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'S EXPERT RICHARD WEISGRAU

Plaintiff intends to offer expert testimony from Richard Weisgrau to establish the amount of his alleged actual damages and Avnet's profits caused by infringing uses of three of his copyrighted photographs. Mr. Weisgrau's testimony regarding plaintiff's actual damages should be precluded for three reasons. First, none of his calculations represent the amount that a willing buyer would have agreed to pay a willing seller for the use Avnet made of Plaintiff's photographs. In fact, Mr. Weisgrau acknowledged that he does not have an opinion on what that amount should be. Q. Do you have an opinion, sir, about whether a reasonable buyer would have agreed, would have, not might, would have agreed to pay $17,160 for the use you describe on Page 11 of your report? I don't have an opinion on that. Is that true with respect to every one of your calculations in your report? Yes; right.
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See Exhibit E at pp. 105:23-106:9.1 Second, Mr. Weisgrau's failed to establish any causal nexus between the infringement and Avnet's profits. Q. Leaving aside now what Avnet's expenses were, tell me what income in your opinion is directly attributable to the infringement. I have no idea.

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See Exhibit E at p. 140:16-20. As he explained in his June 24, 2005 Report, "determining the infringer's profits is beyond the expertise of this expert." See Exhibit B at pp. 5-6. Third, Mr. Weisgrau's testimony is inadmissible because it fails to meet the reliability requirements of Fed. R. Evid. 702. I. BACKGROUND Plaintiff filed suit on March 29, 2004 seeking recovery for his alleged actual damages and Avnet's profits arising out of Defendants' unauthorized use of three of his copyrighted photos. See Complaint.2 This case is scheduled for a trial to the Court on July 11, 2006. The deadline for Plaintiff to make his expert disclosure was June 24, 2005. Plaintiff identified Richard Weisgrau and Jeff Sedlik as damage experts. See March 21, 2005 Order. Mr. Weisgrau authored three reports, dated June 24, 2005, January 12, 2006 and January 25, 2006. See Exhibits B and C. 3 Mr. Weisgrau's January 12, 2006 Report was disclosed more than six months after the deadline for Plaintiff's expert disclosure. See Exhibit C. On February 13, 2006, the Court authorized an extension of the discovery deadline for the sole purpose of permitting Defendants to depose Plaintiff, Mr. Sedlik and Mr. Weisgrau within 30 days. See February 13, 2006 Order. Mr. Weisgrau was deposed on March 8, 2006. See Exhibit E. Mr. Sedlik prepared a "Preliminary Expert Report and Disclosure," dated June 24,
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All Exhibits referenced in this pleading are included in a separate document entitled "Defendants' Exhibits in Support of Motions" filed concurrently herewith. 2 Plaintiff filed an Amended Complaint on October 18, 2004. See Amended Complaint. 3 Mr. Weisgrau's January 25, 2006 Rebuttal Report is not addressed in this Motion.
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2005, that did not contain any opinions regarding the amount of Plaintiff's actual damages or Avnet's profits. See Exhibit A. Plaintiff disclosed a Supplemental Report from Mr. Sedlik on March 24, 2006, nine months after the disclosure deadline. See Exhibit D. Mr. Sedlik's Supplemental Report does contain opinions regarding the amount of Plaintiff's actual damages, but not Avnet's profits. See Exhibit D. Defendants did not depose Mr. Sedlik because he had never offered any opinions regarding the amounts of Plaintiff's actual damages or Avnet's profits and the Court's September 30, 2004 Order prohibited the taking of expert depositions until the mandated expert disclosures had been made. See September 30, 2004 Order and Exhibits G, H, and J. Mr. Weisgrau purported to calculate Plaintiffs' actual damages arising from the infringements in his June 24, 2005 Report. See Exhibit B. He computed Plaintiff's actual damages by pricing a generic stock photograph of a corporate executive on the Getty Images website. See Exhibit B at p. 7. To price each infringement, Mr. Weisgrau 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. Mr.

Weisgrau multiplied the price obtained based on the selected criteria by three as a premium for the "proprietary" nature of Plaintiff's photographs. See Exhibit B at p. 8. Mr. Weisgrau then multiplied the "proprietary value" by the alleged number of months of the infringement to arrive at his calculation of the actual damages for each infringement.4 Id. Finally, Mr. Weisgrau added all of the damages for the individual infringements together for a total of either $567,675 or $351,795, depending on whether the contract between Plaintiff and Avnet was enforceable or void. See Exhibit B at pp. 14-15. Mr. Weisgrau purported to calculate Avnet's profits earned because of the
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In two instances Mr. Weisgrau did not multiply the propriety price by a number of months because his initial calculation included the alleged entire duration of the infringement. See Exhibit B at pp. 9-10. For Avnet's use of a photograph in the July/August 2001 and September 2001 issues of Avnet Global Perspective Magazine, Mr. Weisgrau selected one year as the duration of use, despite the fact that the magazine was issued on a monthly or bi-monthly basis. See Exhibit B at pp. 9-10; Exhibit E at pp. 85:2187:1. He computed the damages for the Global Perspective uses based on the alleged one-year duration. Id. For Avnet's use of a photograph in the 2002 and 2003 Annual Reports, Mr. Weisgrau also selected one year as the duration of use and calculated the alleged damages based on one year duration of use. See Exhibit B at pp. 10-11.
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infringement in his January 12, 2006 Report. See Exhibit C. He concluded that Plaintiff is entitled to recover $786,900,000, Avnet's gross profits from its worldwide operations. See Exhibit C at pp. 15-17. He arrived at this conclusion by arguing that Avnet's

employee, investor and public relations uses of Plaintiff's photographs contributed to Avnet's profits and increased market capitalization. See Exhibit C. Since Avnet had not produced evidence of offsetting costs, without establishing any causal relationship, he concluded that all of its gross profits were attributable to the infringement. See Exhibit C at pp. 15-17. Although Ninth Circuit law only permits recovery for a plaintiff's actual damages and the amount of an infringer's profits earned because of the infringement, Mr. Weisgrau argued that in the alternative to Avnet's profits, Plaintiff is entitled to recover "no less than 1.5 times whatever his [Coogan's] actual damages are in [sic] determined to be." See Exhibit C at p. 17. To reach this conclusion, Mr. Weisgrau applied a ROI (return on investment) "1.5 multiplier from ad rates" to Avnet's aspirational goal of expanding its public relations efforts. See Exhibit C at p. 9; Exhibit E at pp. 125:11-128:1. With no further explanation, Mr. Weisgrau stated: Avnet considers its ROI on advertising to be 1.5, i.e., a fifty percent return. At the minimum, following Avnet's own prescription, the profits to which Dan Coogan is entitled out to be no less than 1.5 times whatever his actual damages are determined to be. See Exhibit C at p. 17. II. ANALYSIS A. Expert Testimony.

Expert opinion testimony may be admissible if: 1. 2. 3. 4. 5.
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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.

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Fed. R. Evid. 702. It is insufficient for plaintiff's expert to speak of possibilities without 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). 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). B. Copyright Damages.

The owner of an infringed copyright can recover his actual damages and the amount of the infringer's profits causally related to the infringement, to the extent that the two do not overlap.5 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); 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) ("to the extent a plaintiff receives a license fee covering the infringing sales, the plaintiff cannot also recover the full amount of the defendant's profits from those same infringing sales"). C. Mr. Weisgrau's Opinions Regarding Plaintiff's Actual Damages Are Inadmissible.

"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, 772 F.2d at 512. 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"). Evidence of the amount of plaintiff's prior licensing fees for the same or similar
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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). Mr. Weisgrau does not offer an opinion regarding the amount of any statutory damages. Therefore, statutory damages are not addressed in this Motion.
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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's testimony regarding 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 ("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). Mr. Weisgrau's opinions regarding Plaintiff's actual damages are inadmissible because they: (1) do not represent the amount that a willing buyer would have agreed to pay a willing seller for the use Avnet made of Plaintiff's photographs, (2) are the product of unreliable principles, methods, and application to the facts of this case, (3) and are based on insufficient facts and data. 6 1. Mr. Weisgrau failed to offer an opinion regarding what a reasonable buyer would have agreed to pay for Avnet's use of Plaintiff's photographs.

Plaintiff offered Mr. Weisgrau for his purported ability to calculate the actual damage to the market value of his photographs. However, Mr. Weisgrau's opinions do not represent the amount that a willing seller and willing buyer would have agreed upon in the open market. See Exhibit E at pp. 72:14-73:5; 101:9-16; 104:24-105:10; 105:23106:9; 109:3-13; 112:20-113:3; 114:1-11.
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Mr. Weisgrau's June 24, 2005 Report contains legal arguments and conclusions regarding: (1) whether Plaintiffs' photographs constitute a "collection" pursuant to the Code of Federal Regulations, (2) whether the same photograph appearing in different forms (i.e. cropped) are "different images" for purposes of determining the number of alleged infringements, (3) Defendants' alleged willful infringement, and (4) the enforceability of the contract between Plaintiff and Avnet. See Exhibit B at pp. 2 14-19. Mr. -5, Weisgrau's opinions regarding questions of law and determination of ultimate fact issues in this case are not appropriate expert testimony and will not assist the Court in making a damage award.
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Q.

Do you have an opinion, sir, about whether a reasonable buyer would have agreed, would have, not might, would have agreed to pay $17,160 for the use you describe on Page 11 of your report? I don't have an opinion on that. Is that true with respect to every one of your calculations in your report? Yes; right.

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See Exhibit E at pp. 105:23-106:9.7 At best, Mr. Weisgrau's calculations amount to speculation about what a willing buyer "might" be willing to pay on the open market. See Exhibit E at pp. 101:9-16; 104:24-105:10; 105:23-106:9. Q. A. You cannot say that's what they would do, you can only say that's what they might do? That's right.

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So what you're telling us is that you think a reasonable buyer in 2002 and 2003 would have agreed to pay a photographer for a license to publish a picture in an annual report or statement this size would agree to pay $4,290? I'm telling you I think it's possible, yes.

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You'll agree with me, will you not, that no rational, reasonable buyer would pay $17,160 to have that photograph on that website? No.

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You think a reasonable person would agree to that number? I think a reasonable person might agree to that.

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See Exhibit E at pp. 101:9-16; 104:24-105:10; 105:23-106:9. Mr. Weisgrau's speculation about what a reasonable buyer "might" have agreed to pay is inadmissible. See Daubert,
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Mr. Weisgrau testified several other times that he does not have an opinion regarding whether a reasonable buyer would have agreed to pay the amount he calculated as the value for each use. See Exhibit E at pp. 105:23-106:9; 109:3-13; 112:20-113:3; 114:1-11.
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43 F.3d at 1322 ("insufficient for plaintiff's expert to speak of possibilities without attempting to quantify those possibilities"). 2. Mr. Weisgrau's opinions are the product of unreliable principles, methods and application to the facts of this case.

Mr. Weisgrau's opinions are all based solely on pricing for a generic stock photograph of a corporate executive on the Getty Images website. See Exhibit B at p. 7. His pricing method is unreliable and inadmissible for at least four reasons. a. The Getty website prices are 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 (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. Weisgrau computed Plaintiff's actual damages by pricing a generic stock 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.
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He then multiplied the Getty price by three as a premium for the "proprietary" nature of Plaintiff's photographs and by the alleged number of months of the infringement to arrive at his calculation of the actual damages for each infringement. Id. Mr. Weisgrau's analysis and conclusions regarding actual damages are nothing more than an attempt to circumvent the hearsay rules. He simply offered inadmissible hearsay (the Getty prices), to prove the value of the photographs. impermissible use of expert testimony. Id.8 b. Mr. Weisgrau's damage calculations are based on 2005 stock photography values, not the market value of Plaintiff's photographs at the time of the infringement. This is an

Mr. Weisgrau's calculations are unreliable because the valuations are based on 2005 stock photograph values, not the market value of Plaintiff's photographs at the time of the infringement. See Exhibit E at pp. 12:15-14:7; 54:3-55:7; 68:19-69:13. 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. Weisgrau performed his Getty website calculations on June 16, 2005 and obtained pricing based on then current values. See Exhibit E at pp. 54:3-55:7; 68:19-69:13. The alleged infringements began in 2002 and 2003. Mr. Weisgrau testified that 2005 stock photography values are different than 2002-2004 values. See Exhibit E at pp. 12:15-14:7, 54:3-55:7. He made no adjustment to the Getty prices to account for the differences between 2005 and 2002-2004 photography values. 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's photographs at the time of the 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.

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Mr. Weisgrau also admitted that no special expertise is required to use the Getty website. 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.
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See Exhibit E at p. 69:4-9. Mr. Weisgrau's use of 2005 values renders his analysis irrelevant and unreliable. See Baker, 254 F. Supp. 2d at 354 (expert testimony

inadmissible because conclusions based on "the sort of `apples and oranges' comparison" rejected by courts as irrelevant). c. The damages are calculated based on pricing for dissimilar photographs.

Mr. Weisgrau's calculations are unreliable because they are based on the valuation of photographs with significantly different values than Plaintiff's photographs. It is important to note that the licensing fees at the Getty Images Website apply to generic images not to proprietary images like Corporate CEO's photographs, which Getty does not license as traditional stock photography or for standard licensing fees. The infringing images in this case are not generic. They are proprietary, not available for licensing from any agency, and only available for licensing from Dan Coogan. This means that the images would have premium license fees that would reflect their unique nature. See Exhibit B at p. 8 (emphasis added). As such, the value of Plaintiff's photographs cannot be determined using the Getty website. In an attempt to cure this defect, Mr. Weisgrau applied an arbitrary multiplier of 3X to the purported value for each use. See Exhibit B at p. 8 ("As part of this analysis, the premium nature of the images will be valued by using a multiplier of 3 times the standard licensing fees for generic images."). Mr. Weisgrau's sole basis for choosing a 3X multiplier was his opinion that some photographers might utilize a 3X multiplier for proprietary photographs. See Exhibit E at pp. 77:21-81:20. He had no idea if Mr. Coogan would have, or ever has, used a 3X multiplier, and could not cite any source other than his own experience as a basis for the multiplier. Id. Q. A. Where did the multiplier of three come from? Because my experience of 40 years in the business is photographers employ multipliers of between two and five whe n they have proprietary photographs, and most of the photographers I know and I, myself, when did I that type of work employed a multiple of three. I take it you've examined Coogan's invoices and
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determined that he charged a multiple of three when he had proprietary photographs? A. I did not do that. So how do you know that Coogan would have done it? I don't know that Coogan would have done it, but Mr. Coogan wasn't given the opportunity to do it, so I took a general industry trade practice. Just as I used an actual fee of Getty, I took a trade practice that most photographers do. So if we are going to talk about trade practice, I assume it a published somewhere that photographers who own images charge three times more than stock photography? I think you can find that. Where? Do a search on the internet. Do you know now a place where you can show a judge that that is standard in the industry? I didn't say it was a standard. I said most of the photographers I know and my own practice in the industry and from my experience with talking with photographers and from reading articles about what photographers have done, that is the number that comes to my mind. I didn't say it's a published standard. You can't have a published standard like that. Anybody that publishes that standard is liable to get slapped with a restraint of trade suit, so you're going to go to the trade literature you're not going to find any trade association setting a standard --

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See Exhibit E at 79:17-81:15. d. The damages are calculated based on arbitrary criteria unrelated to the types of photographs, uses or duration of uses in this case.

Mr. Weisgrau's computations are unreliable because he used inaccurate and arbitrary selection criteria on the Getty Images website, unrelated to the actual size, uses and duration of uses of the photographs in order to generate inflated prices. See Exhibit E at pp. 71:12-74:6. 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;
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Baker, 254 F. Supp. 2d at 357-59. The size of the image in relationship to the media on which it is reproduced impacts the cost of its licensing fee. See Exhibit E at pp. 61:17-62:8. Mr. Weisgrau used inaccurate and arbitrary selections regarding the size of the photos. For instance, for Avnet's use of a photo in its Annual Reports, he selected "up to one half page" as the size of the picture. See Exhibit B at p. 10. However, he admitted in his deposition that the size of the photo used in the Annual Reports was less than one-quarter of a page. See Exhibit E at pp. 95:8-99:19. The intended use of a photograph impacts the cost of its licensing fee. See Exhibit E at pp. 55:8-56:9, 66:5-9. "Advertising" license fees are the most expensive, while "editorial" license fees are the least expensive. See Exhibit E at pp. 55:8-57:21. Mr. Weisgrau selected "advertising" to compute the damages for Avnet's use of a photograph in Upside Magazine, even though he acknowledged that the use was "editorial" in nature. See Exhibit E at pp. 56:18-57:17. Mr. Weisgrau's calculations are unreliable because he used more expensive use criteria unrelated to the actual use in this case. Id. Mr. Weisgrau used inaccurate criteria for the duration of the uses. For Avnet's internet use of a photo, he selected the "up to one month" duration from a list including three months, six months, one year, two years, three years and five years. See Exhibit B at p. 8-9; Exhibit E at pp. 71:12-74:8. The "up to one month" selection bears no

relationship to the actual use, which he stated was 24 months. Id. He selected one month to ensure that a higher price would result. Id. ("The up to one month period was selected because selecting another option would effectively discount the use as the period became longer in duration.").9
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Mr. Weisgrau utilized inaccurate and arbitrary time criteria in at least six additional computations. See Exhibit B at pp. 9-11, 12-14; Exhibit E at pp. 85:21-87:1; 91:18-92:13; 103:7-104:23. For Avnet's use of a photograph in the July/August 2001 and September 2001 issues of Avnet Global Perspective Magazine, Mr. Weisgrau selected one year as the duration of use, despite the fact that the magazine was issued on a monthly or bi-monthly basis. See Exhibit B at pp. 9 -10; Exhibit E at pp. 85:21-87:1. Although he conceded that the value of a use in a monthly or bimonthly periodical decreases as new issues are published, he computed the damages for the Global Perspective uses based on the alleged one year duration. Id.
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Mr. Weisgrau's use of inaccurate and arbitrary criteria renders his analysis irrelevant and unreliable. See Baker, 254 F. Supp. 2d at 354. 3. Mr. Weisgrau's opinions are based on insufficient facts and data.

Plaintiff can recover actual damages for the amount that the market value of his work has been injured or destroyed by the infringement. See Mackie, 296 F.3d at 914; Frank Music, 772 F.2d at 512. When a Plaintiff has previously licensed the same or similar work, the amount of those license fees should be considered in determining the market value. See On Davis, 246 F.3d at 161; Baker, 254 F. Supp. 2d at 357-59. Mr. Weisgrau ignored information necessary to establish the market value of Plaintiff's photographs and his actual damages due to the infringement. He did not consider Plaintiff's past earnings, what Plaintiff charged to license uses of his photographs in the past and what other photographers would have charged for the same uses. See Exhibit B at p. 6; Exhibit E at pp. 46:2-15. Instead, as explained above, Mr. Weisgrau merely offered hearsay pricing from a photography website for dissimilar photographs and uses unlike those at issue in this case.10 4. Actual damages conclusion.

Mr. Weisgrau's actual damage calculations should be precluded at trial because they: (1) do not represent the amount that a willing buyer would have agreed to pay a willing seller for the use Avnet made of Plaintiff's photographs, (2) are the product of unreliable principles, methods, and application to the facts of this case, (3) are based on insufficient facts and data, and (4) will not assist the Court in understanding any evidence. D. Mr. Weisgrau's Opinions Regarding Avnet's Profits Are Inadmissible.11

A plaintiff can recover an infringer's indirect profits caused by the infringement. Mackie, 296 F.3d at 914; Polar Bear, 384 F.3d at 707-8.12 Only profits that have a causal
10 With absolutely no factual support, Mr. Weisgrau concluded that Plaintiff is entitled to recover statutory damages for unknown third-party infringing uses of the photos. See Exhibit B at p. 14; Exhibit E at 41:15-42:10. The existence of third party infringements beyond those alleged in the Complaint is pure speculation. 11 The law regarding the recovery of damages for an infringer's profits is more fully set forth in Defendants' concurrently filed Motion for Summary Judgment Regarding Profit Damages. 12 "Direct profits" are generated by sales of the infringed product. Mackie , 296 F.3d at 914; Polar Bear,
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FENNEMORE CRAIG, P.C.
PHOENIX

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's gross revenue caused by the infringement. Polar Bear, 384 F.3d at 707, 711; Mackie, 296 F.3d at 914; On Davis, 246 F.3d at 161.13 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 alleged enhancement); Rainey, 26 F. Supp. 2d at 970-71 (plaintiff failed to introduce any facts by which a reasonable nonspeculative formula could be used to award profit damages.); 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. Weisgrau's opinions regarding Avnet's profits are inadmissible because: (1) he 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's profits.14
384 F.3d at 707-8. "Indirect profits" are not generated through the direct sale of the infringed product. Id. There are no direct profits in this case and they will not be addressed in this Motion. See Exhibit E at p. 120:12-15. 13 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. 14 Mr. Weisgrau's opinions regarding Avnet's profits were not disclosed until more than six months after the deadline for Plaintiff to make his expert disclosure. See Exhibit C.
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FENNEMORE CRAIG, P.C.
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Mr. Weisgrau failed to establish a causal nexus between the infringement and any revenue stream.

Mr. Weisgrau argued that the infringing use of Plaintiff's photos enhanced Avnet's goodwill, resulting in profits.15 He calculated Avnet's gross profits for the period of infringement as $786,900,000, and argued that the entire amount is attributable to the infringement in this case. See Exhibit C at pp. 15-17; Exhibit E at p. 90:3-6. 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. 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. Mr. Weisgrau admitted that he cannot calculate the amount of any alleged profits attributable to increased goodwill cause by the infringing use of the photos. See Exhibit E at pp. 120:20-121:19; 122:3-13. Q. We talked a moment ago about calculating profit from the infringement, and I now want to ask you a slightly different question. Can you calculate the increase in good will that resulted from the infringement in dollars? No.

A. ... Q.

Leaving aside now what Avnet's expenses were, tell me what income in your opinion is directly attributable to the infringement. I have no idea.

A.
15

Mr. Weisgrau's entire argument is inadmissible hearsay. See Engebretsen, 21 F.3d at 728 (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); 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 photographs used in advertisements elicit emotional responses from viewers. See Exhibit C at pp. 3-6. In support he cites a two-page article that summarized a Princeton University study (he did not review the study), which found that voter's choices can be predicted based solely on their reaction to the candidates' photos. See Exhibit C at pp. 5-6; Exhibit E at pp. 124:8-125:4. This is not the type of hearsay reasonably relied upon by experts in calculating a company's profits related to the use of copyrighted material.
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See Exhibit E at pp. 121:13-19; 140:16-20. Indeed, Mr. Weisgrau made no effort to identify what percentage of Avnet's profits from their global operations were related to the infringement. See Exhibit E at pp. 90:7-91:17; 117:6-118:21; 140:16-20. He did not consider the impact on Avnet's revenue or profits of existing market conditions, or Avnet's acquisitions and sales of businesses during the infringement period. Id. 2.
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Mr. Weisgrau is not qualified as an expert regarding Avnet's profits.

Even if Mr. Weisgrau had established a causal nexus between the infringement and Avnet's profits, his testimony would still be inadmissible. Mr. Weisgrau admitted that he is not qualified to determine the amount of Avnet's profits attributable to the infringement. In his June 24, 2005 Report he stated that " determining the infringer's profits is beyond the expertise of this expert." See Exhibit B at pp. 5-6 (emphasis added). He confirmed his lack of qualifications in his deposition. See Exhibit E at pp. 36:7-23; 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. Mr. Weisgrau's admitted lack of qualifications alone disqualify him as an expert and render his opinions inadmissible. III. CONCLUSION Mr. Weisgrau's opinions regarding Plaintiff's actual damages and Avnet's profits
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In the alternative, Mr. Weisgrau argued that Plaintiff is entitled to recover, as an alternative to the amount of Avnet's actual profits causally related to the infringement, "no less than 1.5 times whatever his [Coogan's] actual damages are in [sic] determined to be." See Exhibit C at p. 17. This argument is wholly without merit. A plaintiff can recover an infringer's indirect profits caused by the infringement. Mackie , 296 F.3d at 914; Polar Bear, 384 F.3d at 707-8. There is no legal basis for the conclusion that, in lieu of recovering Avnet's profits, Plaintiff is entitled to recover some mult iplier of his actual damages.
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are inadmissible hearsay and fail to meet any of the standards for admissibility of expert testimony pursuant to Fed. R. Evid. 702. Therefore, the Court should grant Defendants' Motion to Preclude Testimony of Plaintiff's Expert Richard Weisgrau. DATED this 10th day of April, 2006. FENNEMORE CRAIG, P.C.

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

CERTIFICATE OF SERVICE I hereby certify that on April 10, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for 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

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