On Site Energy Company, Inc. v. MTU Onsite Energy Corp.
Filing
70
MEMORANDUM AND ORDER denying 44 Motion in Limine. Pending before the Court is MTU's motion to exclude two of OSE's experts: Robert Schlegel and Henry Ostberg. For the foregoing reasons, MTU's motion to exclude OSE's experts (Docket Entry 44) is DENIED in its entirety. So Ordered by Judge Joanna Seybert on 7/19/2012. C/ECF (Valle, Christine)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------X
ON SITE ENERGY CO.,
Plaintiff,
-against-
MEMORANDUM & ORDER
10-CV-1671(JS)(WDW)
MTU ONSITE ENERGY CORP.,
Defendant.
--------------------------------------X
APPEARANCES
For Plaintiff:
Kurt N. Jones, Esq.
William A. McKenna, Esq.
Woodard Emhardt Moriarty McNett & Henry LLP
111 Monument Circle, Suite 3700
Indianapolis, IN 46204
Annalee Cataldo-Barile, Esq.
Jarrett M. Behar, Esq.
Sinnreich Kosakoff & Messina
267 Carleton Avenue, Suite 301
Central Islip, NY 11722
For Defendant:
Kathleen E. McCarthy, Esq.
Amy E. Jones, Esq.
Bruce W. Baber, Esq.
Erik J. Dykema, Esq.
Yuridia Caire, Esq.
King & Spalding LLP
1185 Avenue of the Americas
New York, NY 10036
SEYBERT, District Judge:
In
this
Lanham
Act
case,
Plaintiff
On
Site
Energy
(“OSE”) sued Defendant MTU Onsite Energy (“MTU”) for trademark
infringement.
Pending
before
the
Court
is
MTU’s
motion
to
exclude two of OSE’s experts: Robert Schlegel and Henry Ostberg.
(Docket Entry 44).
MTU’s motion is DENIED.
DISCUSSION
Federal Rule of Evidence 702 is the starting point for
assessing
whether
experts
may
testify
at
trial.
Rule
702
provides that:
A witness who is qualified as an expert by
knowledge, skill, experience, training, or
education may testify in the form of an
opinion or otherwise 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
facts or data;
is
based
on
sufficient
(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.
Districts courts act as “gate-keepers” whereby
they make an initial determination whether an expert’s testimony
is both relevant and reliable.
See Amorgianos v. Nat’l R.R.
Passenger
264
Corp.,
303
F.3d
256,
(2d
Cir.
2002).
Expert
evidence is relevant if it tends to make any fact of consequence
to the litigation more or less probable.
Id. at 265; see also
FED. R. EVID. 401.
Expert evidence is considered reliable if the expert’s
theory is valid and if it has been properly applied to the facts
of a particular case.
See Daubert v. Merrell Dow Pharms., Inc.,
2
509 U.S. 579, 592-93, 13 S. Ct. 2786, 125 L. Ed. 2d 469 (1993).
In
making
a
preliminary
reliability
assessment,
courts
are
guided by the factors listed in Rule 702, and they may also
consider a number of additional factors that the Supreme Court
has identified in its precedents.
265.
See Amorgianos, 303 F.3d at
These factors include whether an expert’s theory or
technique (1) “can be (and has been) tested,” Daubert, 509 U.S.
at 593; (2) “has been subjected to peer review and publication,”
id.; (3) has an acceptable rate of error, see id. at 594; (4) is
guided by accepted professional standards, see id.; and (5) is
generally accepted within the relevant professional community,
see id.
The Court’s gate-keeping inquiry “is fluid and will
necessarily vary from case to case.”
Amorgianos, 303 F.3d at
266.
The proponent of an expert’s testimony has the burden
of satisfying the admissibility requirements by a preponderance
of the evidence.
The decision whether to admit or exclude a
proposed expert’s testimony is committed to the Court’s broad
discretion.
E.g., Amorgianos, 303 F.3d at 264.
District courts
should generally exclude expert testimony “if it is speculative
or conjectural or based on assumptions that are ‘so unrealistic
and contradictory as to suggest bad faith’ or to be in essence
‘an apples and oranges comparison.’”
3
Zerega Ave. Realty Corp.
v. Hornbeck Offshore Transp., LLC, 571 F.3d 206, 214 (2d Cir.
2009) (quoting Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18,
21 (2d Cir. 1996)).
“[O]ther contentions that the assumptions
are unfounded go to the weight, not the admissibility, of the
testimony.”
Id. (alteration in original).
I. Robert Schlegel
Robert
Schlegel
proposes
to
testify
about
(1)
a
hypothetical “reasonable royalty” for the trademark in issue,
and
(2)
OSE’s
trademark.
2.)
advertising
expenditures
in
relation
to
the
(Trial Ex. 164, Schlegel Report (“Schlegel Rpt.”)
MTU challenges both of these opinions.
MTU challenges Schlegel’s reasonable royalty testimony
on two grounds.
First, it argues that a reasonable royalty
calculation is irrelevant in cases, such as this one, where the
parties have no history of trademark licensing.
Although
damages,
reasonable
The
royalties
Apollo
are
Theater
Syndication, No. 02-CV-10037,
a
(Def. Br. 6-8.)
“seldom-used”
Found.,
Inc.
v.
measure
W.
of
Int’l
2005 WL 1041141, at *13 (S.D.N.Y.
May 5, 2005)--largely because they are difficult to quantify,
see Gucci Am., Inc. v. Guess?, Inc., __ F. Supp. 2d __,
2012 WL
841620, at *2 (S.D.N.Y. Mar. 13, 2012)--there is no per se rule
against
reasonable
royalties
in
cases
with
no
evidence
of
licensing history, Coryn Group II, LLC v. O.C. Seacrets, Inc.,
4
No. 08–CV-2764,
2010 WL 1375301, at *8 (D. Md. Mar. 30, 2010);
see also Sands, Taylor & Wood v. Quaker Oats Co., 34 F.3d 1340,
1351 (7th Cir. 1994).
Second, MTU challenges the reliability of
Schlegel’s royalty analysis.
(Def. Br. 8-10.)
Any flaws in
Schlegel’s methods may be challenged during cross-examination.
See Gucci Am., 2012 WL 841620, at *3 (“While Imburgia's opinions
may be subject to attack via ‘[v]igorous cross-examination [and]
presentation of contrary evidence,’ I am not convinced, after
reviewing his report, that his opinions are so flawed as to be
[inadmissible].”
(quoting
Daubert,
509
U.S.
at
596));
Coryn
Group II, 2010 WL 1375301, at *8 (criticism of a reasonable
royalty
expert
“may
be
adequately
addressed
through
cross-
examination and the presentation of contrary evidence”).
This
portion of MTU’s motion is denied.
MTU
challenges
Schlegel’s
advertising
testimony
as
irrelevant because Schlegel has not analyzed how effective OSE’s
advertising was in promoting the trademark.
(See Def. Br. 10.)
Schlegel compares advertising outlays as a percentage of net
revenue for a handful of generator sales companies and concluded
that OSE’s advertising efforts were “an indicator of investment
by
management
recognition.”
to
expand
(Schlegel
OSE
Rpt.
operations
3.)
He
and
also
customer
opines
brand
that
OSE
“devoted a reasonable proportion of revenues to advertising and
5
promotion expense in order to expand its ‘Brand’ and attract
customers.”
(Id. at 2.)
Advertising expenditures are a factor
in the secondary meaning analysis, Thompson Med. Co., Inc. v.
Pfizer
Inc.,
753
F.2d
208,
217
(2d
Cir.
1985),
and
MTU’s
criticisms of Schlegel’s analysis go to the weight of Schlegel’s
opinion, not its admissibility, see Zerega, 571 F.3d at 214.
This portion of MTU’s motion is denied also.
II.
Henry Ostberg
Henry
Ostberg
concluded
that
there
confusion
of
at
adjusting
for
a
conducted
was
least
21%
control.”
(“Ostberg Rpt.”) 3.)
a
a
“net
between
(Trial
confusion
survey
likelihood
of
[OSE]
[MTU],
Ex.
and
178,
and
‘reverse’
Ostberg
after
Report
MTU seeks to exclude evidence concerning
the survey, arguing that its methodology was inherently flawed.
(Def. Br. 16-22.)
Specifically, MTU maintains that the universe
of survey participants was too broad (id. at 16), the survey
control was useless (id. at 18-19), the array format did not
replicate market conditions (id. at 19), and the survey results
included
too
much
“noise”
(id.
21).
This
portion
of
MTU’s
motion is denied.
Errors
survey’s
weight,
in
not
survey
methodology
its
admissibility.
generally
go
Schering
to
the
Corp.
v.
Pfizer Inc., 189 F.3d 218, 228 (2d Cir. 1999), as amended on
6
reh’g (Sept. 29, 1999).
survey.
“[T]here is ‘no such thing as a perfect
The nature of the beast is that it is a sample, albeit
a scientifically constructed one.’”
THOIP v. The Walt Disney
Co., 690 F. Supp. 2d 218, 230 (S.D.N.Y. 2010) (quoting MCCARTHY
TRADEMARKS § 32:184).
ON
District courts may exclude survey evidence
if it is patently unreliable or unhelpful, see id. at 231, but
cross-examination
is
often
the
appropriate
way
to
raise
criticisms of the survey’s methods, see, e.g., POM Wonderful LLC
v. Organic Juice USA, Inc., 769 F. Supp. 2d 188, 201 (S.D.N.Y.
2011).
As to the argument concerning the survey’s control,
Ostberg used two boiler companies--Mobile Steam Boiler Rental
Corporation
and
Cleaver-Brooks
respondents
whether
they
Boiler
thought
associated with one another.
that
Company--and
the
companies
(Ostberg Rpt. 10.)
asked
were
Unlike OSE and
MTU, the control companies did not have similar names.
In OSE’s
view, “[t]he extent to which there was a greater likelihood of
confusion
in
the
answers
given
concerning
[OSE
and
MTU],
as
compared to the answers given concerning Mobile Steam/CleaverBrooks, can therefore be attributed to the similarity in the On
Site Energy/MTU Onsite Energy names.”
(Trial Ex. 185 at 2.)
MTU argues that the controls should have been more similar to
the test stimulus.
(Def. Br. 18.)
7
Although survey controls
should, as a general matter, be similar to the marks at issue,
see THOIP, 690 F. Supp. 2d at 240-41, the Court cannot say that
Ostberg’s choice of control renders his survey unreliable as a
matter of law.
MTU may address the control’s efficacy on cross-
examination.
As to the degree to which the survey replicated market
conditions,
MTU
points
to
THOIP,
a
case
in
which
the
court
concluded that a sequential survey was inadmissible because the
trademarks at issue were not found in close proximity to one
another.
THOIP, 690 F. Supp. 2d at 236-37.
Here, however,
there is some evidence that the allegedly conflicting marks are
seen in close proximity, including, for example, on a Google
search results page (Trial Ex. 4) and in hard copy advertising
books (see French Decl. ¶¶ 9-10).
As with its other criticisms
of the survey, MTU is free to challenge the survey methodology
at trial.
The remaining challenges to the Ostberg survey--that
its respondent universe was too broad and that the high noise
level indicates its unreliability--also go to its weight, not
admissibility.
See THOIP, 690 F. Supp. 2d at 241-42; MCCARTHY
ON
TRADEMARKS § 32:162 (“The selection of an inappropriate universe
generally affects the weight of the resulting survey data, not
its admissibility.”).
8
CONCLUSION
For
the
foregoing
reasons,
MTU’s
motion
to
exclude
OSE’s experts (Docket Entry 44) is DENIED in its entirety.
SO ORDERED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:
July 19, 2012
Central Islip, New York
9
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