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Inc. v. Sweetwater Sound, Inc.

United States District Court, D. New Hampshire

January 6, 2020

D'Pergo Custom Guitars, Inc.
v.
Sweetwater Sound, Inc.

          ORDER

          Landya McAafferty, United States District Judge.

         D'Pergo Custom Guitars, Inc. (“D'Pergo”) brings this suit against Sweetwater Sound, Inc. (“Sweetwater”), alleging claims of copyright and trademark infringement and violations of the New Hampshire Consumer Protection Act (“CPA”). D'Pergo alleges that Sweetwater used a copyrighted photograph of D'Pergo's trademarked custom guitar necks and headstock to promote and sell Sweetwater products on Sweetwater's website. Sweetwater moves to exclude two of D'Pergo's experts, Dr. Michael Einhorn and Jeffrey Sedlik. D'Pergo moves to exclude one of Sweetwater's experts, Paul Reed Smith. The opposing party objects to each motion.

         BACKGROUND

         D'Pergo manufactures and sells custom guitars. In 2003, D'Pergo's owner, Stefan Dapergolas, created a photograph showcasing a number of D'Pergo's unique guitar necks and headstock (the “Photograph”), which D'Pergo published to its website. D'Pergo used the Photograph on its website from 2003 - 2006, after which it took down the Photograph and replaced it with professional photography.

         Sweetwater is a retailer that sells musical instruments, including guitars, through its website. In 2004, Sweetwater copied the Photograph and published it on Sweetwater's website. More specifically, Sweetwater used the Photograph in its “Electric Guitar Buying Guide” (the “Buying Guide”), in the section titled “Guitar necks explained.”[1] The end of the Buying Guide features a number of guitars from various manufacturers for purchase (not D'Pergo's), as well as a hyperlink to “Shop for Electric Guitars.”

         In January 2016, D'Pergo contacted Sweetwater about the Photograph and Sweetwater immediately removed the Photograph from its website. D'Pergo subsequently trademarked its headstock design depicted in the Photograph.

         D'Pergo then brought this lawsuit in December 2017. It asserts five claims: (1) copyright infringement in violation of the Copyright Act (Count I); (2) unfair competition in violation of the CPA (Count II); (3) deceptive business practices in violation of the CPA (Count III); (4) false designation of origin and unfair competition in violation of the Lanham Act (Count IV); and (5) trademark infringement in violation of the Lanham Act (Count V).

         DISCUSSION

         Sweetwater moves to exclude the opinions of both of D'Pergo's damages experts: Dr. Michael Einhorn and Jeffrey Sedlik. D'Pergo moves to exclude the opinion of Sweetwater's liability expert, Paul Reed Smith.

         Federal Rule of Evidence 702 is “[t]he touchstone for the admission of expert testimony in federal court litigation . . . .” Crowe v. Marchand, 506 F.3d 13, 17 (1st Cir. 2007). Under that rule, an expert witness may offer opinion testimony if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. Fed.R.Evid. 702. As the structure of this rule suggests, before the factfinder in a case can consider expert testimony over the adverse party's objection, the trial judge, serving as “gatekeeper, ” must determine whether the testimony satisfies the relevant foundational requirements. See Daubert v. Merrell Dow Pharm. Inc., 509 U.S. 579, 597 (1993). The party who is the proponent of the expert opinion bears the burden of showing that it is admissible. United States v. Tetioukhine, 725 F.3d 1, 6 (1st Cir. 2013).

         I. Motion to Exclude Dr. Einhorn

         In support of its claim for damages for its copyright and trademark infringement claims, D'Pergo retained Dr. Michael Einhorn, an economist, to offer an expert opinion. Sweetwater challenges Dr. Einhorn's opinion as to damages for both categories of claims and argues that his opinion should be excluded in its entirety.

         A. Damages for Copyright Infringement

         Under the Copyright Act, a plaintiff who establishes the elements of a copyright infringement claim may recover damages, including “any profits of the infringer that are attributable to the infringement.” 17 U.S.C. § 504. “In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.” Id.

         Dr. Einhorn opines that Sweetwater totaled $6, 632, 249 in gross revenues reasonably related to its use of the Photograph. According to Dr. Einhorn, that figure represents the revenues Sweetwater derived from its sale of electric guitars during the relevant time period from customers who purchased electric guitars after viewing the Buying Guide, which contained the Photograph. As explained further infra, Dr. Einhorn rendered his opinion based on data from the relevant time period that Sweetwater provided in discovery, including Sweetwater's total revenue from its sale of electric guitars, the number of visitors to Sweetwater's “shop page” where customers could purchase electric guitars, and the total number of customers who viewed the Buying Guide.

         Sweetwater argues that the court should exclude Dr. Einhorn's opinion for two reasons. First, Sweetwater takes aim at Dr. Einhorn's methodology. Second, Sweetwater contends that the probative value of his opinion is substantially outweighed by the prejudicial impact and should be excluded under Federal Rule of Evidence 403. D'Pergo disputes both arguments.[2]

         1. Methodology

         Sweetwater raises three challenges to Dr. Einhorn's methodology: (1) he offers no rationale for the formula he uses to determine Sweetwater's gross revenues reasonably related to the infringement; (2) he fails to consider several other factors unrelated to the infringement that affected Sweetwater's gross revenues from the sale of electric guitars; and (3) his opinion is based on the faulty premise that the entire Buying Guide is infringing simply because it contained the Photograph.

         a. Lack of rationale

         In his report and during his deposition, Dr. Einhorn explained how he arrived at the $6, 632, 249 gross revenue figure. In his expert report, Dr. Einhorn includes the following chart:

1

2

3

4

5

YEAR

GUITAR SALES

SHOP VISITORS

GUIDE VISITORS

INFRINGING SALES

2004

$41, 029

NA

NA

2005

$380, 335

NA

NA

2006

$1, 016, 809

43391

4715

$110, 490

2007

$1, 713, 865

66760

5501

$141, 222

2008

$2, 227, 182

87008

44797

$1, 146, 688

2009

$2, 405, 661

176609

55014

$749, 367

2010

$3, 159, 778

449651

84878

$596, 453

2011

$4, 429, 955

458570

83306

$804, 767

2012

$7, 682, 152

599068

80949

$1, 038, 050

2013

$12, 937, 302

908480

44797

$637, 936

2014

$19, 028, 826

1175673

51870

$839, 541

2015

$18, 739, 642

1297037

39295

$567, 736

SUM

$6, 632249

Doc. no. 115-2 at 11. As he explained in both his report and his deposition, Dr. Einhorn arrived at the infringing sales total in Column 5 by beginning with Sweetwater's electric guitar sales each year Sweetwater used the Photograph (Column 2). Dr. Einhorn then determined the number of customers who visited Sweetwater's shop page to purchase electric guitars (Column 3), and the number of those customers who also visited the Buying Guide which contained the Photograph (Column 4). Dr. Einhorn then determined the percentage of total customers who reached the shop page who also viewed the Buying Guide and applied that percentage to Sweetwater's total guitar sales to reach the infringing sales figure in Column 5. Dr. Einhorn further testified at his deposition why he took this approach.

         Sweetwater contends that Dr. Einhorn's opinion fails to employ any methodology or rationale in reaching his opinion. That is not the case. Although Sweetwater may contend that there are flaws in Dr. Einhorn's methodology, it may explore any such deficiencies during cross-examination. See, e.g., Gray v. Perry, No. 215CV05642CASJCX, 2019 WL 2992007, at *19 (C.D. Cal. July 5, 2019) (denying motion to exclude Dr. Einhorn's expert opinion on damages for copyright infringement claim because any “purported flaws in his methodology or the evidence he relied upon in reaching his opinion are matters for cross-examination and argument”).

         b. Other factors unrelated to infringement

         Sweetwater next contends that the court must exclude Dr. Einhorn's opinion because his methodology omits consideration of factors unrelated to the infringement that affected Sweetwater's gross revenues from the sale of electric guitars. For example, Sweetwater notes that Dr. Einhorn did not consider: (1) whether visitors to the Buying Guide actually saw the Photograph; (2) the size or placement of the Photograph within the Buying Guide; (3) images of guitars on the Buying Guide which would have influenced customers' purchasing decisions; (4) the fact that Sweetwater did not sell D'Pergo guitars; and (5) the relationship between Buying Guide visitors and customers' decisions to purchase a guitar.

         Sweetwater questioned Dr. Einhorn at his deposition about each of these factors. Although Sweetwater is dissatisfied with Dr. Einhorn's answers, that is not a sufficient basis to exclude his opinion. To the extent Sweetwater believes that Dr. Einhorn improperly failed to account for certain factors in reaching his opinion, it is free to explore that line of questioning during cross-examination. See, e.g., Gray, 2019 WL 2992007, at *19 (“Einhorn's failure to consider costs when calculating profits goes to the weight of his testimony and can be addressed on cross-examination.).

         c. Commingling

         In his expert report, Dr. Einhorn stated that his opinion is based on the premise that the inclusion of the Photograph in the Buying Guide rendered the entire Buying Guide infringing. Specifically, Dr. Einhorn states in his report: “As a legal matter, I am advised that the commingling of infringing and non-infringing elements render the entire page to be an infringing work.” Doc. no. 115-2 at 11. Thus, Dr. Einhorn's damages calculation for D'Pergo's copyright infringement claim does not seek to parse out the impact of the Photograph itself on Sweetwater's sales, but rather considers the impact of the entire Buying Guide. Sweetwater takes issue with that theory of damages and contends that Dr. Einhorn's opinion is faulty and must be excluded as a result.

         “[A]n infringer who commingles infringing and noninfinging elements ‘must abide the consequences, unless he can make a separation of the profits so as to assure to the injured party all that justly belongs to him.'” Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 567 (1985) (quoting Sheldon v. Metro-Goldwyn Pictures Corp.,309 U.S. 390, 406 (1940)). Thus, it is Sweetwater's burden-not D'Pergo's or Dr. ...


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