Free Motion for Miscellaneous Relief - District Court of Arizona - Arizona

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

Plaintiff intends to offer expert testimony from Jeff Sedlik regarding the amount of his alleged actual damages and Avnet' profits caused by infringing uses of three of his s copyrighted photographs. Mr. Sedlik' testimony should be precluded because: s 1. 2. 3. 4. 5. Plaintiff did not disclose Mr. Sedlik' opinions on damages until s March 24, 2006, more than nine months after Plaintiff' expert s disclosure deadline; The late disclosure of Mr. Sedlik' opinions on damages was not s justified and unfairly prejudices Defendants; Mr. Sedlik' testimony fails to meet the reliability requirements of s Fed. R. Evid. 702; Mr. Sedlik failed to establish the required causal nexus between the infringement and Avnet' profits; and s Mr. Sedlik' testimony would be needlessly cumulative of 1 s the testimony of Plaintiff' other damages expert, Richard Weisgrau. s

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... ...
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The Court granted Defendants leave to file this Motion on May 10, 2006.

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I.

BACKGROUND The deadline for Plaintiff to make his expert disclosure was June 24, 2005. See

March 21, 2005 Order. That day, Plaintiff disclosed reports from two damage experts, Jeff Sedlik and Richard Weisgrau. See Exhibits A and B.2 Mr. Weisgrau' June 24, 2005 s Report contained opinions regarding Plaintiff' alleged actual damages. See Exhibit B. s Mr. Sedlik' Preliminary Report did not contain any opinions regarding the amount of s Plaintiff' actual damages or Avnet' profits. See Exhibit A at p. 15. s s On February 13, 2006, the Court authorized a 30-day extension of the discovery deadline for the sole purpose of permitting Defendants to depose Plaintiff, Mr. Sedlik and Mr. Weisgrau. See February 13, 2006 Order. Mr. Weisgrau was deposed on March 8, 2006. See Exhibit E. Defendants did not depose Mr. Sedlik because he had never offered any opinions regarding the amounts of Plaintiff' actual damages or Avnet' profits. See s s Exhibits G, H, and J.3 Plaintiff disclosed Mr. Sedlik' opinions regarding the amount of his actual s damages for the first time on March 24, 2006, nine months after his expert disclosure deadline and 11 days after the March 14, 2006 extended deadline for Defendants to depose Plaintiff and his experts had elapsed.4 See Exhibit D. Plaintiff has argued that the late disclosure was justified because Avnet failed to make some timely disclosures of evidence regarding specific infringements and "overhead, expenses, manufacturing costs or any other deductions from their gross s revenue." See Plaintiff' Response to Defendants' Motion to Preclude Testimony of Plaintiff' Expert Richard Weisgrau ("Weisgrau Response") at pp. 3, 6. Several facts s
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All Exhibits with alphabetical designations referenced in this Motion were previously filed with Defendants' Motion to Preclude Testimony of Plaintiff' Expert Witness Richard Weisgrau on April 10, s 2006. In a letter dated January 16, 2006, Plaintiff' counsel wrote "Mr. Sedlik' report says virtually nothing s s with regard to damages. Therefore, you take his deposition at your own risk." See January 16, 2006 letter, attached hereto as Exhibit 1.
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In letters dated March 24, 2006 and May 10, 2006, Plaintiff offered to make Mr. Sedlik available for a deposition regarding his late disclosed opinions. See Exhibits 2, 3.
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demonstrate that Plaintiff and Mr. Sedlik possessed ample evidence and documentation sufficient for him to calculate and disclose his damages opinions by the expert disclosure deadline, or shortly thereafter: 1. Plaintiff' Amended Complaint, filed October 18, s 2004, detailed, with supporting exhibits, 45 alleged infringing uses of Plaintiff' photographs. See Amended Complaint at s ¶¶ 22-49. 2. Mr. Sedlik' Preliminary Report identified several of s the infringements and documents he had reviewed regarding same. See Exhibit A at pp. 6 and 7, Appendix B. 3. Mr. Sedlik specifically indicated his ability to "calculate actual damages based on the information available" in June 2005. See Exhibit A at p. 15. 4. Plaintiff' other damage expert, Mr. Weisgrau, s rendered an opinion regarding Plaintiff' alleged actual s damages by the deadline based on a nearly identical methodology and available facts. See Exhibit B. 5. Plaintiff sued Supply Chain Council, Inc. on June 24, 2005, over use of one of Plaintiff' photographs obtained s from Avnet. See CV05-0270-PHX-NVW, United States District Court, District of Arizona. Plaintiff' lawsuit against s Supply Chain Council, Inc. detailed, with supporting exhibits, three infringing uses of Plaintiff' photographs. Id. s 6. Avnet provided one of Plaintiff' photographs to a s company called CRN for use in an article regarding an interview with Roy Vallee. Plaintiff subpoenaed documents from CRN, and deposed its representative, Scott Campbell, on January 25, 2005. See Exhibit 4. 7. On October 3, 2005, the Court conducted a telephonic hearing on a discovery dispute raised by Plaintiff. The Court ordered Avnet to produce further information within two weeks. See October 3, 2005 Order. That information was provided by letter, chart, and electronic documents. See Exhibit 5. 8. Avnet has made 10 supplemental disclosures since June 24, 2005. See Docket Entries 111, 113, 114, 128, 130, 134, 137, 140, 153, and 162. In his Supplemental Report, Mr. Sedlik computed Plaintiff' actual damages by s obtaining current pricing for generic stock photographs of a corporate executive on the Corbis website. See Exhibit D at p. 13. To adjust for differences between current stock photography values and values at the time of the infringements, Mr. Sedlik applied a 2.4%
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discount to the Corbis prices. See Exhibit D at pp. 16-17. He based the 2.4% discount on average price data from Gettyimages, a competing stock photography website. See

Exhibit D at p. 16-17. To price each infringement, Mr. Sedlik selected criteria regarding the photograph, including its intended use, size and duration of use. See Exhibit D at p. 13. In many instances, Mr. Sedlik priced the Corbis photographs based on monthly licenses, rather than longer periods of time which reflect the actual use, to ensure that Avnet did not receive any "discount." See Exhibit D at p. 12. Mr. Sedlik added four additional fees or premiums to the Corbis prices: 1. 2. 3. A 25% premium to compensate for Avnet' prior infringements of s Plaintiff' photographs (See Exhibit D at p. 10-11); s A 3X multiplier as a premium for the "scarcity" of Plaintiff' s photographs (See Exhibit D at pp. 11-12); A $20,000 annual fee for sub-licensing of one of Plaintiff' s photographs, over a four-year period, for a total of $80,000 (See Exhibit D at p. 14-15); and A fee of $2,000 per year (for 10 years), per photograph (totaling $90,000) for the loss of the ability to license "first use" of the photographs (See Exhibit D at p. 14-15).

4.

Mr. Sedlik concluded that Plaintiff' actual damages total either $645,055.44 or s $795,423.60, depending on whether the contract between Plaintiff and Avnet was enforceable or void. See Exhibit D at p. 19. Mr. Sedlik' Supplemental Report contains opinions regarding the amount of s Avnet' gross profits from its worldwide operations ($52,093,000,000) and his belief that s Defendants' infringing uses contributed to Avnet' profits. See Exhibit D at pp. 4-8. Mr. s Sedlik did not identify what portion of Avnet' profits from its global operations is s causally related to the infringement, nor did he attempt to establish a causal nexus between the infringement and specific profits. Id. I do not expect to opine or testify as to the specific amount of disgorged profit that is attributable to the infringements, nor do I intend to opine or testify as to specific deductible expenses or to elements of Avnet' profit not attributable to s the infringements. Id. at p. 5.
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Mr. Sedlik did not offer any evidence that he is qualified to offer expert testimony regarding Avnet' profits. See Exhibit D. However, he intends to testify "on the causal s relationship between Avnet' use of Coogan' images and Avnet' profits." Id. s s s II. ANALYSIS A. Mr. Sedlik' Testimony Should Be Precluded Because His Opinions s Were Disclosed More Than Nine Months Late.

Rule 26(a)(2) requires that experts submit a report containing "a complete statement of all opinions to be expressed and the basis and reasons therefore." Fed. R. Civ. P. 26(a)(2)(B) (emphasis added). Rule 26(a)(2)(C) further provides that "[t]hese disclosures shall be made at the times and in the sequence directed by the court." (Emphasis added). This Court ordered Plaintiff to make his Rule 26 expert disclosures due no later than June 24, 2005. See March 21, 2005 Order. Plaintiff disclosed Mr. Sedlik' Preliminary Report, which did not contain any opinions, on June 24, 2005. See s Exhibit A.5 Plaintiff first disclosed Mr. Sedlik' opinions on March 24, 2006, more than s nine months after Plaintiff' disclosure deadline. See Exhibit D. s Rule 37(c)(1) requires the exclusion of any opinions not disclosed as required by Rule 26. See also Fed. R. Civ. P. 37 Advisory Committee notes (1993) ("Revised Rule 37(c)(1) provides an incentive for full disclosure; namely, that a party will not ordinarily be permitted to use on direct examination any expert testimony not so disclosed."); Yeti by Molly, LTD v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001) ("Rule 37(c)(1) gives teeth to [the Rule 26 disclosure] requirements by forbidding the use at trial of any information required to be disclosed by Rule 26(a) that is not properly disclosed."). The Rule is intended to be a "self-executing," "automatic sanction," "provid[ing] a strong inducement for disclosure of material that the disclosing party would expect to use as
Mr. Sedlik' view that his timely filed report is "preliminary" and subject to amendment is restated s several times. See Exhibit A at pp. 1 and 15. Preliminary reports do not comply with Rule 26(a)(2)(B). See Dixie Steel Erectors, Inc. v. Grove U.S., L.L.C., 2005 WL 3558663, *6 (W.D. Ok. 2005) ("Reports that are preliminary do not suffice."); Fidelity Nat' Title Ins. Co. of N.Y. v. Intercounty Nat' Title Ins. l l Co., 2001 WL 789218, *1 (N.D. Ill.); Smith v. State Farm Fire and Cas. Co., 164 F.R.D. 49, 53 (S.D.W.V. 1995).
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evidence." See Fed. R. Civ. P. 37 Advisory Committee notes (1993). The intent behind Rule 37(c)(1) is not just to redress the misconduct of the violator, but also to prevent unfair prejudice to the opposing party and deter other violations of the rules. Cont' Lab. l Prods. Inc. v. Medax Int' Inc., 195 F.R.D. 675, 676 (S.D. Cal. 2000); Gratton v. Great l, Am. Communications, 178 F.3d 1373, 1374 (11th Cir. 1999). This Rule has been upheld even when its application resulted in the preclusion of a party' entire cause of action. Yeti, at 259 F.3d at 1106, citing Ortiz-Lopez v. Sociedad s Espanola de Auxilio Mutuo Y Beneficiencia de P.R., 248 F.3d 29 (1st Cir. 2001). Even absent "an explicit court order to produce the [expert evidence,] and even absent a showing in the record of bad faith or willfulness, exclusion is an appropriate remedy for failing to fulfill the required disclosure requirements of Rule 26(a)." Id. Notably, this is not a case where the Court need find "willfulness, fault, or bad faith"; that is a standard that applies only when a party is requesting an outright dismissal. Id.; see also Henry v. Gill Indus., Inc., 983 F.2d 943, 946 (9th Cir. 1993); Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 589 (9th Cir. 1983). In order to defeat a motion to preclude Plaintiff must show that his failure to disclose was substantially justified or harmless. Fed. R. Civ. P. 37(c)(1); Yeti, 259 F.3d at 1107 ("Implicit in Rule 37(c)(1) is that the burden is on the party facing sanctions to prove harmlessness."), citing Wilson v. Bradlees of New England, Inc., 250 F.3d 10, 21 (1st Cir. 2001) ("[I]t is the obligation of the party facing sanctions for belated disclosure to show that its failure to comply with [Rule 26] was either justified or harmless..."). Plaintiff' late disclosure of Mr. Sedlik' opinions regarding damages is neither s s justified nor harmless. 1. The late disclosure of Mr. Sedlik' opinions is not justified. s

Defendants anticipate that Plaintiff will argue that the late disclosure was justified because Mr. Sedlik lacked sufficient documentation to conduct his analysis because Avnet failed to provide timely discovery responses.6 The facts belie this claim. As detailed on
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For instance, Plaintiff argued that Mr. Weisgrau could not calculate Avnet' profits because of Avnet' s s

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pages 2-3 of this Motion, Plaintiff and his expert possessed ample information for Mr. Sedlik to review and base his damages calculations. Indeed, Plaintiff' other expert, s Richard Weisgrau, was able to make a timely disclosure of his actual damages computations based on the same information available to Plaintiff and Mr. Sedlik. See Exhibit B. Since Plaintiff' disclosure of Mr. Sedlik' opinions more than nine months after s s the Court ordered deadline is not justified, the Court should preclude Mr. Sedlik from testifying at trial. 2. The late disclosure of Mr. Sedlik' opinions unfairly prejudices s Defendants.

On February 13, 2006, the Court entered an Order permitting Defendants to depose Mr. Coogan, Mr. Weisgrau, and Mr. Sedlik. See February 13, 2006 Order. The

depositions of Mr. Coogan and Mr. Weisgrau have been taken. Defendants declined to depose Mr. Sedlik because, among other reasons, there was no "report" within the meaning of Rule 26(a)(2)(B) provided by Plaintiff to Defendants. See Rule 26(b)(4)(A);
failure to disclose "overhead, expenses, manufacturing costs or any other deductions from their gross revenue." See Weisgrau Response at p. 6. Plaintiff requested that Avnet produce "documents Avnet has related to deductible expenses under 17 United States Code § 504(b) against Avnet' gross revenue... ". s See Exhibit 6 at p. 4. Avnet responded: Response: Objection. Avnet is unable to respond to this Request until plaintiff identifies which income stream the infringement allegedly affected and shows a causal nexus between the infringement and Avnet' s gross revenue. Avnet is a worldwide corporation with multiple sources of revenue and income. . . See Exhibit 6 at pp. 4-5. Plaintiff never responded or identified any income stream related to the alleged infringements. Further, the discovery issue is irrelevant. Plaintiff ignored the causal nexus requirement for recovery of an infringer' profits and argued that "Defendants refused to produce documents showing any of their costs to s be deducted from their sales; thus for purposes of this case, all of Defendants' sales represent their profits." See Weisgrau Response at p. 8. Plaintiff has the initial burden to provide proof of the infringer' s gross revenue caused by the infringement. Polar Bear Productions, Inc. v. Timex Corp., 384 F.3d 700, 707, 711 (9th Cir. 2004); Mackie v. Riser, 296 F.3d 909, 914 (9th Cir. 2002); On Davis v. Gap, Inc., 246 F.3d 152, 161 (2nd Cir. 2001). Only after Plaintiff has met his burden of proof regarding the gross profits causally related to the infringement, does the burden shift to Avnet to prove any offsetting costs. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914. Neither Plaintiff nor his experts have ever identified any revenues causally related to the infringement.
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Exhibit 1("Mr. Sedlik' report says virtually nothing with regard to damages. Therefore, s you take his deposition at your own risk.").7 Plaintiff' late disclosure of Mr. Sedlik' opinions is clearly an attempt to s s improperly correct defects in Mr. Weisgrau' analysis that were uncovered during his s deposition. As fully explained in Defendants' Motion to Preclude Testimony of

Plaintiff' Expert Witness Richard Weisgrau ("Weisgrau Motion"), Mr. Weisgrau s acknowledged that he could not offer an opinion regarding the value of Plaintiff' s photographs at the time of the infringement because his calculations were based on 2005 stock photography values. See Exhibit E at 12:15-14:7; 54:3-55:7; 68:19-69:13. Q. You cannot tell us with any precision what the value of these photographs or licenses for these photographs would have been in 2002, can you? No.

A.

See Exhibit E at 69:4-9. In his Supplemental Report, Mr. Sedlik attempted to cure this problem applying a 2.4% discount to his damage calculations to compensate for the change in stock photography values between 2002 and 2005.8 See Exhibit D at pp. 16-17. Mr. Weisgrau also admitted that no special expertise is required to price stock photography on the internet. See Exhibit E at pp. 51:10-24. Anyone with a computer can log on and select the pricing criteria to determine the current price of a stock photograph. Id. Without citation to any authority, or explanation of the expertise required, Mr. Sedlik attempted to cure this defect by simply stating: While it is true that anyone can visit a stock agency web site and obtain a price for use of a photograph, it is also true that anyone can visit an online brokerage and invest in the stock market. Like pricing and comparing stocks in the stock market, the process of obtaining, analyzing and comparing prices for Avnet' infringing uses of Coogan' photography s s
In letters dated March 24, 2006 and May 10, 2006, Plaintiff offered to make Mr. Sedlik available for a deposition regarding his late disclosed opinions. See Exhibits 2, 3. Defendants declined to depose Mr. Sedlik at this time because, as fully explained in this Motion, Mr. Sedlik' opinions could and should have s been timely disclosed, his opinions are unreliable and inadmissible and unnecessarily duplicative of Mr. Weisgrau' opinions. s
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As explained below, Mr. Sedlik' use of a 2.4% discount is unreliable because it is based on sales data s from an unrelated website. See Exhibit D at pp. 16-17.
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was complex and required considerable expertise. See Exhibit D at p. 13. Plaintiff should not be permitted to take advantage of his unjustified late expert disclosure to cure defects in the analysis of his timely disclosed expert' analysis. Since s Defendants are unfairly prejudiced by the inability to fairly depose Mr. Sedlik on properly disclosed opinions and Plaintiff' improper attempt to cure defects in Mr. Weisgrau' s s testimony, the Court should preclude Mr. Sedlik' testimony at trial. s B. Expert Testimony.

Expert opinion testimony may be admissible if: 1. 2. 3. 4. 5. it assists the fact finder in understanding the evidence or a fact in issue; the expert is qualified by knowledge, skill, experience, training, or education; it is based upon sufficient facts or data; it is the product of reliable principles and methods; and it is the result of reliable application of the principles and methods to the facts of the case.

Fed. R. Evid. 702. It is insufficient for plaintiff' expert to speak of possibilities without s attempting to quantify those possibilities. See Daubert v. Merrill Dow Pharmaceuticals, Inc., 43 F.3d 1311, 1322 (9th Cir. 1995), cert. denied 116 S. Ct. 189 (1995). "[N]othing in either Daubert or the Federal Rules of Evidence requires a district court to admit opinion evidence which is connected to existing data only by the ipse dixit of the expert. A court may conclude that there is simply too great an analytical gap between the data and the opinion proffered." General Electric Co. v. Joiner, 118 S. Ct. 512, 518 (1997). The proponent of the expert testimony bears the burden of establishing its admissibility, by a preponderance of the evidence. See Bourjaily v. United States, 483 U.S. 171, 175 (1987). C. Mr. Sedlik' Opinions Regarding Plaintiff' Actual Damages Are s s Inadmissible.

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
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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). "Actual damages" are "the extent to which the market value of a copyrighted work has been injured or destroyed by an infringement." Mackie, 296 F.3d at 914; Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 512 (9th Cir. 1985); Baker v. Urban Outfitters, Inc., 254 F. Supp. 2d 346, 358 (S.D.N.Y. 2003). 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 ("The test is not what some buyer was willing to pay, but what a buyer would have been willing to pay for a use of a plaintiff's work similar to the defendant's use"). 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 v. Gap, Inc., 246 F.3d 152, 161 (2nd Cir. 2001); Baker, 254 F. Supp. 2d at 357-59 ("Reasonable license fee damages are not intended to be a windfall for a plaintiff. An indispensable component of a reasonable license fee is, quite obviously, that it be reasonable"); Barrera v. Brooklyn Music, Ltd., 346 F. Supp. 2d 400, 411 (S.D.N.Y. 2004) (additional $45,000 fee (5X base license fee) cannot be awarded as actual damages because "cost of litigation premium" not compensable as actual damages). The plaintiff has the initial burden to provide proof of the infringer' gross revenue caused by the infringement. Polar Bear, 384 F.3d at 707, s 711; Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161.9 1. Mr. Sedlik' opinions are the product of unreliable principles, s methods and application to the facts of this case. a. The Corbis website prices are hearsay.

Mr. Sedlik' opinions are all based solely on pricing for a generic stock photograph s of a corporate executive on the Corbis website.
9

An expert is permitted to rely on

Once the plaintiff has met its burden of proof regarding the gross profits related to the infringement, the burden shifts to the infringer to prove any offsetting costs. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914.
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materials, including hearsay, in forming the basis of his opinion if the materials are of the type "reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject." Fed. R. Evid. 703. Rule 703 does not authorize admitting hearsay on the pretense that it is the basis for expert opinion when the expert adds nothing to the out-of-court statements other than transmitting them to the jury. See Engebretsen v. Fairchild Aircraft Corp., 21 F.3d 721, 728 (6 th Cir. 1994) (Rule 703 allows a testifying expert to rely on inadmissible hearsay in forming the basis of his opinion but does not permit the admission of inadmissible hearsay for the truth of the matters it contains); U.S. v. Smith, 869 F.2d 348, 355 (7th Cir. 1989) ("an expert witness may not simply summarize the out-of-court statements of others as his testimony"); Blue Cross & Blue Shield of South Carolina v. W. R. Grace, 781 F. Supp. 420, 427 (D. S.C. 1991) (hearsay not automatically admissible simply because an expert is testifying); Rose Hall, Ltd. V. Chase Manhattan Overseas Banking Corp., 576 F. Supp. 107, 158 (D. Del. 1983) ("While an expert witness may base his opinion on [hearsay] evidence, this does not magically render the hearsay evidence admissible"), aff'd, 740 F.2d 956 (3d Cir. 1984). Mr. Sedlik' actual damages calculations are nothing more than an attempt to s introduce inadmissible hearsay (the Corbis prices) to prove the value of the photographs. This is an impermissible use of expert testimony. Id. b. Mr. Sedlik' damage calculations are based on current s stock photography values, not the market value of Plaintiff' photographs at the time of the infringement. s

Mr. Sedlik' calculations are unreliable because they are based on current stock s photograph values, not the market value of Plaintiff' photographs at the time of the s infringement. See Exhibit D at pp. 16-17. The 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. See Polar Bear, 384 F.3d at 707; Mackie, 296 F.3d at 917; Frank Music, 772 F.2d at 512. Mr. Sedlik admits that he used current stock photography values that are different than 2001-2004 values. See Exhibit D at pp. 16-17. To adjust for the differences, Mr. Sedlik applied a 2.4% discount to the current Corbis prices. See
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Exhibit D at pp. 16-17. Without establishing any link between Corbis' current or past pricing and pricing on Gettyimages, a competing stock photography website, Mr. Sedlik derived the 2.4% discount from Gettyimages pricing data and applied the discount to the Corbis prices. See Exhibit D at p. 16-17.10 As the reference prices obtained from Corbis for this report are based on Corbis' current pricing, and as actual damages must represent the amount that Coogan would have reasonably required Avnet to pay at the time of the infringement, I will apply an overall adjustment to compensate for any fluctuation in Corbis' prices. Corbis is a private company and does not release financials. I am not aware of a precise indicator for fluctuations in Corbis pricing from 2001 through present. I have therefore referenced the financial data and sales statistics released quarterly by Corbis competitor Gettyimages (a public company) for the years 2001 to 2005. Though not a precise indicator, this is the best and most applicable information available under the circumstances. See Exhibit D at p. 16-17. Mr. Sedlik' opinions are inadmissible because they are based s on "the sort of ` apples and oranges' comparison" rejected by courts as irrelevant. Baker, 254 F. Supp. 2d at 354. c. The damages are calculated based on pricing for dissimilar photographs.

Mr. Sedlik' calculations are unreliable because they are based on the valuation of s generic stock photographs, which he stated: serve as a point of reference, but will not directly represent the license fees applicable to Coogan' photographs and s Avnet' use, as the fees for use of generic stock photographs s do not contemplate the scarcity of fine executive portraits of a Fortune 500 CEO. A photograph of the CEO of Avnet is of far greater value (and would demand significantly higher license fees) than a stock photograph of, for example, a teacup, a banana, or an anonymous person. See Exhibit D at p. 11. As such, the value of Plaintiff' photographs cannot be s

determined using the Corbis website. In an attempt to cure this defect, Mr. Sedlik applied an arbitrary multiplier of 3X to the purported value for each use. See Exhibit D at pp. 1110

Mr. Sedlik provided no foundation for the source or accuracy of the Gettyimages pricing data.

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12. Mr. Sedlik did not offer any basis for the 3X multiplier beyond his own opinion. See General Electric, 118 S. Ct. at 518 ("[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.). d. The damages are calculated based on inaccurate criteria unrelated to the duration of uses in this case.

Mr. Sedlik' computations are unreliable because he used inaccurate license s duration criteria on the Corbis website, unrelated to the actual uses in this case in order to ensure that Avnet did not benefit from any "discounts." See Exhibit D at p. 12. Mr.

Sedlik acknowledged that his use of inaccurate time periods resulted in prices that are "quite high relative to average annual fees for similar use." See Exhibit D at p. 12. The market value is based on the use the infringer made, not the highest use for which a plaintiff might license the work. See On Davis, 246 F.3d at 161; Baker, 254 F. Supp. 2d at 357-59. e. Mr. Sedlik Applied Additional Premiums And Fees Without Any Supporting Bases.

Mr. Sedlik applied three additional fees or premiums to the base valuation of the Corbis photographs: 1. 2. 3. A $20,000 annual fee for sub-licensing of one of Plaintiff' s photographs over a four-year period ($80,000 total) (See Exhibit D at p. 14-15); A $2,000 annual fee (for 10 years), per photograph, for the loss of the ability to license "first use" of the photographs ($90,000 total) (See Exhibit D at p. 14-15); and A 25% premium to compensate for Avnet' prior infringements of s Plaintiff' photographs (See Exhibit D at p. 10-11). s

These fees are wholly without basis. Mr. Sedlik cites no independent authority or prior use of these fees in the industry to support their applicability or reasonableness. See Barrera, 346 F. Supp. 2d at 411 (additional $45,000 fee (5X base license fee) cannot be awarded as actual damages because "cost of litigation premium" not compensable as actual damages). Further, Mr. Sedlik offers no basis whatsoever for the duration of the
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applicable fees (4 years for the sub-licensing fee and 10 years for the "first-use" premium). See Exhibit D at p. 14-15. 2. Actual damages conclusion.

Mr. Sedlik' actual damage calculations are the product of unreliable principles, s methods, and application to the facts of this case because they: (1) are based on current stock photography prices rather than prices at the time of the infringement, (2) are computed using photographs with dissimilar values than Plaintiff' photographs, (3) are s computed based on inaccurate use durations, and (4) include additional fees that are without any bases. D. Mr. Sedlik' Opinions Regarding Avnet' Profits Are Inadmissible. s s

A plaintiff can recover an infringer' indirect profits caused by the infringement. s Mackie, 296 F.3d at 914; Polar Bear, 384 F.3d at 707-8. Only profits that have a causal nexus to the infringement are recoverable. Polar Bear, 384 F.3d at 707, 711 ("this rule of reason ` obviates a good deal of mischief' in claiming profits beyond what might be attributable to the infringement"); Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161. The plaintiff has the initial burden to provide proof of the infringer' gross revenue caused s by the infringement. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161.11 Evidence establishing the causal nexus cannot be speculative. Polar Bear, 384 F.3d at 711; Mackie, 296 F.3d at 914-15; Frank Music, 772 F.2d at 513, 517; Rainey v. Wayne State Univ., 26 F. Supp. 2d 963, 970-71 (E.D. MI 1998) (in cases where profits cannot be traced only to the infringing work but rather to a complex income stream the plaintiff must introduce detailed evidence linking gross revenues to the

infringement). Mere evidence of enhanced goodwill or market recognition is insufficient to support recovery of indirect profits. Bus. Trends Analysts, Inc. v. Freedonia Group, Inc., 887 F.2d 399, 407 (2nd Cir. 1989) (vacating award of profit damages for alleged enhancement of defendant's good will because plaintiff failed to quantify the value of the
11

Once the plaintiff has met its burden of proof regarding the gross profits related to the infringement, the burden shifts to the infringer to prove any offsetting costs. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914.
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alleged enhancement); Roy Export Co. Establishment v. Columbia Broad. Sys., Inc., 503 F. Supp. 1137 (S.D.N.Y. 1980), aff'd, 672 F.2d 1095 (2d Cir. 1982) (rejecting as speculative profits derived from prestige allegedly resulting from broadcasting infringing motion picture). Mr. Sedlik' opinions regarding Avnet' profits are inadmissible because: (1) he s s failed to establish a causal nexus between the infringement and any revenue stream, and (2) he is not qualified to offer expert testimony regarding Avnet' profits. s 1. Mr. Sedlik failed to establish a causal nexus between the infringement and any revenue stream.

Mr. Sedlik argued that the infringing use of Plaintiff' photos enhanced Avnet' s s reputation, resulting in profits.12 See Exhibit D at pp. 4-8. Mr. Sedlik calculated Avnet' s gross profits for the period of infringement as $52,093,000,000, and argued that it is Avnet' burden to prove the amounts of their gross profits that are not related to the s infringement.13 See Exhibit D at p. 5. Mr. Sedlik did not offer any opinions or attempt to compute the amount of Avnet' profits caused by the infringement. s I do not expect to opine or testify as to the specific amount of disgorged profit that is attributable to the infringements, nor do I intend to opine or testify as to specific deductible expenses or to elements of Avnet' profit not attributable to s the infringements. See Exhibit D at p. 5. Only profits that have a causal nexus to the infringement are recoverable. Polar
Mr. Sedlik' entire argument is inadmissible hearsay. See Engebretsen, 21 F.3d at 728 (Rule 703 allows s a testifying expert to rely on inadmissible hearsay in forming the basis of his opinion but does not permit the admission of inadmissible hearsay for the truth of the matters it contains); Smith, 869 F.2d at 355 ("an expert witness may not simply summarize the out-of-court statements of others as his testimony"). For instance, he argued that CEO reputation contributes up to 50% of a company' value as perceived by the s investment community. See Exhibit D at p. 7. In support he cited an Ernst & Young survey, "Measures that Matter." See Exhibit D at p. 7. This is not the type of hearsay reasonably relied upon by experts in calculating a company' profits related to the use of copyrighted material. Nor is it the type of hearsay s normally relied upon by photographers when forming opinions or inferences on the subject of their expertise-photography. See Fed. R. Evid. 703. Mr. Sedlik' argument ignores settled 9th Circuit law. The plaintiff has the initial burden to provide s proof of the infringer' gross revenue caused by the infringement. Polar Bear, 384 F.3d at 707, 711; s Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161.
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Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161. Mere evidence of enhanced goodwill or market recognition is insufficient to support recovery of indirect profits. Bus. Trends, 887 F.2d at 407; Vane, 849 F.2d at 189-90; Rainey, 26 F. Supp. 2d at 970-71. 2. Mr. Sedlik is not qualified as an expert regarding Avnet' profits. s

Neither Plaintiff nor Mr. Sedlik offered any basis to conclude that Mr. Sedlik is qualified to offer opinions about the causal connection between the infringements and Avnet' profits. There is no evidence that he has any background in marketing, public s relations or corporate valuation. Mr. Sedlik stated only that "based on my twenty years experience as a commercial photographer working with high level clients, my experience as an officer in industry associations, and my experience in observing and interacting with many other commercial photographers, I expect to offer opinions and testimony in this case related to damages." See Exhibit D at p. 1. Mr. Sedlik then offered opinions regarding the value of the photographs to Avnet' marking efforts, the enhancement of the s company and CEO' reputations and the resulting profits. See Exhibit D at pp. 5-7. s Plaintiff has not met his burden of demonstrating that Mr. Sedlik is qualified to offer opinions on issues that have absolutely nothing to do with his area of expertisephotography. Bourjaily, 483 U.S. at 175 (proponent of the expert testimony bears the burden of establishing its admissibility, by a preponderance of the evidence). E. Mr. Sedlik' testimony will be unnecessarily cumulative. s

It would be time wasteful and cumulative to have two experts testify on the same subject. See Fed. R. Evid. 403; Cabrera v. Cordis Corp., 134 F.3d 1418, 1421-22 (9th Circ. 1998) (affirming exclusion of expert testimony as a "needless presentation of cumulative evidence"); Bowman v. Correction Corp. of America, 350 F.3d 537, 547 (6th Cir. 2003) ("district court is ` free to exclude any expert testimony, including testimony of an announced expert, if the testimony is cumulative or redundant under Fed.R.Evid. 403.'"), quoting In re Air Crash Disaster, 86 F.3d 498, 527 (6th Cir. 1996). Mr. Sedlik and Mr. Weisgrau employed similar methodologies to compute
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Plaintiff' alleged actual damages and offered similar opinions regarding his actual s damages and Avnet' profits. See Exhibits B and D. This matter is scheduled for a bench s trial on July 11, 2006. Mr. Weisgrau was able to disclose his opinions by the disclosure deadline. See Exhibit B. If permitted to testify, Mr. Sedlik' late disclosed opinions will be unnecessarily s cumulative of Mr. Weisgrau' timely disclosed opinions. Therefore, the Court should s preclude Mr. Sedlik from testifying a trial. III. CONCLUSION The Court should grant Defendants' Motion to Preclude Testimony of Plaintiff' s Expert Jeff Sedlik because (1) Mr. Sedlik' opinions regarding Plaintiff' actual damages s s and Avnet' profits were disclosed more than nine months late, without justification, s (2) his testimony fails to meet the reliability requirements of Fed. R. Evid. 702, (3) he failed to establish the required causal nexus between the infringement and Avnet' profits, s and (4) his testimony would be needlessly cumulative of the testimony of Plaintiff' other s damages expert, Richard Weisgrau. DATED this 18th day of May, 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 May 18, 2006, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for s filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Jordan Meschkow, Esq. Meschkow & Gresham, P.L.C. 5727 North Seventh Street Suite 409 Phoenix, Arizona 85014-5818 Nancy Giles, Esq. Giles Legal PLC 733 W. Willetta Street Phoenix, Arizona 85007

s/Jordan Green
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