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

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

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

Plaintiff' Response to Defendants' Motion to Preclude Testimony of Plaintiff' s s Expert Richard Weisgrau fails to demonstrate that Mr. Weisgrau' methods and s conclusions meet the reliability requirements of Fed. R. Evid. 702 and Daubert. Plaintiff ignores the causal nexus requirement for the recovery of an infringer' profits and s employs flawed logic to argue that Mr. Weisgrau' testimony meets the Fed. R. Evid. 702 s reliability test. Plaintiff' lengthy discussion regarding alleged discovery violations is s irrelevant and is intended to divert the Court' attention from the reliability issue. s I. ANALYSIS A. The Reliability Of Mr. Weisgrau' Testimony Is A Question For The Court. s

Plaintiff repeatedly argues that the reliability of Mr. Weisgrau' methods and s conclusions are issues for trial. See Response at pp. 14-17. Mr. Weisgrau' testimony s
1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197

Filed 05/04/2006

Page 1 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

must first meet the reliability requirements of Fed. R. Evid. 702 and Daubert before it can be presented at trial. Fed. R. Evid. 702. Plaintiff bears the burden of establishing its admissibility, by a preponderance of the evidence. See Bourjaily v. United States, 483 U.S. 171, 175 (1987). The trial court performs a "gate keeping role" to keep "junk science" out of the courtroom. Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579, 597 (1993).1 This "gate keeping" obligation applies "not only to testimony based on ` scientific' knowledge, but also to testimony based on ` technical' and ` other specialized knowledge.'" Kuhmo Tire Co., Ltd. v. Carmichael, 119 S. Ct. 1167, 1171 (1999). The Court must first determine whether the proffered testimony has a reliable basis. Daubert II, 43 F.3d at 1315. Plaintiffs' Response fails to prove by a preponderance of the evidence that Mr. Weisgrau' methodology and opinions are reliable. Plaintiff argues that Mr. Weisgrau' s s methodology is reliable because "he explains exactly how he computes his figures, and he would continue to reach the same conclusion were he to do the analysis 100 times" claiming that "this is the essence of reliability." See Response at p. 16. The fact that Mr. Weisgrau explained his methodology and can repeatedly obtain the same result does not establish reliability. Repetition of an unreliable method that repeatedly produces the same erroneous result simply proves that the methodology is consistently unreliable. As

explained below and in Defendants' Motion, Mr. Weisgrau' use of inaccurate pricing, s size and use information in performing his analysis renders his testimony unreliable.2 B. Mr. Weisgrau' Methods And Conclusions Regarding Actual Damages Are s Unreliable.

Plaintiff argues that Mr. Weisgrau' calculations are reliable despite his use of s
1

Rule 702 was amended in 2000 in response to Daubert. Rule 702, Fed. R. Evid., Advisory Committee Notes, 2000 Amendments. The amended rule affirms the trial court' role as gatekeeper. Id. s 2 Plaintiff' argument regarding Avnet' late supplemental disclosures is irrelevant. Mr. Weisgrau' s s s testimony is unreliable and inadmissible in its entirety. Earlier disclosure would have had no effect on his ability to perform his calculations or cure the defects in his methodology.
1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197 2 Filed 05/04/2006

Page 2 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

generic photos unlike Plaintiff' as the basis of his value calculations. See Response at p. s 12. First, Plaintiff claims that Mr. Weisgrau' analysis is neutral and reliable because the s generic photos are less expensive than Plaintiff' photos. s See Response at p. 12.

However, in the very next sentence, Plaintiff claims that the disparity is remedied by multiplying the value of the generic photos by three. See Response at p. 13. Plaintiff' s argument ignores the fact that the generic photos and Plaintiff' photos have different s values. It is irrelevant whether Mr. Weisgrau' computations are inaccurate because his s price is too low or too high. Pricing based on photographs of dissimilar values is

unreliable. See Baker v. Urban Outfitters, Inc., 254 F. Supp. 2d 346, 354 (S.D.N.Y. 2003) (expert testimony inadmissible because conclusions based on "the sort of ` apples and oranges' comparison" rejected by courts as irrelevant). Similarly, Mr. Weisgrau' use of 2005 stock photo values renders his calculations s unreliable. Based on a chart attached to his Response, Plaintiff argues that "the 2005 prices utilized by Weisgrau are not significantly different from the prices in 2002." See Response at pp. 14-15. Plaintiff has provided no foundation for the source or reliability of the chart. Contrary to Plaintiff' conclusion, there is a significant difference between 2002 s and 2005 values. See Plaintiff' Exhibit F. According to the chart, the average price for a s stock photo varies as much as $115 between 2002 and 2005. Id. The price variation is magnified by Mr. Weisgrau' methodology. First, the variation triples to $345 when the s 3X multiplier is applied to rectify the disparity between the values of generic photos and Plaintiff' photos. The price disparity grows again when the stock photo price, multiplied s by three, is multiplied by a number of months or years for the length of the infringement. For instance, using a 24 month infringement period, the 2002 and 2005 prices could differ by as much as $8,280 ($345 x 24). Although Plaintiff claims that the inaccurate 2005 values can easily be adjusted to
1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197 3 Filed 05/04/2006

Page 3 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

2002 values, Mr. Weisgrau made no adjustment to the Getty prices to account for the differences. See Exhibit E at p. 54:7-11. Given the difference in values Mr. Weisgrau could not offer an opinion regarding the value of Plaintiff' photographs at the time of the s infringement. See Exhibit E at pp. 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 p. 69:4-9. Plaintiff correctly points out that an expert cannot opine with 100% certainty what a reasonable buyer would have been willing to pay a reasonable seller for Plaintiff' s photographs. See Response at p. 13. However, Mr. Weisgrau' statements about what a s reasonable buyer "might" agree to pay for Plaintiff' photos are insufficient to meet the s Fed. R. Evid. 702 and Daubert admissibility tests. See Daubert, 43 F.3d at 1322

("insufficient for plaintiff' expert to speak of possibilities without attempting to quantify s those possibilities"). Plaintiff argues that the use of inaccurate sizes in pricing was appropriate because the "up to one-half page" size was "likely" the smallest unit available for calculating value on the Getty website. See Response at p. 15. Plaintiff is wrong. The Getty website offers both "up to ¼ page" and "up to ? page" options. See Affidavit of Lawrence Palles and Exhibits 1, 2, and 3 attached thereto. Mr. Weisgrau' valuations are inflated and s

unreliable due to his use of inaccurate sizes in pricing.3 Plaintiff claims that Mr. Weisgrau' failure to consider Plaintiff' past licensing s s
As demonstrated above, Mr. Weisgrau' use of inaccurate criteria in pricing photos on the Getty website s results in inflated pricing, which is compounded by his methodology. Use of "up to ? page" instead of "up to ½ page" size criteria yields a difference in price of $120 ($805 for "up to ? page" and $925 for "up to ½ page"). See Exhibits 1 and 3, attached to Affidavit of Lawrence Palles. The variation triples to $360 when the 3X multiplier is applied to rectify the disparity between the values of generic photos and Plaintiff' photos. s
1790001.1/12444.027
3

Case 2:04-cv-00621-SRB

Document 197 4 Filed 05/04/2006

Page 4 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

fees for the same or similar photos was appropriate because Mr. Weisgrau did not consider Avnet to be a "reasonable buyer" and Plaintiff' past fees "were not fees charged s for illegitimate uses agreed after the fact of the infringement." See Response at p. 11. This argument ignores the 9th Circuit test for determining actual damages. "Actual damages" are "the extent to which the market value of a copyrighted work has been injured or destroyed by an infringement." Mackie v. Riser, 296 F.3d 909, 914 (9th Cir. 2002); Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 512 (9th Cir. 1985). 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 Productions, Inc. v. Timex Corp., 384 F.3d 700, 707 (9th Cir. 2004); 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"). Evidence of the amount of plaintiff' prior s

licensing fees for the same or similar works is relevant to determine actual damages. See On Davis v. Gap, Inc., 246 F.3d 152, 161 (2nd Cir. 2001) (court relied on plaintiff' s testimony that he previously was paid a $50 royalty for the publication a similar photo to establish market value); Baker, 254 F. Supp. 2d at 357-59 (plaintiff' testimony regarding s prior licensing of photographs from same collection sufficient evidence from which award of a reasonable licensing fee was made). 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). Avnet' alleged infringements do not provide a basis for Plaintiff to ignore settled s law or pertinent data in determining actual damages. The test is clear: the market value of Plaintiff' photos is "what a willing buyer would have been reasonably required to pay s to a willing seller for [the owner's] work" at the time of the infringement. Polar Bear, 384
1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197 5 Filed 05/04/2006

Page 5 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

F.3d at 707; Mackie, 296 F.3d at 917; Frank Music, 772 F.2d at 512. Where available, evidence of the amount of plaintiff' prior licensing fees for the same or similar works is s relevant to determine actual damages. On Davis, 246 F.3d at 161; Baker, 254 F. Supp. 2d at 357-59. Mr. Weisgrau' refusal to factor this data into his computations renders his s conclusions unreliable. C. Mr. Weisgrau' Testimony Regarding Avnet' Profits Is Inadmissible. s s

Ignoring the causal nexus requirement, Plaintiff argues that the question of whether Plaintiff can recover indirect profits is an issue for trial. See Response at p. 16. Plaintiff can recover indirect profits caused by the infringement. Polar Bear, 384 F.3d at 707-8; Mackie, 296 F.3d at 914. Only profits that have a causal nexus to the infringement are recoverable. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161. Plaintiff has the initial burden to provide proof of Avnet' gross revenue s caused by the infringement. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161. Once Plaintiff has met his burden of proof regarding Avnet' s gross profits related to the infringement, the burden shifts to Avnet to prove any offsetting costs. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914. Mr. Weisgrau admitted that he cannot calculate the amount of any alleged profits caused by the infringing use of the photos. See Exhibit E at pp. 120:20-121:19 and 122:313. He made no effort to identify what percentage of Avnet' profits from their global s operations were related to the infringement and did not consider the impact on Avnet' s revenue or profits of existing market conditions, or Avnet' acquisitions and sales of s businesses during the infringement period. See Exhibit E at pp. 90:7-91:17, 117:6-118:21, and 140:16-20.4
4

25 26
FENNEMORE CRAIG, P.C.
P HOENIX

In the alternative, Mr. Weisgrau argued that Plaintiff is entitled to recover, as an alternative to the amount of Avnet' actual profits causally related to the infringement, "no less than 1.5 times whatever his s [Coogan' actual damages are in [sic] determined to be." See Exhibit C at p. 17. Plaintiff did not address s] this theory in his Response.
1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197 6 Filed 05/04/2006

Page 6 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

Mr. Weisgrau' resume is lengthy and impressive. While his credentials might s qualify him as an expert on photography values, he admits that he is not qualified as an expert regarding Avnet' profits. In his June 24, 2005 Report he stated that "determining s the infringer' profits is beyond the expertise of this expert." See Exhibit B at pp. 5-6 s (emphasis added). He confirmed his lack of qualifications in his deposition. See Exhibit E at pp. 36:7-23 and 115:3-117:5. Q. Tell me now is it beyond your expertise to render an opinion on the amount of Avnet's profits attributable to the infringement of Coogan's photos? You mean an amount in dollars? I mean an amount in dollars. Yes, it is beyond my expertise.

A. Q. A.

See Exhibit E at p. 115:16-22. Despite Mr. Weisgrau' admitted lack of qualifications to calculate Avnet' profits s s caused by the infringement, Plaintiff argues that Mr. Weisgrau could not calculate Avnet' s profits because of Avnet' failure to disclose "overhead, expenses, manufacturing costs or s any other deductions from their gross revenue." See Response at p. 6. These items are irrelevant to Mr. Weisgrau' computations. Again ignoring the causal nexus requirement, s Plaintiff argues "Defendants refused to produce documents showing any of their costs to be deducted from their sales; thus for purposes of this case, all of Defendants' sales represent their profits." See Response at p. 8. Plaintiff has the initial burden to provide proof of the infringer' gross revenue caused by the infringement. Polar Bear, 384 F.3d at s 707, 711; Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161. 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 Mr. Weisgrau has ever identified any revenues causally related to the infringement.
1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197 7 Filed 05/04/2006

Page 7 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

Plaintiff inaccurately states that Avnet refused to produce the requested information. Plaintiff requested that Avnet produce "documents Avnet has related to deductible expenses under 17 United States Code § 504(b) against Avnet' gross s revenue... ". See Plaintiff' Exhibit D at p. 4. Avnet responded: s 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' gross revenue. Avnet s is a worldwide corporation with multiple sources of revenue and income. s See Plaintiff' Exhibit D at pp. 4-5. Plaintiff never identified any income stream related to the alleged infringements. D. Mr. Weisgrau' Testimony Is Inadmissible Hearsay. s

Plaintiff misstates Defendants' hearsay argument. Mr. Weisgrau' testimony is s inadmissible because he merely acts as a conduit to introduce inadmissible hearsay. An expert is permitted to rely on materials, including hearsay, in forming the basis of his opinion if the materials are of the type "reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject." 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 (6th 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.
1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197 8 Filed 05/04/2006

Page 8 of 10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

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. Weisgrau computed Plaintiff' actual damages by pricing a generic stock s photograph of a corporate executive on the Getty Images website. See Exhibit B at p. 7. To obtain a price, he selected criteria from a dropdown menu on the website regarding the photograph, including its intended use, size and duration of use. See Exhibit B at p. 7-8. He then multiplied the Getty price by three as a premium for the "proprietary" nature of Plaintiff' photographs and by the alleged number of months of the infringement to arrive s s at his calculation of the actual damages for each infringement. Id. Mr. Weisgrau' analysis and conclusions regarding actual damages are nothing more than an attempt to introduce inadmissible hearsay (the Getty prices), to prove the value of the photographs. This is an impermissible use of expert testimony. Id. II. CONCLUSION Plaintiff failed to meet his burden of demonstrating the reliability of Mr. Weisgrau' methods and conclusions. s Mr. Weisgrau' opinions regarding Plaintiff' s s

actual damages and Avnet' profits are inadmissible hearsay and fail to meet any of the s standards for admissibility of expert testimony pursuant to Fed. R. Evid. 702. Therefore, the Court should grant Defendants' Motion to Preclude Testimony of Plaintiff' Expert s Richard Weisgrau. DATED this 4th day of May, 2006. FENNEMORE CRAIG, P.C.

By s/Jordan Green Jordan Green Lawrence Palles Attorneys for Defendants
1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197 9 Filed 05/04/2006

Page 9 of 10

1 2 3 4 5 6 7 8 9

CERTIFICATE OF SERVICE I hereby certify that on May 4, 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

s/Jordan Green
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
FENNEMORE CRAIG, P.C.
P HOENIX

1790001.1/12444.027

Case 2:04-cv-00621-SRB

Document 197 10Filed 05/04/2006

Page 10 of 10