Free Proposed Findings of Fact - 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,

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No. CV2004-0621 PHX SRB Plaintiff, v. DEFENDANTS'PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

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AVNET, INC., et al.,
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Defendants.
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FINDINGS OF FACT The Parties 1. 2. Plaintiff is a professional photographer. Avnet is a publicly traded company with varied business operations

worldwide. Defendant Roy Vallee is Avnet' Chief Executive Officer. Defendant Allen s Maag was, at all relevant times, Avnet' Chief Communications Officer.1 s Background 3. Upside Magazine ("Upside") hired Plaintiff to shoot photographs of Vallee.

Following the April 2001 photo shoot, Plaintiff registered the photographs as an Mr. Maag is a corporate officer and owns 2,200 shares of Avnet stock, approximately .0015% of the outstanding shares.
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F ENNEMORE C RAIG
PROFESSIONAL CORPORATION P HOENIX

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unpublished "collection" with the United States Copyright Office. 4. Upside published one of Plaintiff' photographs ("Photo 1") with an article s

about Vallee in its July 2001 issue. Maag saw the article with the photograph and contacted Upside' Editor-in-Chief Jerry Borrell, for permission from Upside to use the s photo. 5. Avnet copied the photo and used it in the June 27, 2001 issue of "AvnetInk

Online," an e-mail sent to approximately 8,000 employees, 100 stock analysts, Avnet' s public relations firm, and a few journalists who follow the industry. 6. Avnet also used the photo in the July/August 2001 and September 2001

editions of Avnet Global Perspective Magazine ("AGP"). 7. Plaintiff saw one of his photos in AGP, contacted Sean Fanning, an Avnet

employee, and informed him that he had not been paid by Upside for the Vallee photo shoot and of the unauthorized uses. 8. Fanning referred Plaintiff to Maag. Plaintiff contacted Maag and following

a brief telephone conversation, they exchanged e-mails over roughly a four month period. 9. In a January 10, 2002 e-mail, Plaintiff stated that Upside had gone out of

business without paying his $1,192.75 fee for the photo shoot. Plaintiff also stated that the licensing fee for the two uses in AGP would have been $850 if negotiated in advance ($425 per use). 10. Plaintiff and Maag met on March 6, 2002 and reached an agreement That agreement was

concerning the past and future use of Plaintiff' photographs. s

"memorialized," in an invoice (the "Invoice") dated April 9, 2002 that Plaintiff e-mailed to Maag on April 10, 2002. The Invoice provided that Avnet would pay Plaintiff $2,500 in exchange for: the prior use of one of the photographs in Avnet's magazine, and the nonexclusive use, for one year, of "[a]n additional 3-5 images from the same photo shoot." The Invoice further provided that the images could not be used in Avnet's annual report,
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nor could they be transferred to third parties. 11. Maag forwarded the Invoice to Avnet's accounting department, which paid

it in full. In response to a request for admission, Defendants admit that the check was issued to Plaintiff for payment of the Invoice, and "constitutes a writing accepting the terms set forth in the [I]nvoice." The Infringement 12. ? Avnet used two additional photos provided by Plaintiff pursuant to the

Invoice in violation of the Invoice and Plaintiff' copyright as follows. s Six editions of AGP (July/August 2002, September/October 2002, January/February 2003, July/August 2003, September/October 2003, and November/December 2003). ? Three issues of an Avnet e-mail publication, "This Week at Avnet" (February 9-15, 2003, March 2-6, 2003, and January 25-31, 2004). These emails were sent to approximately 8,000 Avnet employees, including the Board of Directors, and may have been sent to three outside contractors. ? Printed and electronic versions of Avnet' 2002 and 2003 Annual Reports. s The electronic version with the infringing photo were available on Avnet.com until modified in February or March 2004 to remove Plaintiff's photograph. Print versions of the 2003 Annual Report were distributed until October 2005. ? Avnet' website. One of Plaintiff's photos was posted on a secondary page s at Avnet.com between August 28, 2002 and February 25, 2004. photograph was available for download by those accessing the website. ? The parties agree that one of Plaintiff' photos was posted on the homepage s at Avnet.com, but dispute the duration of its presence on the main page. Based on the testimony and exhibits, the Court finds that the infringing
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The

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photo was posted on the homepage for less than one month in February 2004. ? ? One 50th anniversary card presented to Vallee. Avnet provided a photo to CRN Magazine, where it was published on January 30, 2004 in electronic and printed versions of an interview with Vallee. ? The Governor' Council on Innovation and Technology ("GCIT") website. s Avnet provided the photo to GCIT who posted it on its website between April 2003 and December 2005. Vallee served as a member of the Council.2 ? Supply-Chain Council used Photo 2 in a newsletter announcement and a seminar brochure, both available in printed form, and on Supply Chain' s website. ? Avnet provided the photo to Morgan Stanley who used it in a print program made available to the attendees of the "Annual Semi-Conductor and Systems Conference" in Dana Point, California on March 2, 2004. ? The photo may have been downloaded from Avnet' website and used by s AZCentral.com and Channel Web. 13. Avnet used Plaintiff' photos for public, employee, and investor relations. s

Avnet did not sell any of Plaintiff' photographs or use them for advertising. s The Value of Plaintiff' Photographs s 14. In his e-mail exchange with Maag, Plaintiff stated that the license fee for the

first two uses in AGP would have been $850 if negotiated in advance ($425 per use). He also revealed that he had charged Upside $1,192.75 for the entire photo shoot. 15.
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Avnet hired Plaintiff twice in 2001.

On July 25, 2001, Plaintiff

There is no evidence that Mr. Vallee had any connection to the posting of the photo or the operation of the website. There is also no evidence that Mr. Vallee had any financial interest in his service on the Council or the website.
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photographed an awards ceremony entitled "Avnet Achieving Greatness."

Plaintiff

charged Avnet $750.50 for one year internal and public relations use of the meeting photos, the photography fee, film processing, and two sets of 4x6 proof prints. He also charged Avnet $962.13 for one 16x20 custom color print, nine 8x12 color glossy prints, and two rush 8x12 color glossy prints from the event, for a total of $1,712.63. 16. On October 4, 2001, Plaintiff took photographs of Avnet' then-President of s

Computer Marketing Andy Bryant. Plaintiff charged Avnet $3,000 for a portrait of Mr. Bryant with two year non-exclusive public relations, internal employee publication, and internet rights. Plaintiff also charged $64.40 for a CD of the Bryant photo shoot and a minor clean up of an image. 17. In March 2004, Avnet received two quotes for a photo shoot of Vallee from

local photographers: (1) a $1,600 quote from Vince Adam at Spark Design for a single location executive photo shoot, digital files of all of the photos on CD Rom, and unlimited use and ownership rights, and (2) a $750 quote from Ben Arnold for a half day shoot, imaging, and full use and ownership rights of the photographs. 18. Plaintiff has never reported profit of more than $XX,XXX per year as a

photographer, from 2000 through 2005. 19. There is no evidence in the record that any third-party has ever shown

interest in purchasing stock photographs of Vallee. 20. Defendants' expert, John Trotto, calculated Plaintiff' actual damages for s

Avnet' infringement at a maximum of $19,600, broken down as follows: s Usage for 2nd years of up to five photos of Vallee (same terms as first year, to be used only for Avnet publications) 2002 Annual Report 2003 Annual Report (75% of first year) Website, two photos after April 9, 2003
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$2,500

$1,200 $900 $1,000

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3rd Party usage, 80% of $2,500 = $2,000 x 7 (20% discount because third-party use limited and Avnet acted as a rep for the additional sale of a stock image) CONCLUSIONS OF LAW Liability 1.

$14,000

The Court previously ruled that Defendants willfully infringed Plaintiff' s

copyright 3 and that Avnet breached its contract with Plaintiff. Only two issues remain, individual liability for Maag and Vallee and Plaintiff' damages. s Individual Liability Copyright Infringement 2. The test for finding a corporate officer jointly and severally liable with his

corporation for copyright infringement is whether the officer "has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities." Chi-Boy Music v. Towne Tavern, Inc., 779 F. Supp. 537, 530 (N.D. Ala. 1991). 3. The Court previously found that Maag possessed the right and power to

supervise the infringing activity. However, there is insufficient evidence of a direct financial interest in the infringement to impose individual liability. Maag' ownership of s Avnet stock and various benefits as part of his compensation package do not constitute a direct financial interest sufficient for individual liability. It cannot be reasonably argued that the infringement in this case could, or did, have an impact on the value of Avnet's stock sufficient to give Maag a financial interest in encouraging the infringement. 4. There is no evidence that Vallee had any connection to the use of the photo

on the GCIT website or a financial interest in his service on the Council or the content of the website. 5.
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Therefore, Maag and Vallee cannot be individually liable for the

The Court previously ruled that Plaintiff' photos constitute one work. s
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infringement. Breach of Contract 6. Maag and Vallee cannot be liable for breach of contract because neither was

a party to the contract between Plaintiff and Avnet. Kuehn v. Stanley, 208 Ariz. 124, 131, 91 P.3d 346, 353 (App. 2004); Stratton v. Inspiration Consolidated Copper Co., 140 Ariz. 528, 531, 683 P.2d 327, 330 (App. 1984). Damages 7. The owner of an infringed copyright can recover his actual damages and the

amount of the infringer' profits causally related to the infringement, to the extent that the s two do not overlap. 17 U.S.C. § 504(c)(1); Polar Bear Productions, Inc. v. Timex Corp., 384 F.3d 700, 707 (9th Cir. 2004); Mackie v. Riser, 296 F.3d 909, 914 (9th Cir. 2002). 8. In lieu of actual damages and profits, a plaintiff may elect to seek an award

of statutory damages for all infringements involved in the action. 17 U.S.C. § 504(c)(1). The plaintiff must elect between actual or statutory damages: both cannot be recovered. 17 U.S.C. § 504(c)(1); Latin American Music Co., Inc. v. Spanish Broadcasting Systems, Inc., 866 F. Supp. 780, 782 (S.D.N.Y. 1994). 9. U.S.C. § 504. Actual Damages 10. "Actual damages" are "the extent to which the market value of a The maximum statutory award for a willful infringement is $150,000. 17

copyrighted work has been injured or destroyed by an infringement." Mackie, 296 F.3d at 914; Frank Music, 772 F.2d at 512. 11. The work's market value is "what a willing buyer would have been

reasonably required to pay to a willing seller for [the owner's] work" at the time of the infringement. Polar Bear, 384 F.3d at 707; Mackie, 296 F.3d at 917; Frank Music, 772 F.2d at 512.
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12.

Evidence of the amount of plaintiff' prior licensing fees for the same or s

similar works is relevant to determine actual damages. See On Davis v. Gap, Inc., 246 F.3d 152, 161 (2nd Cir. 2001); Baker v. Urban Outfitters, Inc., 254 F. Supp. 2d 346, 35759 (S.D.N.Y. 2003). 13. The market value must be reasonable and based on the use the infringer

made, not the highest use for which plaintiff might license the work. On Davis, 246 F.3d at 161; Baker, 254 F. Supp. 2d at 357-59; Barrera v. Brooklyn Music, Ltd., 346 F. Supp. 2d 400, 411 (S.D.N.Y. 2004). 14. Plaintiff seeks actual damages for Avnet' infringements that bear no s

relationship to the market value of his photographs. 15. The Court finds that the maximum reasonable market value for the

infringing uses of Plaintiff' photographs is $19,600. s Infringer's Profits 16. The owner of an infringed copyright can recover the amount of the

infringer' "direct" and "indirect" profits causally related to the infringement. 17 U.S.C. s § 504(c)(1); Polar Bear, 384 F.3d at 707; Mackie, 296 F.3d at 914. "Direct profits" are generated by sales of the infringed product. Mackie, 296 F.3d at 914; Polar Bear, 384 F.3d at 707-8. "Indirect profits" are not generated through the direct sale of the infringed product. Id. Plaintiff has not alleged that Defendants engaged in the direct sale of Plaintiff' photographs. s 17. Only profits with a causal nexus to the infringement are recoverable. Polar

Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914. 18. The plaintiff has the initial burden to provide proof of the infringer' gross s

revenue related to the infringement. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914. "Gross revenue" means the gross revenue associated with the infringement, not the infringer' overall gross revenue. Polar Bear, 384 F.3d at 711; On Davis, 246 F.3d at s
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160. 19. After the plaintiff has met its burden of demonstrating a relationship

between the infringement and revenue, the burden shifts to the infringer to prove any costs that should be deducted to arrive at profits and that revenues were attributable to something other than the infringement. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914. 20. Evidence of enhanced goodwill or market recognition is insufficient to

support recovery of indirect profits. See Polar Bear, 384 F.3d at 713-16; Bus. Trends Analysts, Inc. v. Freedonia Group, Inc., 887 F.2d 399, 407 (2nd Cir. 1989). 21. Plaintiff cannot recover any profits from Avnet because he has not

demonstrated a causal nexus between the infringement and any revenue. 22. Plaintiff argues that the use of his photographs enhanced Mr. Vallee' s

reputation, which enhanced the goodwill of Avnet, resulting in a company-wide increase in revenue. Plaintiff concludes that this connection between the public relations use of his photographs and all of Avnet' revenue entitles him to recovery of millions of dollars. s 23. Plaintiff' argument has been rejected by the Ninth Circuit and other courts. s

See Polar Bear, 384 F.3d at 713-16; Bus. Trends, 887 F.2d at 407. Mere evidence of enhanced goodwill or market recognition is insufficient to support recovery of indirect profits. Id. 24. Similarly, Plaintiff' evidence of Avnet' gross revenue from its worldwide s s

operations fails to satisfy his burden of proof. Polar Bear, 384 F.3d at 711 ("A copyright owner is required to do more initially than toss up an undifferentiated gross revenue number; the revenue stream must bear a legally significant relationship to the infringement."); On Davis, 246 F.3d at 160. Double Recovery 25. Plaintiff has established Avnet' liability for both copyright infringement s

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and breach of contract. However, Plaintiff cannot recover both copyright and contract damages. Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 886 F.2d 1545, 1556 (9th Cir. 1989); Junker v. Eddings, 396 F.3d 1359, 1368 (D.C. Cir. 2005); Sparaco v. Lawler, Matusky, Skelly Engineers, LLP, 313 F. Supp. 2d 247, 250-51 (S.D.N.Y. 2004). An award of both contract and copyright damages would constitute an improper double recovery because Plaintiff' damages arise out of the same set of facts. s Id. The

prohibition on double recovery applies whether Plaintiff elects to recover actual or statutory damages. Sparaco, 313 F. Supp. 2d at 252-55. DATED this 19th day of June, 2006. FENNEMORE CRAIG, P.C.

By s/Jordan Green Jordan Green Lawrence Palles Attorneys for Defendants Avnet, Inc., Roy Vallee, and Allen Maag

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CERTIFICATE OF SERVICE I hereby certify that on June 19, 2006, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and s 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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