Disney Enterprises, Inc. et al v. Hotfile Corp. et al

Filing 217

MOTION to Strike and Memorandum of Law of Defendants Hotfile Corporation and Anton Titov to Strike Plaintiffs' Putative "Rebuttal" Report of Dr. Richard Waterman Before the Close of Expert Discovery on January 17, 2012 and Motion for Expedited Briefing and Hearing at the Upcoming Status Conference on January 13, 2012 by Hotfile Corp., Anton Titov. Responses due by 1/26/2012 (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K)(Munn, Janet)

EXHIBIT “D”

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 11-20427-WILLIAMS/TURNOFF

DISNEY ENTERPRISES, INC.,
TWENTIETH CENTURY FOX FILM CORPORATION,
UNIVERSAL CITY STUDIOS PRODUCTIONS LLLP,
COLUMBIA PICTURES INDUSTRIES, INC., and
WARNER BROS. ENTERTAINMENT INC.,

V.
HOTFILE CORP., ANTON TITOV, and
DOES 1-10.

Defendants.

HOTFILE CORP.,

Counterclaimant,
v.
WARNER BROS. ENTERTAINMENT INC.,

Counterdefendant.

RULE 26(a)(2)(B) REBUTTAL REPORT OF DR. RICHARD WATERMAN
1.

My name is Richard Waterman and I am an Adjunct Professor of Statistics at The

Wharton School at the University of Pennsylvania, and the President and Co-Founder of
Analytic Business Services, Inc., a consultancy focused on providing expert advice and opinions
in the field of statistical analysis. Further details of my educational background, professional
experience, qualifications, publications, previous testimony, and compensation are included in

CASE: NO. I 1-20427-WILLIAMS/TURNOFF

my November 18. 2011 Rule 26(a)(2)(B) report in this case. and are incorporated herein by
reference.
2.

I have reviewed the report submitted by Prof. James Boyle in this litigation, in

which Prof. Boyle identified downloads of files from Hotfile that he believes to be noninfringing. However, as Prof. Boyle acknowledges, he did not attempt to analyze a
"representative statistical sample of the uses of Hotfile as a whole." Boyle Report at p. 2. He
therefore provides no basis to draw conclusions from his study about the level of infringing
activity on Hotfile generally, which a statistical analysis involving sampling would allow. .
Further, although he identifies a total number of downloads of files that he considers to be noninfringing, he does not compare that number to the number of all downloads on Hotfile.
According to data provided to me that I understand has been produced by Hotfile, there have
been over 2 billion downloads over the lifetime of Hotfile. Thus, from a quantitative
perspective, there is no basis for concluding that the downloads that Prof. Boyle identified are
"substantial" in terms of the predominant uses of the site.
3.

In the statistical analysis I described in my November 18 report, I analyzed a

representative sample of daily downloads of files on Hotfile drawn from Hotfile's
"dailydownload" data from January 2011. That analysis enabled me to draw conclusions about
the level of infringing downloads from Hotfile during the month from which the sample was
drawn, and provides information about periods of time on Hotfile with substantially similar
circumstances. The methodology of looking at infringement levels based on data reflecting a
certain period of time is consistent with the approach taken in other studies of online
infringement levels, including in the Lime Wire, Usenet, and Fung cases. Each of those cases

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CASE NO. I I -20417..\\ILHAN IsrruRN0FF

analyzed the availability or download activity of files at certain points or periods of time in order
to determine what percentage of the file availability or activity was infringing.
4.

In this case. there were strong reasons for choosing January 201 1 as the period of

time from which to draw the sample. My reasonable expectation is that Hotfile, in general,
would be more likely

to be in possession of actual content files available on Hotfile in more

recent periods of time. Thus, if we drew a sample of downloads from January 2011, we would
be more likely to obtain the associated files from Hotfile for those downloads than if we drew a
sample of downloads from previous months. Subsequent to my initial report I have been
provided with data that confirms that expectation. In the attached Exhibit 1, I have provided a
graphic illustration of data showing that cohorts' of files uploaded in earlier months generally
were less likely to be available from Hotfile after this litigation than cohorts of files uploaded in
Months closer to January 2011. (I understand that the presence of "file size" data is an indication
of whether Hotfile is still in possession of the content file.) For example, only 15-20% (at most)
of files uploaded shortly after the launch of Hotfile were still available as of the initiation of
litigation, whereas up to 80% of the more recent files were available.
5.

I have reviewed data regarding the development of the Hotfile site over time.

Based on my review of the data, it appears that Hotfile grew at a relatively stable rate from its
launch in February 2009 through January 2011. In Exhibits 2, 3, 4, and 5, I have provided a
graphic depiction of a number of trends in the Hotfile data, including the steady growth in
revenue, number of uploads, number of downloads, and available files. 2 All of these graphs

' A cohort of files is defined as a sequential set of one million file uploads. My understanding is
that Hotfile generally numbers its uploads sequentially.
2 Available files is defines as the cumulative sum of the difference between uploaded and deleted
files.

CASE NO. I 1-20427-WI I_LIAMS/Tt TNOFF

show a distinct "break point" occurring in February 2011, the month in which this litigation
began
6.

Likewise. I have received information regarding the changes that Hotfile claims to

have made to address infringing activity at various points in time. While I have no information
about the effectiveness of any of these steps in reducing infringement, by intention, none of these
would be expected to increase the amount of infringement on Hotfile. As reflected in Exhibits 25, each of the steps taken prior to February 2011 appears to have had little effect on Hotfile's
consistent pattern of growth.
7.

Based on the stability in Hotfile's growth from the beginning of its operation, and

the fact that changes in Hotfile's operation purportedly addressing infringing activity during that
time were unlikely to result in increased infringement, I would not anticipate that the level of
infringing daily downloads on Hotfile for periods prior to January 2011 would be materially
lower than the level of infringing daily downloads in January 2011.
8.

In contrast, the change that Hotfile claims to have made to its repeat infringer

policy in February 2011 appears to have been the kind of major change, a watershed event in the
site, that could potentially affect the level of infringement on Hotfile. As noted in Exhibit 6,
Hotfile's deletions of files spiked dramatically in February 2011. At the same time, as noted in
Exhibits 2-5, Hotfile's revenues, uploads, and downloads fell sharply after February 2011. Thus,
drawing a sample from January 2011 was likely a relatively conservative choice for estimating
the level of infringement prior to that month, whereas I am not able to draw similar conclusions
about the level of infringement on Hotfile after February 2011.
9.

I understand that Hotfile has provided testimony that the "daily download" counts

of downloads by "free" (non-Premium) users includes downloads from users in 54 specific

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CASF NO. I 1-20427-WILLIAMS/TURNOFF

countries. and thus there are some downloads of files by non-Premium users in January 2011 that
were not included in the population from which the statistical sample was drawn. Based on the
review of the data I have been provided, the volume of downloads by non-Premium users in
January 2011 not included in the sampled population appears to be only approximately 16% of
the total downloads. I have calculated this by comparing the non-Premium download counts of
the sample files recorded in the "dailydownload" data with the non-Premium download counts in
the "uploadsdownloads" data for all time periods. Assuming that the "uploadsdownloads" table
counts all non-Premium downloads, approximately 84% of the total non-Premium downloads are
included in the "dailydownload" data. Based on Hotfile's testimony, the other approximately
16% of daily non-Premium downloads appear to come from countries other than the 54 Affiliate
countries. However, I understand that Mr. Titov has testified that lie does not have any reason to
believe that the downloading patterns of users from those other countries are any different from
those of the users from the 54 Affiliate countries. Further, based on the sample of 1,750
downloaded files, the proportion of infringing files from non-Premium users in non-Affiliate
countries was on average 16% of all downloads. For all the remaining files in the sample, it was
17%. Hence, the download rates from non-Premium users in non-Affiliate countries of sampled
infringing files, and those of the remaining sample files, are almost identical. Based on Mr.
Titov's testimony and my analysis described above, I have no reason to believe that the level of
infringing daily downloads for non-Premium users outside the 54 countries would be materially
different than to the level of infringing downloads for Premium users within the 54 countries.
10. Overall, my review of data and other information as described above leads me•to
believe that my conclusions about infringement levels from the sample data are likely indicative
of the level of infringement prior to January 2011.

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CASE. NO. 11-20427-WILLIAMS/TURNOFF

I I.

I reserve the right to conduct additional analyses based on additional information

and to supplement this report based on such further analyses. I further reserve the right to
provide additional graphical exhibits reflecting my analysis. Additional materials that I have
considered in the course of this report and exhibits I may present are being produced
concurrently with this report.

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CASE NO. 11-20427-WILLIAMS/TURNOFF

Dated: January 6, 2012

Richard Waterman, Ph.D.