understanding and i believe the law that is i think the courts should apply is the case united states v andersen and in that case the court that was a ninth circuit case held that the government failed to prove the lost profits as required so this really gives to the heart of both my concern is is it your contention that the government would be should have had to prove what the profit was and that and that the amount of restitution should be limited to that amount that is correct that is correct and and the witness who testified i think we had some objection to the witness didn't seem to have firsthand knowledge but indicated that that witness did not know how many cells were lost did not know the how much the manufacturing costs were and i think that's the driving force here  when restitution is granted it should not end up being a windfall for the companies and even if i go to the here's the problem for me  i think that i think that there could be cost that are included in what the victims suffer here that they've incurred to which they would be entitled to some restitution without regard to profit ok and so for example advertising costs marketing costs those kinds of things would would be something that they would be entitle to be compensated for because it's built into that wholesale price oh the problem i had in this is why i wanted to really get to the heart of your argument was it seemed to me that there are two components of costs that they did not incur with respect to these d v d s arguably and that is transportation costs and manufacturing costs because in fact the transportation and manufacturing for these particular d v d s regularly incurred by your your  conscience but if your objection is that they should be just limited to profits it doesn't seem to me that that's exactly right you see where i'm coming from and let me address that we i think that it was a something that was a step that it's an agreement that it cost sixteen dollars and fifty two cents for every cd from that sixteen dollars and fifty two cents the advertising costs are taking  a lot of the embedded costs that are probably already compensated for by previous sales and so if you look at it just from the practical perspective of the wholesalers what they have lost as a sale and i think just record spend a fair amount of time looking at all the testimony that was presented by the m p saying that these sales were being made through the same avenues of common they had edition of authenticity that they were being i think a lot of them were being sold on amazon and you and i when we use amazon we look at cost assuming that we you know we're looking for the cheapest one and what was displaced i think you can make a fair argument i think just record found that people were buying it from you thinking that they were buying the genuine article and that's a if you look at that case there's actually a footnote which says that after and that's what's relied on which is to say that they're entitled to the whole profit but if you look at the footnote in that case the footnote indicates  that the there should be deductions made or the for the costs and what it was for the deduction should be made for those costs which are not factored in but what happened in that case is that the did the defendant when he appealed did not raise that issue it wasn't a blanket do we just take the profits and and we don't subject in the last mile from it  so and and if anything if if it's necessary to go back in establish the loss amounts that's something we can do however in this case it was raised at the time of the hearing that dick costs which come out of that sixteen dollars and fifty secondary market are going to be reaping the companies can be compensated for a direct sale that's d h gate but not subsequent sales which is mr comrie and for subsequent sales thereafter such as the people that bought the as this court said in robertson there is a causal chain and that calls a chain cannot be attenuated mr comrie is attenuated and nothing that mr comrie did and sold caused any loss whatsoever at least that the government proved at the restitution hearing they didn't what the district courts or the district court and i'd i don't agree with you that he's a reseller in the secondary market so many reselling the secondary market is somebody who gets who acquires goods that are authentic and then for whatever reason there's less demand in those who they're selling it at a lower cost generally that person pays less than wholesale in order for them to sell at retail at a lower amount but what the just record i think didn't this case  tried to see whether or not there was displacement of a sale by those that had that own the copyright in the article in that what were you not a secondary market you created your own market by creating something in far less honor you are correct that the district court went in that direction and analyzed it as lost sales first the district court went in the direction that it should have and that is lost profit based on diverted sales based on the andersen in the fair case but could not go in that direction because they were denied by the n p a who would not divulge their costs and their profits because they don't want people to know how much profit they're making so the court was left with no other alternative than to go in the direction of lost sales and there was no production of evidence at the restitution hearing that orlando comrie sales on the secondary market diverted any sale away from sony or columbia or paramount there was no evidence that an individual went and bought mr comedies product that that person would have bought that product from sony columbia and paramount how are you supposed to figure that out call those people to say if you had known that this in that's one way of doing it that's what i suggest of the rest to show here and there are ten thousand sales they could have called all ten thousand people to figure out who call one call ten call twenty you know what were what were you thinking well i was going to go to kmart i was going to buy criminal minds but i saw this advertised on the secondary market so i bought it that way the government has the burden of proof here it's a preponderance standard in this court has said that the preponderance standard is not a suitable standard it has to be said substantiated with specific and credible evidence what was the specific and credible evidence that the government produced here they didn't produce anything other than what you had said judge and that is that the copies appeared to be authentic but the government's argument there was that that was intended to to fool the buyer into thinking that they were getting it as to the origin in other words that they were actually getting these from sony and paramount and columbia actually not the wholesaler from the distributor kmart wal mart or target that is actually absolutely belied by how business is done on amazon and e bay when individuals go on amazon  and they look for a prada they'll get ten or twelve different submissions for that product in this particular case months mr comrie one of the his websites was charles in charge nobody that's buying a criminal minds via charles in charge and getting it ship comrie is thinking that they're getting it from wal mart or target or or or kmart they're not they can't believe that they know that they're getting in on the secondary market they know they're getting it from somebody like orlando comrie where he got it they don't really care they see a price they buy it that has not denied sony or paramount or columbia one sale at all and for them to be compensated in that fashion for that subsequent sale would re windfall because what happens with the people that buy from comrie that then put it on e bay and amazon maybe they got it in the mail they don't open it up they put it right back on amazon and e bay and they resell has that denied sony and kmart excuse me sony and wall sony and columbia and paramount of sale it has not and that's the point i don't know my wife tells me too much on amazon but but there are lots of names of companies that are selling product on amazon that have different sorts of names but that there's a there's an imprimatur attached to those because they're being sold on amazon and you can go ahead this long discussion with our clerk to camel camel camel and find that the fluctuation in price even amongst the original producing manufacture fluctuates a lot during the course of a sales season so i just because it has a funny name doesn't mean that somebody is saying i'm going to buy the house because it's four dollars cheaper than it is from from somebody who represents themselves to be sony in there and you are in fact displacing a sale when you have those indicia of authority and the imprimatur of using that sort of retail outlet respectfully judge i disagree with you i don't think that you're displacing a sale i don't think that you can assume and presume that when somebody buys a d v d from charles in charge that they would have that's a diverted sale away from sony i don't think and the government has the burden of proof on that issue or the real question is whether the district court was entitled to find that it did divert the sale and whether that's clearly runa well yes your honor the court has said in robertson that the determination of proximate cause which is the restitution statute is reviewed for clear air however the court said also in simmons that in making clear error determinations if there is no factual dispute then the court reviews do no vote for the application of the law to the facts and i think that's what we have here we have no real defense buter the facts so i think it is novo review and i would say to the court that the that the district court employed the wrong legal standard should've gone with lost profits based on diverted sales because the courts have held that goods held by a merchant for a say one of the big one of the buyers had come in and testified the way you had suggested a moment ago would it be a question of law then i think it would still be a question of the law applied to the facts because the judge would have to make thing at abilities so you don't really think that would make a difference though i do think it would make a difference because that would be some evidence credible the judge would have to make the determination whether that specific and credible evidence a credit soon and that would be a factual determination that the court because the district court didn't have that testimony but instead  looked at how this transaction occurred and and made that same kind of finding it's a question of well i think that the application if there is no factual dispute and if the individual came in and  said look i was going to go into i was going to go to kmart but i'm calm resolve phoring and i don't think there would be a dispute as to that i mean i wouldn't have any evidence to dispute that so it will be an undisputed fact that i think would be reviewed to novo for the application of the law to those specific and you can you think the answer would be what the answer would be that in that scenario that perhaps the government the government would have satisfied their burden but one sale for this but what you're saying w have been entitled to say well that's representative of the buyers the decor could have at least listen to the investigator from the n p a how many did you call to pull people did you try to do a survey did you get any sense whatsoever saying that you were hired one buyer if there was just one i think that the district court could have then made a determination that perhaps that was representative i don't think that would have been representative but at least this court would have had some evidence but the court went the wrong direction it should have been lost profits was there any evidence before the district court about what those costs were there was not your honor i mean do you agree or disagree with judge pryor i mean you're the m p a did not incur transportation and reasonable for the included costs that were not incurred by the n p a because compared to the other costs the primary cost and there was testimony from n p a regional director keesey and i believe also from investigator fernandez during the execution hearing that the bulk of the costs borne by the six victims in producing these d v d s were in creating maintaining promoting and advertising the intellectual property the physical pressing of the d v d s and shipping was a relatively minimal cost compared so you know the sixteen dollar and thirty two cent wholesale price is a largely comprised of the profit margin and of the cost expanded in building creating and promoting the underlying intellectual property which is really the heart of what  district court about something that maybe really wasn't the objection and and when i look at the transcript and look at the briefs it seems that the defendants are really making a different argument than that what the the limitation on restitution to be should be to loss profits which seems to me to be wrong oh it does seem to me though that there should be some deduction for manufacturing and transportation costs but it's but i'm not really sure that that objection was made and it's something that we ought to fault the district court about at this stage that's that's what i've been troubled about you're correct judge bar this is sort of coming up for the first time here and that's why i'm really in looking at how to respond to that i would direct the court to the fact that we are are all direct competitors indeed they're the six major movie studios in the world and really comprise the bulk of the entertainment industry and they felt that they could not reveal their individual cost breakdowns and profit margins without worrying about running afoul of  antitrust legislation or publicly revealing really valuable business secrets to the public and also to their direct competitors and thus we don't know the last net profits or the specific cost breakdown for manufacturing i'm persuaded that this is not about profit ok ok i mean because there are cost that you would that the manufacturer would capture that you know in for all kinds they're all kinds of costs right there we go into the equation but anyway i just don't see it as what is so much a lost profits argument and that seems to be what the defendant are using right and the problem too is that if we sent this back to the district court to really evaluate something it's not really been the objection and not really been litigated i don't know how you go and figure that out what what's that amount going to i mean i'm just sort of saying common sense wise we've all gone to staples and bought a stack of d v d s you know how much you know the actual physical d v d is not compared to that there was no evidence of that you know there was in the district there was not that was just a common sense no genuine d v d that is introduced into the stream of commerce and as we noted nearly all of the victims costs are sort of producing creating maintaining this intellectual property well that wholesale value of the genuine may not be the only reasonable estimate of actual loss and a determine the measure of value appropriate for the facts of each case in a manner that could best provide a fair outcome to the victim and that case as this court noted in united states versus two trial there will be an editable gaps in the evidence regarding the value of the victim's property which is why the restitution amou before if they could still make a reasonable last estimate on the evidence before and still find that the wholesale price was close enough and was reasonable and would provide fairness to the victims without giving them an idea when full so you're not asking u define value it opted not to because it gives the courts flexibility to look at every unique case and the facts of each case and the evidence that's available and decide how to best bring fairness to the victims giving any gaps or uncertainties in the record and here that i don't think that just  and sharing all of their individual costs in negotiations on profit breakdowns that given all of those facts in this circumstance the district do not clearly erin finding that the sixteen dollars thirty tuesday wholesale price was a fair and reasonable value of the actual loss said which is having had a counterfeit d v d case myself that we tried the government has an obligation also not to just accept that somebody says that their information is proprietary and confidential has antitrust implications the government's obligation is to do a robust analysis and trying to prove what the actual loss is in at least in my case i think even in this case the government needs to be attentive to of course  but at the end of the day we can only work with what the victims are willing to give us and we present that we presented that to the district court and what we believed was a reasonable argument and i think at this point the district court considered it and we don't think that they clearly erred but of course the evidence could always  with my three minutes i'm going to attempt to persuade the three of you that in fact there is no loss here whatsoever i'm not going to address i'll adopt to the computation argument as much as it was preserved but my belief my firm belief is that  the court ordered restitution here for companies that suffered no loss there was nothing in the court's languages but for the actions of the defendant there would not have suffered a loss and that was not the scenario in which what was and they were sold at a at a commensurate price keep in mind that when the people are buying these on amazon they're not seeing the actual product they're actually only seeing the price so really price is the only thing that that the district court really could have reliably relied upon but that in and of itself does not show a divergence sale you know this is about really though a loss of value of intellectual property and i just don't it's hard for me to get over the the court is saying as you know what so no recourse for these companies they do have a recourse d h gate the h gate is the company that pirated these put this particular intellectual property they're the ones that are responsible i'm not saying that they are not but not mr co and if the court thinks about the cases milstein anderson roberts and fair all of those defendants were assessed restitution and they directly pirated that intellectual property not mr comrie in robertson they bought directly comrie is is removed from the distributor he has no contact with the distributor that's d h gate he has contact with d h gate he has to removed he's a reseller on a secondary market he's no more responsible than lost profits within th people would be who actually bought commerce products are they are they libel for restitution to the m p a companies no because their sellers their buyers on the secondary market if they put those those products on right back on e bay and he and  an amazon they are not depriving a single sale of sony if the court upholds the restitution order here and be a windfall for billion dollar companies who did not suffer a loss thank you mr de we have your case with we know