon Inc., No. 03-1095-KAJ, 2005 U.S. Dist. LEXIS 5803, *4 (D. Del. Apr. 7, 2005) (expert testimony must be "based on more than a subjective belief or speculation"). To assess reliability, a court "must examine the expert's conclusions in order to determine whether they could reliably flow from the facts known to the expert and the methodology used." Oddi v. Ford Motor Co., 234 F.3d 136, 146 (3d Cir. 2000) (citation omitted). That requires an expert to "explain how and why he . . . has reached the conclusion being proffered and [] have as a basis more than a subjective belief or speculation." AstraZeneca, 2006 U.S. Dist. LEXIS 40620, at *14. This "analysis applies to all aspects of an expert's testimony: the

methodology, the facts underlying the expert's opinion, the link between the facts and the conclusion" Heller v. Shaw Indus., 167 F.3d 146, 155 (3d Cir. 1997). The Third Circuit has not hesitated to exclude a damages expert where, as here, the expert's opinion is not supported by a sufficient factual foundation or rests on

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faulty assumptions. See, e.g., Elcock, 233 F.3d at 754-57; Benjamin v. Peter's Farm Condo. Owners Ass'n., 820 F.2d 640, 642 (3d Cir. 1987); Gumbs v. Int'l Harvester, Inc., 718 F.2d 88, 98 (3d Cir. 1983) (finding trial court erred "in permitting plaintiff's expert to testify as to plaintiff's future earnings loss without first requiring plaintiff to establish a factual basis for this testimony"). For example, in Benjamin, the Third Circuit held that the expert's damages opinion, based solely on the "personal belief of the plaintiff," should have been excluded because, absent "sufficient factual predicates," the expert's assumption was nothing more than "a castle made of sand." 820 F.2d at 643. In Elcock, the Third Circuit similarly held that expert testimony on "lost economic opportunities" was fatally flawed because it was based on assumptions that lacked foundation. 233 F.3d at 754-56. So too, this Court in Augustine Med., Inc. v. Mallinckrodt, Inc., No. 01387-SLR, 2003 U.S. Dist. LEXIS 6079, at *21-27 (D. Del. Apr. 9, 2003), excluded a damages expert who, like Mr. Tarter, "failed to gather facts and data sufficient to form a reliable opinion," and "[i]nstead of facts, stack[ed] assumption upon assumption to come to his conclusion." See also Astrazeneca, 2006 U.S. Dist. LEXIS 40620 (excluding plaintiff's damages expert in a false advertising case because he failed to take into account and correct "for enough variables to allow a rational cause-and-effect conclusion to be drawn"); Izumi Prods. Co. v. Koninklijke Philips Elecs. N.V., 315 F. Supp. 2d 589, 602 (D. Del. 2004) (excluding as unreliable patent infringement expert's opinion "based solely on his subjective belief" and "void of good grounds absent some form of support").

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Here, Mr. Tarter opines that $192,240 (plus an "estimated" $25,000$50,000 for unknown services from an unnamed "good advertising agency") is necessary "to correct the impression that the industry has as to who owns the title to the intellectual property `Red Sonja.'" (Ex. 1 at 7-9). There is, however, no methodology or support for that conclusion. He simply offers his subjective "belief" that six full page ads in each of four trade papers would be "the most effective approach." (Id. at 8). How Mr. Tarter arrived at this approach is unstated. Why six ads is the correct number is unknown. What such ads would say is unstated. How much each ad would cost is also a mystery. Whether there is a less expensive alternative is left unaddressed. Indeed, Mr. Tarter's opinions are built solely on his unsupported assumptions, estimations and beliefs. research or investigation whatsoever. Mr. Tarter did not conduct any independent He cites to no surveys, never contacted any

"decision maker[] in the entertainment and publishing industries" ­ who he assumes is confused ­ never reviewed Paradox's April 27, 2006 clarifying press release, and does not rely on any cognizable facts or documents in reaching his conclusions. Gen Elec. v. Joiner, 522 U.S. 136, 144 (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."). Mr. Tarter's opinions regarding "opportunity cost" are similarly deficient. Mr. Tarter's "opportunity cost" damages consist of his unsupported "belief" on top of two "assumptions" and an approximation to "set" the damages at "approximately" $200,000." There is no factual or legal support for Mr. Tarter's opinions or his

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assumptions.6 Why Mr. Tater "assume[es] and 18 month delay is unstated. What caused that "delay" is unknown. Why he "assume[es] that the property ­ Red Sonja ­ would generate approximately 1/3 (conservatively) that the Conan the Barbarian property" generated is wholly unexplained. See Go Med. Indus. Pty, Ltd. v. Inmed Corp., 471 F.3d 1264, 1274 (Fed. Cir. 2006) (affirming JMOL reducing jury's damages award for trademark infringement because it "was based on a wholly speculative royalty rate that plaintiff's expert `arbitrarily pulled out of the air'"). By basing his opinions on unsupportable assumptions, lacking any factual support, Mr. Tarter has left an analytical void between the facts of this case and his conclusions ­ gaps he simply cannot fill. C. Mr. Tarter Is Unqualified To Render Any Opinion With Respect to Opportunity Costs.

To provide an expert opinion under Rule 702, a witness must possess "knowledge, skill, experience, or training or education" sufficient to qualify him as an expert in the relevant field. Paoli., 35 F.3d at 742; see also In re TMI Litig., 193 F.3d 613, 680 (3d Cir. 1999) (despite being a "respected scientist," proffered witness did not meet the "Qualifications" requirement of Rule 702 with respect to the subject matter about which he planned to testify).
6

"Expert testimony can only be received from

Indeed, the facts contradict Mr. Tarter's opinions. Red Sonja's movie was not announced until May 2, 2006, (Ex. 15; Ex. 8 at 68-69), five days after Paradox issued its April 27, 2006 clarifying press release, which Arthur Lieberman has acknowledged, (Ex. 2 at 356). Based on the information in his report, Mr. Tarter reviewed neither of those press releases. See Astrazeneca, 2006 U.S. Dist. LEXIS 40620, at *19 n.7 (plaintiff's expert did not disclose his reason for not considering information failed to comply with Fed. R. Civ. Proc. Rule 26, "and, for that additional reason alone, it is subject to exclusion").

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someone who has specialized knowledge or training sufficient to qualify him to opine on an issue within his field of expertise, and that expert's opinion must be confined to that field." Advanced Med, 2005 U.S. Dist. LEXIS 5803, at *5. Mr. Tarter's expertise does not extend to the area of lost "opportunity costs," which for this case includes the licensing of character-based properties. Instead, for "forty years" he has been "involved in the purchase, sale and barter of advertising and media time." (Ex. 1 at 4). Nowhere in his report does Mr. Tarter indicate that he possesses any expertise in commercializing or licensing character-based properties ­ much less any licensing activities. Because nothing qualifies Mr. Tarter as an expert on this subject, he should be precluded from offering such an opinion. Calhoun v. Yamaha Motor Corp., U.S.A., 350 F.3d 316, 322 (3d Cir. 2003) ("An expert may be generally qualified but may lack qualifications to testify outside his area of expertise."); Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir. 1998) ("Even though we apply Rule 702 liberally, we have not pursued a policy of qualifying any proffered witness as an expert.").

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CONCLUSION For the foregoing reasons, Paradox respectfully submits that the Tarter Report should be stricken, and that the Plaintiff Red Sonja should be precluded from offering any evidence of damages at trial.

MORRIS, NICHOLS, ARSHT & TUNNELL LLP

/s/ Richard J. Bauer (#4828) Jack B. Blumenfeld (#1014) Maryellen Noreika (#3208) Richard J. Bauer (#4828) 1201 N. Market Street P.O. Box 1347 Wilmington, DE 19899-1347 (302) 658-9200 Attorneys for Defendant Paradox Entertainment, Inc. Of Counsel: Frederick U. Fierst Fierst, Pucci & Kane LLP 64 Gothic Street Northampton, MA 01060 (413) 584-8067 Dated: May 23, 2007
828291

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