JAMES S. GWIN, District Judge.
In this copyright action, Plaintiff Ron Satija, the trustee of David Mowder's bankruptcy estate, says that David Mowder created a cartoon character known as the "the General," that the Estate owns the copyright to the General, and that Defendants
Permanent General now moves under
David Mowder says that in 1998 and while living in Northeast Ohio, he created the cartoon character called the General and that from 1998, Defendants have used the character in their advertisements without his permission or authorization.
Defendants generally say they contracted with an advertising agency, Saifman Richards, and that advertising agency's employee actually created the character.
The Court scheduled the case for trial on April 28, 2014.
The Estate disclosed reports from two experts.
Defendants say that both reports are irrelevant and unreliable.
For its response, the Estate says Defendants misunderstands the proper law to be applied, that Dr. Barone's methodologies have previously satisfied legal requirements, and the Defendants objections to Turner's report goes to the weight of evidence, not its admissibility.
Rule 702 of the Federal Rules of Evidence controls the admission of expert testimony. Under Rule 702, testimony based on specialized knowledge is admissible if it "will help the trier of fact to understand the evidence or to determine a fact in issue."
As commentators have noted, Rule 702 liberalized the admissibility of expert testimony from the earlier Frye standard.
Further, experts need not confine their testimony to matters upon which they have personal knowledge.
For the instant motions, the Court restricts itself to determining whether the experts' purported testimony is admissible. To conduct this inquiry, the Court considers the parties' objections.
Dr. Michael Barone holds a masters in business administration from George Washington University and a Ph.D. in marketing with a psychology cognate from the University of South Carolina.
In this case, Dr. Barone purports to give an expert report about the influence of the General as used in marketing materials on consumer decisions to purchase Defendants' products, automobile insurance.
Defendants challenge Dr. Barone's report because they say "Prof. Barone's assumption of a significant positive influence rests solely on the presence of the General cartoon character in a majority of Permanent General's television ads and the increase in permanent General's advertising budget."
Permanent General's challenges to Dr. Barone's expert report lose.
As background, in his report Dr. Barone discusses Permanent General's "direct response strategy" of encouraging customers to "respond `directly and immediately'" via the Internet or telephone.
Dr. Barone then analyzes the character itself. He identifies the "exaggerated features" of the character and portraying the character engaged in activities "that are incongruous with stereotypical views of five-star generals" as "novel images."
He also says that memorable characters can "break through `marketplace clutter'"
Dr. Barone also concludes that the character and Defendants' use of the character likely improves consumers' memory of the information contained in the advertisements and Permanent General's brand.
Dr. Barone also concludes that Permanent General's integrated use of related brand elements increase Defendants return on investment.
Finally, Dr. Barone concludes that increased advertising by Permanent General "can augment the influence of key advertising elements such as The General Caricature on consumer response."
Dr. Barone's conclusion that the General character has a significant positive impact on Permanent General's advertising, therefore, is not solely based on Permanent General's use of the character and increased advertising investment. Rather, Dr. Barone seems to rely upon psychological marketing literature to reach this conclusion.
Although Dr. Barone mentions that Permanent General would not spend so much on advertising if the General were not effective, he uses this common-sense observation as an independent check of his expert hypothesis.
Defendants' claim that Dr. Barone did not test his conclusion with empirical studies goes to the weight of his conclusion rather than its admissibility. The commentary to Rule 702 merely suggests that the Court consider whether the analytical "technique or theory" has been tested.
Defendants challenge to Dr. Barone's opinion does not seem to criticize his opinion that the character has a positive impact on consumers' opinions of Permanent General. Rather, Defendants seem to be more concerned with valuing the specific impact that the General character has on its advertising, as opposed to other features of the commercial.
For these reasons, the Court overrules Defendants' objections to the expert testimony of Dr. Barone.
Robert Turner is a certified public accountant, holds an accreditation in business valuation, and is certified in financial forensics and valuation analysis.
In this case, Turner purports to give an expert opinion about "Permanent General's gross revenue attributable to its alleged copyright infringement" or valuing Defendants' use of the General character.
Defendants say that because Turner "provides a range covering approximately $350 million . . . attributable to Defendants' allegedly infringing activity, Plaintiff has failed to establish the actual amount of gross revenues reasonably related to the infringing activity."
Turner gives the opinion that between 51% and 90% of Permanent General's revenues result from Permanent General's use of the General character.
Turner, however, seems to have missed an important step in the chain of logic. Although the General character may affect consumer's decisions to purchase, and although advertising may correlate with revenue, Turner cites no evidence or expert opinion to suggest that all of the correlation between revenue and advertising is due to the General as opposed to the other elements of the commercials, such as the jingle or even the insurance service itself.
Plaintiff appears to recognize this jump in logic and responds that he does not need to consider the effects of other elements of the commercial.
The 1976 Copyright Act
In Balsley, a news reporter who held copyrights to pictures sued the owners of Hustler magazine for publishing those pictures without her consent.
For revenue to be reasonably related to an infringement, there must be a conceivable connection between the infringement and the revenues.
Plaintiff says that he sufficiently shows a "reasonable relationship" between the use of the General character and Permanent General's gross revenue because the General appears in "every single one" of Defendants' advertisements; because Dr. Barone concludes that the General has a positive impact on consumer decisions; and because Turner concludes that Defendants' revenue is strongly correlated with its TV advertisements.
There are two problems with this argument.
First, Turner's report does not say the he will give an opinion about the revenue reasonably related to the use of the General. Rather, Turner's report says that he is giving an opinion about "the amount of Permanent General's gross revenue attributable to Permanent General's alleged copyright infringement of `The General' caricature."
As the Sixth Circuit noted in Balsley, when a party attempts to show the revenue or profit attributable to infringement, it must establish a non-speculative causal connection between the revenue and the infringement.
Second, Plaintiff's argument may not establish that the revenues are reasonably related to infringement. Balsley differs from this case significantly. In Balsley, the magazine sold pictures and articles. While it owned some of this content, the publisher did not own the Balsley pictures. Therefore, the publisher's revenues from that issue came directly from the sale of the copyrighted images.
In this case, Defendant sells insurance and used the General character to advertise its insurance sales. Customers buy the insurance, not the character. Therefore, the relationship between the alleged infringement and the revenue Turner cites is not as direct.
Nevertheless, Turner's testimony may still be admissible as an opinion about the revenue reasonably related to the use of the General under Balsley. But the Court requires additional information from Turner and argument from the parties before the Court can conclude that Turner has used a reliable valuation method and has reliably applied that method to the facts of this case.
The Court will schedule a hearing at which Turner will testify about the basis for his opinion on the value of the revenues attributable to or reasonably related to the use of the General character. The Court will also hear argument on whether Turner should testify and on what issues Turner should be allowed to testify.
For the foregoing reasons, the Court
IT IS SO ORDERED