IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WILLIAM A. GRAHAM COMPANY,

d/b/a THE GRAHAM COMPANY,

Plaintiff,

v.

THOMAS P. HAUGHEY, an individual,

and USI MIDATLANTIC, INC., a

corporation,

Defendants.

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CIVIL ACTION NO. 05-cv-612-HB

ORDER

AND NOW, this ______ day of _____________________, 2007, upon consideration of

Plaintiff’s Pretrial Motion Concerning the Proper Scope of Jury Issues and Trial Presentations

for the Second Damages Trial, and defendants’ opposition thereto, it is hereby ORDERED that

the MOTION is GRANTED.

It is further ORDERED that the issues for jury determination at the second trial in this

action shall be limited to the determination of the total amount of each defendant’s gross

revenues for copyright infringements occurring after February 8, 2002.

BY THE COURT:

_______________________________________

HARVEY BARTLE III, J.
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WILLIAM A. GRAHAM COMPANY,

d/b/a THE GRAHAM COMPANY,

Plaintiff,

v.

THOMAS P. HAUGHEY, an individual,

and USI MIDATLANTIC, INC., a

corporation,

Defendants.

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CIVIL ACTION NO. 05-cv-612-HB

PLAINTIFF’S PRETRIAL MOTION CONCERNING THE PROPER SCOPE OF

JURY ISSUES AND TRIAL PRESENTATIONS FOR THE SECOND DAMAGES TRIAL

Plaintiff William A. Graham Company (“The Graham Company”), in accordance with

paragraph 2 of this Court’s Sixth Scheduling Order entered on June 5, 2007 (D.I. 198),

respectfully moves the Court for an order limiting the issues for jury determination at the second

trial ordered by this Court on November 21, 2006 (D.I. 161) to the determination of the total

amount of each defendant’s gross revenues for copyright infringements occurring after February

8, 2002. The basis for this motion is set forth in the accompanying memorandum of law, which

is incorporated herein by reference.

Respectfully submitted,

Dated: July 10, 2007 By: /s/ David J. Wolfsohn

David J. Wolfsohn (Atty. ID # 57974)

Aleksander J. Goranin (Atty. ID # 92452)

Cira Centre, 12th Floor

2929 Arch Street

Philadelphia, PA 19104

(215) 568-3100
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WILLIAM A. GRAHAM COMPANY,

d/b/a THE GRAHAM COMPANY,

Plaintiff,

v.

THOMAS P. HAUGHEY, an individual,

and USI MIDATLANTIC, INC., a

corporation,

Defendants.

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CIVIL ACTION NO. 05-cv-612-HB

PLAINTIFF’S MEMORANDUM OF LAW IN SUPPORT OF

ITS PRETRIAL MOTION CONCERNING THE PROPER SCOPE OF

JURY ISSUES AND TRIAL PRESENTATIONS FOR THE SECOND DAMAGES TRIAL

David J. Wolfsohn (Atty. ID # 57974)

Aleksander J. Goranin (Atty. ID # 92452)

WOODCOCK WASHBURN LLP

Cira Centre, 12th Floor

2929 Arch Street

Philadelphia, PA 19104

(215) 568-3100

Attorneys for Plaintiff

Dated: July 10, 2007
i

TABLE OF CONTENTS

INTRODUCTION .......................................................................................................................... 1

RELEVANT FACTS AND PROCEDURAL BACKGROUND ................................................... 6

A. The Jury Instructions............................................................................................... 6

B. The Graham Company’s Damages Evidence at the First Trial .............................. 8

C. The Defendants’ Damages Evidence at the First Trial ........................................... 8

D. The Graham Company’s Closing Argument on Damages ................................... 11

E. The Defendants’ Closing Argument on Damages................................................ 13

F. The Jury’s Verdict................................................................................................. 15

G. Post-trial Motions and Briefing ............................................................................ 16

H. Summary of Section 504(b) Calculations............................................................. 18

ARGUMENT................................................................................................................................ 19

I. The First Jury Has Already Decided Section 504(b)’s “Deductible Costs” and

“Apportionment” Offsets for All Proposals, Including the Ones in the PostFebruary 2002 Period........................................................................................................ 19

II. A Second Jury Deciding Certain Section 504(b) Damages Issues Should Be

Constrained By the First Jury’s Determinations............................................................... 25

A. The Reexamination Clause Precludes a Second Jury From Re-Trying

Issues Already Decided by a First One................................................................. 26

B. The Second Jury on Re-Trial Should Be Asked to Decide Only the

Amount of Gross Revenues for the Post-February 2002 Period........................... 29

C. Defendants Should Not Be Permitted to Bolster Their “Apportionment”

Arguments and Evidence at the Damages Re-trial ............................................... 30

III. Defendants Should Not Be Permitted to Bolster Their Case on “Deductible Costs”....... 31

CONCLUSION............................................................................................................................. 33
ii

TABLE OF AUTHORITIES

Case Law

Allen Organ Co. v. Kimball International, Inc.,

839 F.2d 1556 (Fed. Cir. 1988)....................................................................................25

Anastasio v. Schering Corp.,

838 F.2d 701 (3d Cir. 1988).........................................................................................24

Bingham v. Zolt,

66 F.3d 553 (2d Cir. 1995)...........................................................................................25

Blyden v. Mancusi,

186 F.3d 252 (2d Cir. 1999)................................................................................. passim

Cleveland v. Piper Aircraft Corp.,

985 F.2d 1438 (10th Cir. 1993) ...............................................................................2, 32

Crane v. Consolidated Rail Corp.,

731 F.2d 1042 (2d Cir. 1984).................................................................................26, 27

Davis v. Omitowoju,

883 F.2d 1155 (3d Cir. 1989).................................................................................27, 28

Frank Music Corp. v. Metropolitan-Goldwyn-Mayer,

772 F.2d 505 (9th Cir. 1985) .........................................................................................2

Freeman v. Chicago Park District,

189 F.3d 613 (7th Cir. 1999) .................................................................................27, 30

Gallimore v. Missouri Pacific R.R. Co.,

635 F.2d 1165 (5th Cir. 1981) .....................................................................................25

Gasperini v. Ctr. for Humanities,

518 U.S. 415 (1996)...............................................................................................26, 27

Greenhaw v. Lubbock Cty. Bev. Association,

721 F.2d 1019 (5th Cir. 1983) .........................................................................27, 30, 31

Griffin v. Matherne,

471 F.2d 911 (5th Cir. 1973) .......................................................................................25

In re Lower Lake Erie Iron Ore Antitrust Litigation,

998 F.2d 1144 (3d Cir. 1993)............................................................................... passim
iii

Martin's Herend Imports, Inc. v. Diamond Gem Trading United States Co.,

195 F.3d 765 (5th Cir. 1999) .......................................................................................32

In re Rhone-Poulenc Rorer, Inc.,

51 F.3d 1293 (7th Cir. 1995) .................................................................................26, 29

Riley v. Kmart Corp.,

864 F.2d 1049 (3d Cir. 1988).......................................................................................25

Royal Cup, Inc. v. Jenkins Coffee Service, Inc.,

898 F.2d 1514 (11th Cir. 1990) ........................................................................... passim

Skinner v. Total Petroleum, Inc.,

859 F.2d 1439 (10th Cir. 1988) ...................................................................................26

Strauss v. Springer,

817 F. Supp. 1211 (E.D. Pa. 1992)..............................................................................25

Total Containment, Inc. v. Dayco Products, Inc.,

177 F. Supp. 2d 332 (E.D. Pa. 2001).....................................................................32, 34

U.S. v. 0.78 Acres of Land,

81 F.R.D. 618 (E.D. Pa. 1979), aff'd without op, 609 F.2d 504 (3d Cir. 1979)...........25

United States v. Urban,

404 F.3d 754 (3d Cir. 2005).........................................................................................21

Willard v. The John Hayward,

577 F.2d 1009 (5th Cir. 1978) .................................................................................5, 24

Federal Statutes and Rules

17 U.S.C. § 504(b)..................................................................................................... passim

Fed. R. Civ. P. 59...............................................................................................................29

Other Authorities

U.S. Constit. Amend. VII........................................................................................... passim

11 Charles Alan Wright et al., Federal Practice & Procedure

Civil 2d § 2803.........................................................................................................2, 32

Patrick Woolley, Mass Tort Litigation and the Seventh Amendment

Reexamination Clause, 83 Iowa L. Rev. 499 (1998)...................................................26
1

INTRODUCTION

1

Through this motion, plaintiff William A. Graham Company (“The Graham Company”)

addresses the proper scope of the damages-related factual issues that should be submitted for a

second jury’s determination, following this Court’s prior rulings ordering a re-trial of damages.

Both constitutional and procedural law impose important constraints on what a second jury in

this case is permitted to decide with regard to these damages-related factual issues, and what

evidence may be fairly presented in support of them.

The constitutional constraint arises from the Seventh Amendment and its Reexamination

Clause, which provides that “a given issue may not be tried by different, successive juries.”

Blyden v. Mancusi, 186 F.3d 252, 268 (2d Cir. 1999). When, as in this case, a second jury

potentially would be asked to re-decide issues that a prior jury has already determined,

Reexamination Clause concerns come to the front and center. Indeed, in the recent In re Lower

Lake Erie Iron Ore Antitrust Litigation decision, the Third Circuit reversed a district court,

holding that the Reexamination Clause was violated when the defendants were permitted at a

second trial to re-argue damages causation issues already decided by a first jury at a first trial.

998 F.2d 1144, 1182-83 (3d Cir. 1993) (Mansmann, J.). This Reexamination Clause

jurisprudence defines in large part what specific damages-related issues a second jury may not be

asked to decide in this case.

Aside from the Seventh Amendment dimension, the damages re-trial also raises

fundamental fairness concerns that preclude the defendants, USI MidAtlantic and Thomas P.

Haughey, from exploiting the re-trial as a chance to introduce new evidence and/or theories in an

effort to improve their case, despite the fact that they had every opportunity to present their best

1 At the June 4, 2007 status conference in this case (D.I. 197), the Court, after discussion with the

parties, permitted each side to file briefs in support of their pretrial motions in excess of the 25-page limit

set forth in the Court’s Policies and Procedures.
2

case on the issues at the first damages trial. Courts frown upon attempts to use a second trial as

an opportunity “to ‘plug the holes’ of a case” unsuccessfully presented at the first trial, Cleveland

v. Piper Aircraft Corp., 985 F.2d 1438, 1450 (10th Cir. 1993), and that concern is directly

implicated here. See also 11 Charles Alan Wright et al., Federal Practice & Procedure Civil 2d

§ 2803, at 50 (in the new trial context, “[d]ecisions respecting the admission of additional

witnesses and proof should be guided by considerations of fairness and justice to all parties”).

These important Seventh Amendment and fairness principles are implicated because of

the procedural history of this case and the underlying statutory provision that governs damages,

Section 504(b) of the Copyright Act. Section 504(b) sets out a three-step formula for arriving at

a final infringer profit figure. As a first step, the copyright owner submits evidence of “the

infringer’s gross revenue.” 17 U.S.C. § 504(b). For the second step, the burden then shifts to the

defendant to prove up the “deductible expenses” associated with generating that revenue. Id.

Lastly, for the third step, the burden remains on the infringer to offer evidence of “elements of

profit attributable to factors other than the copyrighted work.” Id. Courts frequently refer to this

third step as the “apportionment” of profits. See, e.g., Frank Music Corp. v. Metro-GoldwynMayer, 772 F.2d 505, 518 (9th Cir. 1985) (“when an infringer’s profits are attributable to factors

in addition to use of [its] work, an apportionment of profits is proper”).

A first trial in this case was held in June 2006, and the evidence proved a 14-year period

of thousands of instances of copyright infringement by defendants from July 1992 through June

2005. The first jury adjudicated not only USI MidAtlantic’s and Haughey’s liability for these

infringements – finding them both liable – but it also was asked to determine damages. Under

Section 504(b), the damages question before the first jury was what “profits of the infringer,” 17

U.S.C. § 504(b), the defendants had received from their long series of copyright violations. In
3

other words, the first jury was asked to apply Section 504(b)’s three-step formula to arrive at a

“profits” figure for the 1992-2005 infringement period, and it did so, awarding $16,561,230 in

damages against USI MidAtlantic and $2,297,397 in damages against Haughey.

Before the first jury reached its conclusion about Section 504(b) profits, defendants had

every opportunity to attempt to prove their case regarding the statutory offsets that defendants were

claiming – for “deductible expenses” (step 2 of the three-step formula) and “apportionment” (step 3).

Importantly, virtually all of the defendants’ arguments were universal, generic ones – arguments that

applied across-the-board to any and all of the infringing insurance proposals that were before the

first jury. The defendants broadly argued, for instance, that none of the defendants’ profits, on any

of the 1992-2005 proposals, were attributable to defendants’ infringement – i.e., that the jury should

apportion 0% to the infringement. This was because, according to defendants, the actual language

used in any written proposal was not important, and other factors unrelated to infringement – like

premium costs, and the interpersonal and sales skills of USI MidAtlantic’s producers – were what

actually drove the defendants’ customers to buy insurance from them. Ex. A, Trial Tr. Day V

(defense closing), at 86:14-17, 88:23-89:17, 90:11-24.

Following the entry of judgment on the first jury’s verdict, the defendants sought a retrial of the jury’s Section 504(b) damages analysis, arguing that the first jury had erred in their

apportionment decision. This Court expressly declined to rule on this new trial request. D.I.

161, Nov. 21, 2006 Mem. Op., at 34-35. Rather, the Court ordered a new trial on an altogether

different ground argued by defendants – that the jury’s decision in The Graham Company’s favor

on the statute of limitations defense was not supported by the evidence. Id. at 34. Several

months later, this Court granted another motion by defendants directed to the statute of
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limitations, entering partial summary judgment against The Graham Company on that defense.

D.I. 188, Mar. 29, 2007 Mem. Op. at 28.

The ultimate impact of the Court’s two statute-of-limitations rulings is that only one

piece of the first damages case should be re-tried. With the grant of partial summary judgment,

this Court has ruled that any recovery for copyright infringements occurring prior to February 9,

2002 is time-barred. However, The Graham Company can still recover under Section 504(b) for

infringements occurring between February 9, 2002 and June 2005, the date of the last infringing

proposal presented at the first trial.

2

The Seventh Amendment and fairness concerns that this procedural posture raises are

properly framed as follows. The first jury decided all Section 504(b) factual issues with regard

to the entire universe of 1992-2005 infringing proposals – that is, it decided the amount of “gross

revenues” (step 1 of Section 504(b)’s three-step formula); the amount of “deductible expenses”

(step 2); and the appropriate amount of “apportionment” (step 3). A second jury, because of the

statute of limitations rulings in this case, will be charged with deciding certain Section 504(b)

factual issues with regard to a subset of that entire universe of infringing proposals – just the

2002-2005 infringing proposals. Those 2002-2005 proposals, however, were all before the first

jury when it performed its Section 504(b) analysis, and as defendants were making their broad,

generic arguments that all proposals, as a universal matter, were irrelevant to defendants’

bottom-line profits. Thus, the principal question addressed by this motion is: In light of the

Seventh Amendment’s Reexamination Clause and the case law, what Section 504(b) issue is

properly open for the second jury’s decision?

2

See D.I. 188, Mar. 29, 2007 Mem. Op. at 28 (“The three year statute of limitations set forth in the

Copyright Act bars all of Graham’s claims against defendants that accrued prior to February 9, 2002.

Graham, of course, will still be able to recover defendants’ profits arising from acts of infringement

occurring on or after that date.”). Of course, plaintiff respectfully disagrees with this ruling, and nothing

said in this motion or otherwise by plaintiff should be construed as agreement with that ruling.
5

Reexamination Clause jurisprudence and fairness concerns require that only one, narrow

factual issue be presented to the second jury: the amount of each defendant’s “gross revenues” for

infringements occurring after February 8, 2002. In other words, the second jury needs only to

perform the first step – the “gross revenue” step – of Section 504(b)’s three-step formula, and only

as to the 2002-2005 infringing proposals, the narrowed subset of the entire universe of 1992-2005

infringing proposals presented to and ruled on by the first jury. The first jury never specifically

determined the pool of “gross revenues” attributable to this narrowed subset alone, and so no

Seventh Amendment reexamination concerns are implicated by having a second jury find that fact.

But, in terms of the other two steps of the Section 504(b) formula – the offsets for “deductible

expenses” and “apportionment” – the situation is markedly different. Given the evidence and

arguments at the first trial, and especially given the broad, generic nature of the defendants’

Section 504(b) presentation – virtually every one of their arguments was applicable to every single

infringing proposal, both within the 2002-2005 time period and outside of it – it is only fair and

logical to conclude that the first jury already decided the appropriate amount (easily calculated) by

which to reduce “gross revenues” to account for “deductible expenses” and “apportionment.”

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The scope of the second trial, fairly and logically, should be narrow and limited. In

effect, the second jury would be asked to answer a single interrogatory – What is the total

amount of each defendant’s gross revenues for their infringements occurring after February 8,

2002? In all likelihood, The Graham Company would need to call only one witness, Dr. Richard

Gering, to present the “gross revenue” pool for the narrower 2002-2005 subset of infringing

3 When evaluating what a jury expressly or impliedly determined in reaching a verdict, courts look

to what a jury “logically” or “probably” decided. See, e.g., Willard v. The John Hayward, 577 F.2d 1009,

1010 (5th Cir. 1978) (holding that courts examining a jury’s answer should look to what the “logical and

probable decision” reached was). Moreover, courts undertake this analysis by looking at the entire trial

record, including “evidence, argument, [and] jury instructions.” Royal Cup, Inc. v. Jenkins Coffee

Service, Inc., 898 F.2d 1514, 1521 (11th Cir. 1990).
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proposals – a subset of the revenue information contained in Dr. Gering’s earlier expert reports.

In fact, the defendants likely would take no issue with Dr. Gering’s calculations (since they took

no issue with them in the first trial), in which case the parties may even be able to stipulate to a

figure, and avoid the need to impanel a jury. The remaining two steps of Section 504(b)’s threestep formula should be performed directly by the Court. The Court should take the first jury’s

“gross revenue” finding, apply the “deductible expense” and “apportionment offset” percentages

found by the first jury, and enter a final judgment for the appropriate bottom-line profit amount.

Defendants are not now permitted to re-try these jury findings, particularly since the Court has

not disturbed them in any of its post-trial rulings. This approach is the most reasonable and

practical one given the significant restrictions on re-trial imposed by the Seventh Amendment’s

Reexamination Clause and by basic considerations of fairness.

RELEVANT FACTS AND PROCEDURAL BACKGROUND

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A. The Jury Instructions

This Court, in thorough and proper instructions, explained to the first jury at the first trial

the three-step Section 504(b) formula it was to apply in determining damages.

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The defendants

had no objection to these instructions. Ex. A, Trial Tr. Day V, at 123:8-124:1.

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4 The recitation of this background is thorough because a major question relevant to this motion is

what the first jury, at the first trial, logically and probably decided with regard to Section 504(b). The

pertinent case law teaches that that question is resolved by looking at the entire record of the trial,

including the “evidence, argument, [and] jury instructions.” Royal Cup, 898 F.2d at 1521.

5

Section 504(b) states in full:

The copyright owner is entitled to recover the actual damages

suffered by him or her as a result of the infringement, and any profits of

the infringer that are attributable to the infringement and are not taken

into account in computing the actual damages. 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.
7

With respect to the first step of the 504(b) formula, the Court instructed that “plaintiff is

first required to prove by a preponderance of the evidence the defendants’ ‘gross revenue

reasonably related to the infringement.’” Ex. B, Jury Instructions, at ¶ 66. The Court explained

that USI MidAtlantic’s gross revenues were “the dollar amount of commissions it earned that can

be attributed to the use of proposals containing infringing material,” and that, similarly, Thomas

Haughey’s gross revenues were “the dollar amount of commissions he earned that can be

attributed to the use of proposals containing infringing material.” Id.

The Court then proceeded to instruct on Section 504(b)’s second step – “deductible

expenses” or “deductible costs.”

7

Id. at ¶ 67. The Court explained that the deductible cost

calculation for USI MidAtlantic, a company, would be different than that for Haughey, an

individual. Specifically, the Court stated that USI MidAtlantic was entitled to an offset for

“commissions related to the infringement which USI MidAtlantic, Inc. paid to its producers,

including Thomas Haughey.” Id. at ¶ 68. The jury “must subtract all of [USI MidAtlantic’s]

deductible costs from its gross revenue.” Id. at ¶ 69. In contrast, because Haughey did not claim

any deductible costs, or present any evidence of them at trial, the Court instructed the jury that for

him “there are no deductible costs and thus there is no subtraction calculation to be made to

eliminate” them. Id. at ¶ 70. Defendants had agreed to this instruction in the charge conference,

and, of course, did not object to it.

6

In some places, this cited transcript erroneously identifies Mr. Zemaitis, counsel for defendants,

as Mr. Wolfsohn, counsel for The Graham Company. As the transcript indicates, defense counsel’s only

objections to the Court’s jury charge were to the instruction on spoliation of evidence, and to the

instruction that defendants bore the burden of proof of their publication defense to copyright infringement

liability. No objection to any of the Section 504(b) instructions was made.

7

Section 504(b) refers to this offset as “deductible expenses.” The Court’s jury instructions use

the phrase “deductible costs.” From here on, this brief will follow the Court’s terminology.
8

Finally, the Court instructed the jury about Section 504(b)’s third step, the “apportionment”

offset. Here, the Court explained that “[i]n addition to deducting USI MidAtlantic, Inc’s costs, you

may also deduct from both defendants’ commissions related to the infringing proposals all

amounts that are attributable to factors other than defendants’ infringement.” Id. at ¶ 71. The

Court noted that the defendants bore the burden of proving these deductions, and reiterated to the

jury: “It is for you to decide to what extent the defendants’ commissions were attributable to

copyright infringement, and whether the plaintiff is entitled to all of the defendants’ commissions,

none of the defendants’ commissions, or something in between.” Id. at ¶ 72.

B. The Graham Company’s Damages Evidence at the First Trial

The parties’ damages presentations at trial followed the framework set out in Section

504(b), and in the Court’s jury instructions. Consistent with Section 504(b), The Graham

Company offered evidence (all of which was admitted) of each defendant’s gross revenues, using

USI’s own revenue documentation and calculations based on that documentation presented by Dr.

Richard Gering. That evidence covered the entire 14-year period of infringement addressed at the

first trial, from July 1992 through June 2005. Dr. Gering testified that during the 1992-2005

period, USI MidAtlantic earned $31,830,914 in gross revenue, on 857 infringing proposals. Ex. C,

Trial Tr. Day III, at 95:24-97:21, 104:6-106:3; Ex. D, PX 88A. From that $31.8 million figure, Dr.

Gering also broke out the gross revenues linked to customer proposals that Thomas Haughey sent,

which accounted for $12,252,782 of the overall $31.8 million amount. Ex. C, Trial Tr. Day III

(Gering) at 104:6-25; Ex. D, PX 88A.

C. The Defendants’ Damages Evidence at the First Trial

The defendants opposed The Graham Company’s damages case by offering evidence in

support of both Section 504(b) offsets: “deductible costs” and “apportionment.” Notably, in

virtually every instance (the two exceptions are discussed below in footnote 10), the defendants’
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evidence and arguments applied generically to all 857 proposals at issue in the case, including

those proposals falling within the post-February 2002 period.

For “deductible costs,” the defendants presented only limited evidence. As noted above,

the defendants claimed only one category of deductible cost (producer commissions) for only

one defendant (USI MidAtlantic). Through cross-examination of Dr. Gering, defense counsel

established the amount of this deduction, “approximately twenty-five percent” of USI

MidAtlantic’s gross revenues. Ex. C, Trial Tr. Day III, at 138:18-140:16. Defendants did not

present any evidence of additional deductible costs for USI MidAtlantic, nor did they present any

deductible costs for Haughey.

Defendants spent more time on the “apportionment” offset, but again – with virtually no

exception – defendants focused on broad, generic arguments universally applicable to each and

every proposal, including the post-February 2002 ones. Defendants relied on two witnesses –

defendant Thomas Haughey and fellow USI MidAtlantic producer Don Roberts – and sought to

make three broad points.

8

First, the defendants tried to establish that other factors caused customers to buy their

insurance through defendants, factors ostensibly much more important than the language that

appeared in the defendants’ written proposals. To this end, defense counsel elicited testimony

from Mr. Haughey that “cost is probably a major factor for most small business owners.” Ex. C,

8 The exception occurred when Mr. Roberts was asked to identify customers he had brought over to

USI MidAtlantic from one of his two previous employers, Warren Welsh & Thompson or Aon. According

to Mr. Roberts, the proposal formats he used while at Warren Welsh & Thompson and Aon had not, to his

knowledge, contained any Graham Company language. Ex. E, Trial Tr. Day IV, at 109:8-12.

Mr. Roberts only identified 14 such customers (out of a total of 315 customers who had received

857 infringing proposals, see Ex. D, PX 88A): (1) Action Aids, Inc.; (2) Arcadia University (Beaver

College); (3) B&G Manufacturing Co., Inc.; (4) Bancroft Neurohealth, Inc.; (5) Blue Seas Ventures, Inc.;

(6) Cibran Management, Inc.; (7) Eastern National; (8) GECH, GEKP, GETN; (9) GE Management

Group; (10) Great Expectations of Treasure Coast; (11) Roselon Industries, Inc.; (12) Silogram

Enterprises, Inc.; (13) Strategic Link Consulting; and (14) Tredyffrin Township. Ex. E, Trial Tr. Day IV

(Roberts), at 107:19-108:4, 109:13-111:4; Ex. F, DX 220.
10

Trial Tr. Day III, at 197:11-199:7. Likewise, Mr. Roberts testified that “[a] lot of clients want to

start with the premium page” of the written proposal because “[t]hey want to see what the cost of

the coverage is going to be.” Ex. E, Trial Tr. Day IV, at 126:24-127:10. Defendants presented

this argument generically, that is, as applicable to all insurance proposals received by all of

defendants’ customers for the entire 1992-2005 time period.

Second, defense counsel tried to paint a picture of the USI MidAtlantic sales process that

de-emphasized the role of the written proposal, relegating it to the end of a long process after the

customer has, presumably, already made his or her buying decision. To this end, defense

counsel elicited testimony from Mr. Haughey that the “proposal meeting” (in which the producer

and customer meet to discuss the insurance program embodied in the written proposal) is

“generally last in the process” (Ex. C, Trial Tr. Day III, at 185:21-187:6); and that at that

proposal meeting, Haughey typically presents the program orally first, at which point “the

customer generally smiles, and says that’s fantastic let’s go ahead,” all before Haughey has

“even taken the books [i.e., the written proposal] out of the bag” (id. at 193:23-195:15).

Haughey claimed that “very, very, very few customers will sit there and go through the actual

language” of the proposal. Id. at 195:11-15.

Defense counsel elicited similar testimony from Don Roberts. Mr. Roberts testified that

“[h]opefully . . . the entire proposal process can accomplish” the goal of influencing a customer

to purchase a USI MidAtlantic insurance program. Ex. E, Trial Tr. Day IV, at 128:20-129:5.

Mr. Roberts also discussed the sales process he employs, from “acquir[ing] as much information

about the client as I can,” to the “initial meeting” where “exposures” and “alternative ways that

those risks can be dealt with” are explored, to “go[ing] into the market place” for insurance to

see what kind of coverage can be obtained for the client. Ex. E, Trial Tr. Day IV, at 121:21-
11

125:3. Again, these assertions were presented as being universally and generally applicable to

every one of the defendants’ proposals regardless of the time frame, customer, insurance

situation, or any other particularity.

The defendants’ third and final tack – in effect, the culmination of the other two points –

was an attempt to have Mr. Haughey and Mr. Roberts directly opine on whether language in the

written proposals had any effect on customers’ buying decisions. Mr. Haughey claimed that

there was no effect:

I don’t think the language that we use has any impact on the client’s

buying decision. If we tell him he needs to buy insurance for his boat, if

he has a boat, then he’ll say fine, let’s talk about the boat insurance. I

don’t have to give him a paragraph description of how boat insurance

works.

Ex. C, Trial Tr. Day III, at 201:5-25; see also id. at 196:10-197:10 (“I don’t think the language has

really any impact in the significance or the buying decision from a customer. . . .”). Despite the

defendants’ attempt to have Mr. Roberts testify similarly, he was not as willing as Mr. Haughey to

speculate that his customers were not influenced by the language of proposals they received.

9 But

again, the point that defendants were seeking to establish was a universal and generic one.

D. The Graham Company’s Closing Argument on Damages

In its closing, The Graham Company explained the proposed damages calculation it was

asking the jury to make. Plaintiff relied on USI’s revenue documents and Dr. Gering’s

calculations, as well as the summary exhibits (in particular PX 88A), but used round numbers for

ease of comprehension. For USI MidAtlantic, The Graham Company noted that the evidence

9

In response to the question, “[I]n your opinion, does the language used in the proposal influence

that client’s decision whether or not to purchase the program,” Mr. Roberts said that it did, “to the extent

that it describes the coverage that is being purchased or being offered and then purchased.” Ex. E, Trial

Tr. Day IV, at 128:14-19. This testimony would support a higher percentage of apportionment to

infringing language, and a lower Section 504(b) offset for apportionment to “other factors.”
12

showed that USI MidAtlantic’s “gross revenues” over the 1992-2005 infringement period were

“thirty-one million dollars.” Ex. A, Trial Tr. Day V, at 42:7- 43:6.

Plaintiff then turned to “deductible costs.” The evidence showed that USI MidAtlantic’s

deductible costs were “twenty five percent” of the approximately $31 million gross revenue figure

– i.e., about “7.25 million dollars” – and The Graham Company told the jury to reduce the final

damages number against USI MidAtlantic by that amount. After that $7.25 million offset, The

Graham Company noted, USI MidAtlantic’s profit figure – before being apportioned between

infringement and other factors – was about $23,750,000. Ex. A, Trial Tr. Day V, at 42:7-43:6.

With regard to apportionment, The Graham Company told the jury that this was an issue

for them to decide, and that “it’s defendant’s burden . . . to show to what extent . . . that number

was caused by some factor other than the written proposals that infringe.” Id. at 43:7-11.

The Graham Company then turned to the Section 504(b) profit calculation for Mr. Haughey.

Dr. Gering had testified (as shown in PX 88A) that the revenue from infringing proposals sent by

Haughey during the 1992-2005 period added up to $12,257,782 – or about $12 million – in

commissions to USI MidAtlantic. The evidence also showed that Haughey had received 25% of

those commissions. In other words, Haughey’s individual revenues from the infringing proposals

were 25% of the commissions he obtained for USI MidAtlantic – or, as The Graham Company told

the jury, about $3 million (precisely, $3,063,195). Ex. A, Trial Tr. Day V, at 43:12-44:2 (“So,

twenty-five percent is one quarter, of twelve-million, is three-million dollars. . . . That’s the money

that went to Mr. Haughey on the accounts with the infringing proposals.”).

With respect to Section 504(b)’s two offsets, Mr. Haughey did not claim an offset for

deductible costs, and so the jury was not asked to make any deduction for those expenses. As for
13

apportionment, plaintiff’s counsel stated to the jury that “you will then have to decide what

percentage would fairly be attributable to something other than his use of the books.” Id. at 44:3-5.

E. The Defendants’ Closing Argument on Damages

The defendants in closing, as they did through their evidence, focused almost exclusively

on broad arguments (again, see footnote 10 for the exceptions) universally applicable to all of

defendants’ infringing proposals regardless of time period, customer, producer, or any other

particularity. With regard to “deductible costs,” defense counsel agreed that the calculation The

Graham Company presented – a 25% reduction of only USI MidAtlantic’s gross revenues – was

proper. Ex. A, Trial Tr. Day V, at 78:21-79:1 (“as Mr. Wolfsohn told you, you have [to] deduct

the producer commissions before you do anything else, and that’s at least twenty-five percent”).

Turning to apportionment, defendants’ principal argument was again primarily a

universal and generic one. Defendants mainly argued, and greatly emphasized, that none of the

defendants’ profits was attributable to infringement – that is, defendants claimed that 0% of their

profits should be apportioned to their infringement, and that the Section 504(b) offset for “other

factors” should be 100%. This was because, according to defendants, their profits were the

result of “many, many different factors” besides the use of infringing language, so that “no

award to Graham was merited”:

Now, at the end of the day, the commissions earned by USI and

Tom Haughey are attributable to many, many different factors. But, the

use of a small amount of language from the Standard Proposal, subject to

copyright protection, is not one of them.

For this reason, no award to Graham was merited. Even if you

conclude that infringement has occurred. (Ex. A, Trial Tr. Day V, at

90:11-24).

Defendants’ fall-back position on apportionment was also a universal and generic one.

Defense counsel argued that if the jury were to apportion some of the defendants’ profits to the

proposal language infringing The Graham Company’s copyrights, that apportionment should be
14

no more “than one or two percent of the total commissions” – again, a universal contention

applicable across-the-board to all of the defendants’ proposals before the jury, including the postFebruary 2002 ones:

But, if you do decide that the use of Graham’s language was a

factor, was a factor in some client’s decision to use USI – now Mr.

Wolfsohn said you’ll have to determine the percentage, I submit to you

that that amount can not be more than one or two percent of the total

commissions earned by USI or Tom Haughey. (Id. at 90:18-24).

Echoing their evidentiary presentation, defendants also argued that there were “multiple

factors having nothing to do with the language used in the proposal” that drove insurance

customers’ buying decisions, such as “the effort and experience of the producer,” “the quality

and the price of the insurance program he was able to deliver,” and the “face to face personal

attention that wins the client’s confidence.” Id. at 86:14-17, 88:23-89:17. All of these generic

arguments applied to every one of the defendants’ infringing proposals.

Defendants also returned to the notion that a written proposal has limited importance

because it comes only at the end of a “many month, many staged process” that producers go

through, from “learn[ing] about the client’s business,” to an “analysis of the [client’s] existing

insurance,” to a “discussion of the client’s goals,” by which point “the client is pretty much

committed to the program.” Id. at 86:18-88:4. For this point, the closing relied heavily on a

proposed analogy between a written insurance proposal and a “brochure” handed out by a car

salesman after the customer has already “go[ne] out in the lot,” “look[ed] at the cars,” “test

drive[n] one or two,” “picked the one that seems right,” and “discuss[ed] price.” Id. at 76:16-

77:23. Again, defendants presented a universal, across-the-board theme encompassing all

infringing proposals.

10

10 There were only two exceptions to these universal arguments, in which defendants singled out a

particular group of proposals for special treatment. First, defense counsel mentioned that infringer profits
15

F. The Jury’s Verdict

After the close of evidence and argument, and after receiving the Court’s instructions, the

jury was asked to answer four special interrogatories. The last two interrogatories related to

damages and were posed in the alternative, depending on the jury’s decision on the defendants’

statute of limitations defense. The jury deliberated for about three hours over the course of an

afternoon and the following morning. Ex. A, Trial Tr. Day V, at 124:12-20 (deliberations from

2:47 to 4:24 p.m.); Ex. G, Trial Tr. Day VI, at 3:1-2 (verdict returned at 10:00 a.m.). The jury’s

verdict was in favor of The Graham Company on liability and on the statute of limitations

defense. Id. at 3:16-4:2.

The fourth interrogatory asked the jury to find the amount of damages that would

compensate The Graham Company for the defendants’ infringement. Specifically, question four

asked: “What is the total amount of each defendants’ profits attribute to infringement, if any, that

each defendant earned?” Id. at 4:4-7. Against USI MidAtlantic, the jury awarded profits of

$16,561,230. Against Thomas Haughey, it awarded profits of $2,297,397. The total award

against both defendants was $18,858,627.

The award of $16,561,230 against USI MidAtlantic was 69.4% of the $23,873,185 in USI

MidAtlantic profits that remained after its deductible costs had been taken out. In other words,

in performing the third, “apportionment” step of Section 504(b)’s three-step formula, the jury

should not be awarded on proposals sent to clients of Don Roberts, since Roberts had testified that these

customers were brought over from his former employers. Ex. A, Trial Tr. Day V (defense closing), at

79:7-12. As noted, that encompasses only 14 of the 857 total proposals. See supra note 8.

Defense counsel also specifically identified a handful of proposals that had “only a small amount

of language copied,” (Ex. A, Trial Tr. Day V, at 80:17-22), the implication being that this small-scale

copying cannot have influenced a customer’s buying decision. That assertion encompassed only six

proposals identified by defendants in closing: (1) Able Energy, Inc.; (2) B&G Manufacturing Co., Inc.;

(3) County of Lehigh; (4) MGK Industries, Inc.; (5) Penn National Gaming; (6) Bancroft Neurohealth,

Inc. Id. at 80:20-84:15; see also Ex. F, DX 220.
16

had reduced the profit figure for USI MidAtlantic’s infringement by 30.6% – or about $7.3

million – to account for “other factors” responsible for the profits.

As for Thomas Haughey, the jury awarded $2,297,397 in profits against him, which was

75% of the $3,063,195 net profit figure presented as to his infringement. In apportioning his

profits to infringement versus “other factors,” the jury had reduced his profit figure by 25% – or

about $765,000 – to account for “other factors.”

In total, the jury awarded 70% of the defendants’ combined profits – $18,858,627 out of a

combined total of $26,936,380 in profits – apportioning 30% – or a little over $8 million – of

those profits to factors other than defendants’ use of infringing language.

G. Post-trial Motions and Briefing

Following the verdict, defendants filed motions under Rules 50 and 59, asserting various

grounds for the grant of judgment as a matter of law or of a new trial. D.I. 137 (motion), D.I.

144 (memorandum in support of motion). Only two of those grounds are relevant to this motion.

First, defendants argued that the Court should grant a new trial on their statute of limitations

defense because the jury’s verdict in favor of The Graham Company on that issue was against

the manifest weight of the evidence. The Court did grant a new trial on that issue. D.I. 161, Nov.

21, 2006 Mem. Op., at 34.

Second, and more importantly for present purposes, the defendants also sought a new

trial based on an argument that the first jury’s apportionment of profits – i.e., its analysis under

the third step of Section 504(b)’s three-step formula – was not supported by the manifest weight

of the evidence. D.I. 144 at 23-30.

11 Notably, defendants’ post-trial briefing on the issue

repeated defendants’ trial themes – defendants focused on generic, universal arguments

applicable across-the-board to all of defendants’ proposals. Defendants argued, for instance, that

11

For ease of reference, the defendants’ new trial brief is attached as Exhibit H.
17

as a general principle, their proposals’ infringing language was not important to customers’

purchasing decisions. See, e.g., id. at 26-27 (listing other factors the defendants contend drive

customer decision-making, such as “the producers personal relationship with the client, the

client’s understanding of the services that USI will provide, the producer’s understanding of the

client’s business, and the producer’s efforts to reduce client risk”).

Importantly, the Court expressly declined to validate the defendants’ apportionment

argument. D.I. 161, Nov. 21, 2006 Mem. Op. at 34-35. The Court expressly stated that its new

trial ruling was premised on the statute of limitations ground – not apportionment – and so it

would “not reach these additional issues.” Id. The Court did order a re-trial “as to damages” but

only insofar as damages were “inextricably bound up with the question of the application of the

statute of limitations.” Id. at 34.

Subsequently, the defendants made another motion based on the statute of limitations,

this time seeking an entry of summary judgment in their favor. The Court granted the

defendants’ motion, holding that any copyright infringements occurring prior to February 9,

2002 were time-barred and hence could not support a damages recovery. D.I. 188, Mar. 29,

2007 Mem. Op., at 28. Recognizing that each act of infringement is a separate violation of the

Copyright Act (and thus carries a separate limitations period), the Court noted that The Graham

Company “of course, will still be able to recover defendants’ profits arising from acts of

infringement occurring on or after” February 9, 2002. Id. The Court stated that “[t]he damages

Graham is entitled to recover after February 9, 2002 cannot be resolved on the record before us

and must be decided at a new trial.” Id.

The ultimate effect of the Court’s two statute of limitations rulings was to re-open the

question of damages at a second trial, for the post-February 2002 period of copyright
18

infringement. The question this begs, and that this brief addresses, is the scope of the damagesrelated factual issues to be actually decided by the second jury, particularly in light of important

Reexamination Clause constraints.

To the extent that a second jury, at a second trial, will be asked to take the first step in

Section 504(b)’s three-step calculation – determining the pool of “gross revenues” for the postFebruary 2002 infringement period from which infringing profits can be awarded – Seventh

Amendment constraints are not implicated. The second jury is not being asked to find a fact that

the first jury had already found. However, the Reexamination Clause would preclude the second

jury from deciding step 2 (“deductible costs”) and step 3 (“apportionment”) of the Section 504(b)

calculus. As explained in this brief, the latter scenario would invite a second jury to re-visit and

re-decide factual issues already determined by the first jury at the first trial, which would run

directly afoul of the Reexamination Clause.

H. Summary of Section 504(b) Calculations

To aid in subsequent discussion, the following chart summarizes the evidence and jury

calculations as to Section 504(b)’s profits at the first trial:

USI MidAtlantic, Inc. Thomas Haughey Combined

"Gross Revenue" 31,830,914 3,063,195 34,894,109

"Deductible expenses" 7,957,729 N/A 7,957,729

"Profits" 23,873,185 3,063,195 26,936,380

Jury’s Damages Verdict

Amount 16,561,230 2,297,397 18,858,627

Jury’s Damages Verdict

Amount as Percentage

of "Profits"

(“Apportionment”) 69.4% 75.0% 70.0%

Jury's Apportionment

Reduction (in $) 7,311,955 765,798 8,077,753

Jury's Apportionment

Reduction (as %) 30.6% 25.0% 30.0%
19

Notably, defendants themselves offered a summary of how the first jury went about

calculating and deciding Section 504(b) profits. Defendants presented that summary in their new

trial briefing, in support of their contention that the first jury’s Section 504(b) apportionment

lacked sufficient evidentiary support. D.I. 144 at 25-29 & n.10. The defendants’ summary is

virtually identical to the summary presented above:

Dr. Gering testified that USI’s total commission revenue

totaled $31,830,914, of which 25% was paid by USI to its

producers, leaving a net commission of $23,873,185. Applying the

25% figure to the total commissions generated for Mr. Haughey’s

clients ($12,252,782), yields commissions to Mr. Haughey himself

of $3,063,195 (from which no costs are deducted). Thus, the total

net commissions for both defendants is $26,936,380. The total

jury award is $18,858,627, which is 70% of the total net

commissions.

Id. at 26 n.10 (citations omitted). According to defendants, the first jury decided apportionment

issues universally for all proposals, and applied an across-the-board apportionment offset of 70%,

i.e., it reduced the total amount of profits awarded against both defendants’ by 30% to account for

evidence of “other factors” responsible for defendants’ profits: “It was unreasonable for the jury to

conclude that 70% of defendants’ net commissions were attributable to the language in the written

proposals that came from Graham’s Works.” D.I. 144 at 29; see also id. at 25-26.

ARGUMENT

I. The First Jury Has Already Decided Section 504(b)’s “Deductible Costs” and

“Apportionment” Offsets for All Proposals, Including the Ones in the PostFebruary 2002 Period.

The key to resolving the significant Seventh Amendment and procedural issues in this

case lies in answering a central, threshold question: What factual issues, under the Section 504(b)

framework, did the first jury already decide in arriving at its final verdict figure of $16,561,230

in infringer profits against USI MidAtlantic and $2,297,397 in infringer profits against Thomas

Haughey? In general, a jury’s verdict is reviewed in light of “the entire case,” including
20

“evidence, argument, [and] jury instructions.” Royal Cup, Inc. v. Jenkins Coffee Service, Inc.,

898 F.2d 1514, 1521 (11th Cir. 1990).

As an initial matter, it is clear that the first jury necessarily rejected several of the

defendants’ more aggressive arguments concerning Section 504(b) offsets. Defendants argued to

the first jury that there should be no apportionment of profits to any of the infringing proposals

in the entire 1992-2005 infringement period, including the proposals in the post-February 2002

period that will be subject of the damages re-trial. In other words, defendants argued across-theboard, for each and every one of their infringing proposals (including the post-February 2002

ones), that 0% of the profits generated from customers receiving those proposals was attributable

to the infringing language. This was because, according to defendants, other, universally

applicable factors like sales skills and premium costs were the actual drivers of sales. Ex. A,

Trial Tr. Day V (defense closing) at 90:1-24. The first jury necessarily rejected these generic,

universal contentions when it awarded The Graham Company a substantial percentage of each

defendant’s profits.

The first jury also necessarily rejected the defendants’ fall-back position – another

contention universally applicable to all the infringing proposals – that any apportionment greater

“than one or two percent of the [defendants’] total commissions” was too high. Ex. A, Trial Tr.

Day V (defense closing) at 90:1-24. In effect, defendants contended that any apportionment of

profits between 2% and 100% to the defendants’ infringement was inappropriate. The first jury

explicitly rejected that contention when it awarded The Graham Company around 70% of USI

MidAtlantic’s gross revenues and 75% of Haughey’s gross revenues as Section 504(b) profits.

It is also fair and logical to conclude that the first jury arrived at its infringer profits

award by following Section 504(b)’s three-step formula, as that formula was explained to the
21

first jury in the Court’s instructions. After all, a jury is presumed to follow the instructions it is

given, see, e.g., United States v. Urban, 404 F.3d 754, 776 (3d Cir. 2005), and here, the Court

carefully explained – in instructions to which defendants did not object – the three steps

necessary under Section 504(b) to arrive at the bottom-line infringer profit figure. Ex. B, Jury

Instructions, at ¶¶ 66-69.

Thus, it is fair and reasonable to conclude that the first jury began its analysis by

performing the first step of Section 504(b)’s three-step formula – it determined “gross revenues”

for each of the two defendants over the 1992-2005 infringement period. The first jury relied on

the principal “gross revenue” evidence presented at trial – USI’s revenue information and the

calculations performed by Dr. Richard Gering, as reflected as well in certain summary exhibits

(Ex. C, Trial Tr. Day III, at 95:24-97:21, 104:6-25; Ex. D, PX 88A) – and on plaintiff counsel’s

closing argument explaining plaintiff’s recommended “gross revenue” calculations (Ex. A, Trial

Tr. Day V, at 42:7-43:6). This step would have yielded a “gross revenue” figure of $31,830,914

for USI MidAtlantic, and $3,063,195 for Mr. Haughey.

It is also fair and logical to conclude that the first jury next turned to Section 504(b)’s

second step – it determined the amount to offset against defendants’ gross revenues to account

for “deductible costs.” Here, it is clear from the trial record – particularly the defendants’

closing argument, and the Court’s jury instructions – that the amount of this offset was

undisputed. The parties agreed that “deductible costs” applied to USI MidAtlantic’s gross

revenues only, not to Mr. Haughey’s, and that these expenses amounted to “twenty-five percent”

of USI MidAtlantic’s revenues. Ex. A, Trial Tr. Day V (plaintiff’s closing), at 42:7-43:6; id. at

78:21-79:1 (defense closing). Thus, at this second stage of the Section 504(b) calculus, USI

MidAtlantic’s gross revenue figure was reduced to a profit figure of $23,873,185, and Mr.
22

Haughey’s gross revenue figure of $3,063,195 became his profit figure (because of the lack of

any claimed or proven expense deduction as to him).

Lastly, with regard to the third and final Section 504(b) step – “apportionment” – the

most logical and reasonable conclusion is that the first jury apportioned the defendants’ profits to

defendants’ infringing proposals in a universal fashion. In other words, the fair and reasonable

conclusion is that the first jury applied an offset for “apportionment” across-the-broad to all of

the infringing proposals before it, including those proposals in the post-February 2002 period

that will be the subject of the damages re-trial. A number of items support this conclusion.

First, it is clear from the trial record that defendants’ opposition to The Graham

Company’s damages case focused almost exclusively on generic, universal arguments that

covered each and every infringing proposal disseminated by defendants, including the postFebruary 2002 ones. For example, defendants emphasized their evidence that “many, many

different factors” contributed to profits – factors like premium costs and salespersons’

interpersonal skills. And defendants stressed that at USI MidAtlantic, the written proposal

supposedly plays a limited role in the sales process, because it comes at the “end of the process.”

Ex. C, Trial Tr. Day III (Haughey), at 185:21-187:6, 197:11-199:7; Ex. A, Trial Tr. Day V

(defense closing), at 86:14-17, 88:18-89:17, 90:11-24.

Likewise, defendants had Thomas Haughey voice a universal opinion about what in his

view mattered to USI MidAtlantic’s profit generation from customers. Mr. Haughey testified

point blank: “I don’t think the language that we use has any impact on the client’s buying

decision.” Ex. C, Trial Tr. Day III, at 201:5-25; see also id. at 197:3-4 (“The way I describe it

has no impact or whether or not they buy it.”). Mr. Haughey’s argument was a generic one about

all of defendants’ proposals; he did not speak to any particular category or group of proposals.
23

Indeed, defense counsel expressly invited to the jury to make their Section 504(b)

apportionment decisions across-the-board, in a universal fashion. In closing, defense counsel told

the jury: “if you do decide that the use of Graham’s language was a factor . . . you’ll have to

determine the percentage, I submit to you that that amount can not be more than one or two percent

of the total commissions earned by USI or Tom Haughey.” Ex. A, Trial Tr. Day V, at 90:11-24

(emphasis added). Defense counsel gave a universal apportionment percentage (no “more than

one or two percent”) and explicitly asked the jury to apply that percentage to “total commissions

earned” – that is, revenues from all infringing proposals – not some subset of proposals.

12

Given the dominant argument and evidence presented to the jury, it is only fair and

reasonable to conclude that the jury apportioned in a universal, across-the-board fashion. Indeed,

defendants’ own briefing provides the best support for this conclusion. In seeking a new trial on

Section 504(b) apportionment, defendants explained the first jury’s infringing profits calculation

in a manner virtually identical to the one presented above:

Dr. Gering testified that USI’s total commission revenue totaled

$31,830,914, of which 25% was paid by USI to its producers, leaving a

net commission of $23,873,185. Applying the 25% figure to the total

commissions generated for Mr. Haughey’s clients ($12,252,782), yields

commissions to Mr. Haughey himself of $3,063,195 (from which no costs

are deducted). Thus, the total net commissions for both defendants is

$26,936,380. The total jury award is $18,858,627, which is 70% of the

total net commissions.

D.I. 144 at 26 n.10 (citations omitted). Defendants also understood and directly asserted in their

briefing that the first jury had arrived at an apportionment percentage of 70% and applied it to all

of the defendants’ infringing proposals. See id. at 25-26, 29 (“It was unreasonable for the jury to

12 As noted in the fact section, defendants did mention that two specific categories of infringing

proposals should be excluded from any damages award – those sent to pre-USI MidAtlantic customers of

producer Don Roberts, and those mentioned in defendants’ closing as having only a small amount of

copied. See infra note 10. But defendants did not place much emphasis on this point, and indeed, their

dominant contentions were the generic, universally applicable ones discussed in detail above.
24

conclude that 70% of defendants’ net commissions were attributable to the language in the

written proposals that came from Graham’s Works.”).

Defendants, in their new trial briefing, concluded that the first jury’s apportionment was done

across-the-board – that is, that the first jury had analyzed the entire group of infringing proposals

before it (including the post-February 2002 ones) as a whole. That, of course, means that the first

jury had already decided what apportionment percentage should be applied to the post-February

2002 proposals that will be the subject of the upcoming damages re-trial. Defendants’ conclusion

about what the first jury did continues to be a fair, logical, and reasonable one.

The fact that one might be able to speculate about alternative calculations the first jury

could have performed, and that one can never be absolutely certain about what happened in the

jury room, is ultimately beside the point. The question is not what the first jury might have

possibly done in applying Section 504(b) to calculate damages; it is what one can logically and

reasonably conclude about what the first jury did, in light of the Court’s jury instructions, and the

evidence and argument presented to the jury before they retired to deliberate. The most pertinent

case law here comes from the highly analogous context in which a court is reviewing a jury’s

possibly inconsistent answers to interrogatories to see whether the answers can be reconciled.

13

Courts unanimously have held that the test to apply to conflicting jury responses is to

determine “whether the jury’s answers can ‘be said to represent a logical and probable decision on

the relevant issues as submitted.’” Willard v. The John Hayward, 577 F.2d 1009, 1010 (5th Cir.

13 This context is analogous because, like the Reexamination Clause concerns at issue in

this case, courts’ obligations with regard to review of inconsistent jury answers arise directly from the

Seventh Amendment. In the Reexamination Clause context, courts have a Seventh Amendment

obligation to ensure that “a given issue” is not “tried by different, successive juries.” Blyden v. Mancusi,

186 F.3d 252, 268-69 (2d Cir. 1999). Likewise, in the context of inconsistent interrogatory answers,

courts have stressed that they must “attempt to harmonize the jury’s answers, if that is possible,” because

of Seventh Amendment considerations. Anastasio v. Schering Corp., 838 F.2d 701, 710 (3d Cir. 1988).
25

1978) (quoting Griffin v. Matherne, 471 F.2d 911, 915 (5th Cir. 1973)); Gallimore v. Missouri

Pacific R.R. Co., 635 F.2d 1165, 1172 (5th Cir. 1981) (following Willard and Griffin “logical and

probable” test); Royal Cup, 898 F.2d at 1516 (11th Cir. 1990) (following Griffin “logical and

probable” test).

14 At least two courts in the Third Circuit has explicitly followed this “logical and

probable decision” standard as well. See U.S. v. 0.78 Acres of Land, 81 F.R.D. 618, 621 (E.D. Pa.

1979) (Troutman, J.), aff’d without op., 609 F.2d 504 (3d Cir. 1979); Strauss v. Springer, 817 F.

Supp. 1211, 1214 (E.D. Pa. 1992).

Looked at this from the “logical and probable” perspective, the most reasonable and

logical view of the first jury’s Section 504(b) calculation is that the first jury started with the

“gross revenue” figures presented by The Graham Company; applied the 25% “deductible costs”

offset agreed to by the parties to USI MidAtlantic’s gross revenue figure; considered all of the

universally-applicable “apportionment” arguments relied on by the defendants; and then applied

an across-the-board offset to the defendants’ profits to account for “other factors” responsible for

defendants’ profits. In other words, it is entirely logical and reasonable to conclude that the first

jury calculated Section 504(b) infringer profits in the very same way the defendants have

previously represented that that calculation was performed. See D.I. 144 at 25-26 & n.10.

II. A Second Jury Deciding Certain Section 504(b) Damages Issues Should Be

Constrained By the First Jury’s Determinations

Because a first jury, in a first damages trial, has already decided several important

Section 504(b) factual issues, the law imposes constraints on what a second jury can be asked to

14

See also Riley v. Kmart Corp., 864 F.2d 1049, 1052-53 & n.2 (3d Cir. 1988) (citing to the Fifth

Circuit, and its decisions in Willard and Gallimore, as authority in the area of inconsistent jury answers to

interrogatories). Other courts that follow the “logical and probable decision” test include: Allen Organ

Co. v. Kimball Int’l, Inc., 839 F.2d 1556, 1563-64 (Fed. Cir. 1988) (following Willard and Griffin “logical

and probable” test); Bingham v. Zolt, 66 F.3d 553, 563 (2d Cir. 1995) (citing Royal Cup for the

proposition that appellate court’s task is “to ascertain whether the trial court’s reconciliation of the

apparently inconsistent verdict is a reasonable reading of the record”).
26

decide in a damages re-trial. Those constraints arise principally from the Seventh Amendment’s

Reexamination Clause.

A. The Reexamination Clause Precludes a Second Jury From Re-Trying

Issues Already Decided by a First One

The Reexamination Clause provides that “no fact tried by a jury shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.” U.S.

Constit. Amend. VII. Courts have authority under Rule 59 to grant a new trial on an issue when

there has been an error in the proceeding, but if a court finds no error, or if it does not provide an

adequate basis for holding a new trial on an issue, the Reexamination Clause’s constraints remain

in full force and effect. See e.g., In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1303 (7th Cir.

1995); Crane v. Consolidated Rail Corp., 731 F.2d 1042, 1051 (2d Cir. 1984) (holding that an

order extending the scope of a new trial on damages ran afoul of the Seventh Amendment when

the order lacked an “articulation of a sufficient basis for such action”).

15 Here, the Court granted a

new trial on damages only insofar as it pertained to statute of limitations issues, and explicitly

declined the defendants’ request to invalidate the first jury’s damages determination because of

asserted errors in the jury’s Section 504(b) calculation. D.I. 161, Nov. 21, 2006 Mem. Op., at 34-

35. The Reexamination Clause thus continues to protect the first jury’s 504(b) calculations.

“The Reexamination Clause generally forbids the retrial of issues that have been

determined by a valid jury verdict.” Patrick Woolley, Mass Tort Litigation and the Seventh

Amendment Reexamination Clause, 83 Iowa L. Rev. 499, 532 (1998). The Third Circuit has

explained that this constitutional provision “operate[s] as a guarantee of the integrity of the

15 Courts have read the Reexamination Clause’s last phrase – “than according to the rules of the

common law” – as preserving a court’s power to grant new trials, embodied in Rule 59. See, e.g.,

Gasperini v. Ctr. for Humanities, 518 U.S. 415, 432-33 (1996); Skinner v. Total Petroleum, Inc., 859 F.2d

1439, 1442-43 (10th Cir. 1988) (per curiam). But courts have also made clear that the basis for that new

trial grant must be adequately specified. See Crane, 731 F.2d at 1051.
27

judicial process generally and as a check on the powers of the trial judge specifically.” Davis v.

Omitowoju, 883 F.2d 1155, (3d Cir. 1989) (Garth, J.); cf. Gasperini v. Ctr. for Humanities, 518

U.S. 415, 432-33 (1996) (recognizing that the Reexamination Clause, and the Seventh

Amendment generally, guide “the allocation of trial functions between judge and jury”).

The most concise recent statement about the Reexamination Clause’s operation comes

from Judge Richard Posner of the Seventh Circuit, who explained that litigants have a right to

preclude a second jury from re-examining, or re-deciding, issues already “determined by the first

jury impaneled to hear them”:

The right to a jury trial in federal civil cases, conferred by the

Seventh Amendment, is a right to have juriable issues determined by the

first jury impaneled to hear them (provided there are no errors warranting

a new trial), and not reexamined by another finder of fact . . . . In this

limited sense, a jury verdict can have collateral estoppel effect.

Rhone-Poulenc, 51 F.3d at 1303; see also Blyden v. Mancusi, 186 F.3d 252, 268 (2d Cir. 1999)

(reversing district court’s decision as to the scope of a damages trial on Seventh Amendment

grounds, and citing Rhone-Poulenc for the proposition that “a given issue may not be tried by

different, successive juries”).

16

The Third Circuit, explaining the Reexamination Clause’s history, described its operation

in much the same way as Judge Posner did: “[O]nce facts had been found by a jury, the framers of

the second clause of the Seventh Amendment provided for further protection . . . by decreeing that

such jury factfinding must be final.” Davis, 883 F.2d at 1164. The Third Circuit has also recently

applied the Reexamination Clause to an antitrust case involving successive jury trials. See In re

16 Courts discussing this principle have referenced not just the Reexamination Clause specifically,

but also the Seventh Amendment generally. See, e.g., Freeman v. Chicago Park Dist., 189 F.3d 613, 618

(7th Cir. 1999) (“The Seventh Amendment prohibits a second jury from being given the opportunity to

render a verdict inconsistent with a prior jury’s verdict.”); Greenhaw v. Lubbock Cty. Bev. Ass’n., 721

F.2d 1019, 1025 (5th Cir. 1983) (“That right to jury trial includes the right to have a single issue decided

one time by a single jury.”).
28

Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144 (3d Cir. 1993) (Mansmann, J.). In fact,

the Third Circuit in Lower Lake Erie reversed a district court order permitting damages causation

issues decided by a first jury to be re-argued to and re-decided by a second jury.

The Lower Lake Erie case involved claims of anticompetitive activity in the Lake Erie

market for transporting iron ore, including claims brought by three trucking companies – the

Wills plaintiffs. See id. at 1151-52 & n.1. The district court bifurcated trial into a liability phase

and a damages phase. In the liability phase, a first jury resolved, via answers to special

interrogatories, the question of damages causation – it determined that defendants’

anticompetitive conspiracy had “cause[d]” “injury” to the Wills plaintiffs’ “business or

property.” See id. at 1155, 1182-83. In the subsequent damages trial, however, the trial court

invited the second jury to reconsider damages causation, and it permitted defendants to offer

evidence and argue that there were “potential causes for the plaintiff’s damage other than the

antitrust conspiracy.” Id. at 1183.

The Third Circuit reversed the trial court, finding that the conduct of the second trial ran

afoul of the Reexamination Clause “[b]ecause causation elements re-entered the damages phase

of the trial.” See id. at 1181-82, 1185; see also id. at 1183 (“the Seventh Amendment prohibition

against reexamination of the issue of fact of damage was compromised soon after the damages

jury was empaneled”). Because a second jury was being asked to re-examine and re-decide

damages causation questions already determined by a first jury in a prior trial, the Lower Lake

Erie court held that the Seventh Amendment was violated.

The Lower Lake Erie decision provides important guidance as to what factual issues may

be permissibly tried in a second jury trial, given that a first jury has already made certain factual
29

determinations. Indeed, the Lower Lake Erie decision involved damages causation questions

akin to the Section 504(b) “apportionment” issues decided by the first jury in this case.

B. The Second Jury on Re-Trial Should Be Asked to Decide Only the

Amount of Gross Revenues for the Post-February 2002 Period

Because of the Reexamination Clause’s restraints on the re-determination of factual

issues already decided by a prior jury, the task of a second jury at the damages re-trial is a

limited one. This Court has already narrowed the temporal scope of the re-trial. Because of the

Court’s grant of partial summary judgment on the defendants’ statute of limitations defense, the

only infringements at issue on re-trial are those occurring after February 8, 2002. D.I. 188, Mar.

29, 2007 Mem. Op., at 28. With respect to the first step of Section 504(b)’s three-step formula,

the first jury made a determination of “gross revenues” for the entire 1992-2005 time frame,

without breaking out the post-February 2002 period in particular. The second jury should

therefore be asked to determine the total amount of each defendants’ gross revenues reasonably

related to their infringements occurring after February 8, 2002.

But the second jury’s task should not be any broader. As explained, it is entirely fair,

logical, and reasonable to conclude (and to mathematically calculate) that the first jury has

already decided the remaining two steps of the Section 504(b) formula – “deductible costs” and

“apportionment” – for all of the defendants’ proposals, both those related to infringements taking

place before February 9, 2002 and those related to infringements occurring after that date.

Accordingly, there is nothing for the second jury to decide as to these two offsets. Indeed, if the

second jury is asked to undertake that analysis, it would be re-deciding issues already resolved

by the first jury – a scenario that the Reexamination Clause explicitly forbids. See, e.g., RhonePoulenc, 51 F.3d at 1303; Blyden v. Mancusi, 186 F.3d 252, 268 (2d Cir. 1999) (“a given issue

may not be tried by different, successive juries”); Freeman v. Chicago Park Dist., 189 F.3d 613,
30

618 (7th Cir. 1999) (“The Seventh Amendment prohibits a second jury from being given the

opportunity to render a verdict inconsistent with a prior jury’s verdict.”)

C. Defendants Should Not Be Permitted to Bolster Their “Apportionment”

Arguments and Evidence at the Damages Re-trial

Defendants may argue that they should be permitted at the damages re-trial to present

evidence about apportionment factors unique to the post-February 2002 group of proposals in

particular. But at least two Reexamination Clause decisions have rejected this notion – i.e., that

a first jury’s decision about a global set of claims still permits re-examination and re-argument

directed to a smaller subset of those claims. In Blyden v. Mancusi, a civil rights class action case

from the Second Circuit, the main liability issue was whether various acts of the defendant prison

officials amounted to “reprisals” (and hence civil rights violations). 186 F.3d 252, 259 (2d Cir.

1999). During the first trial, on liability, a first jury determined that the defendants had “engaged

in reprisals” against the entire class (“against the plaintiffs or any of them”). Id. at 260. The

Second Circuit held that this determination sufficed, in light of the Seventh Amendment, to

preclude the defendants from arguing in a second damages trial that an individual act of theirs

did not constitute a “reprisal” or that an individual plaintiff member of the class was not the

victim of a “reprisal”; the Seventh Amendment would be “clearly violated” if the “acts found to

be ‘reprisals’ by the liability jury were different from the acts found to be ‘reprisals’ by the

damages juries.” Id. at 268-69.

Similarly, in Greenhaw v. Lubbock Cty. Beverage Ass’n, an antitrust class action from the

Fifth Circuit, the issue was whether a first jury’s determination that the plaintiff class had

suffered injury as a result of anticompetitive conduct precluded the defendant from arguing

during a second damages trial that a particular subset of plaintiffs were not harmed. The first

jury found that each of the defendants had engaged in an antitrust conspiracy to fix retail alcohol
31

prices, and found that the plaintiff class as a whole suffered damages of $927,078. See Greehaw,

721 F.2d 1019, 1023-24 (5th Cir. 1983). The Fifth Circuit rejected the defendants’ contention

that they should be permitted in a second individualized damages trial to show that one particular

subset of plaintiffs – those who bought alcohol by the case, and received discounts – was not

individually harmed: “the issue of injury to the entire class was developed sufficiently for the

[first] jury, and the jury findings on this record produced a calculus that prevented

redetermination in phase two.” Id. at 1025-26.

In short, as is evident from the arguments, evidence, and jury instructions presented at the

first trial, the first jury has already decided certain key Section 504(b) factual issues – including

the percentage amount of apportionment for all infringing proposals, including those in the postFebruary 2002 period. The Reexamination Clause precludes a second jury from re-visiting and

re-deciding those factual issues.

III. Defendants Should Not Be Permitted to Bolster Their Case on “Deductible

Costs”

The first jury not only made certain factual determinations as to “apportionment” – step 3

of Section 504(b)’s three-step formula – but also as to “deductible costs” – step 2. “Deductible

costs” were a non-controversial issue at the first trial. The Graham Company and the defendants

agreed (1) that “deductible costs” encompassed only one category of expense (producer

commissions); (2) that these costs applied as an offset to only one defendant (USI MidAtlantic);

and (3) that the amount of this deduction was 25% of USI MidAtlantic’s gross revenues. Ex. A,

Trial Tr. Day V (plaintiff’s closing), at 42:7-43:6; id. at 78:21-79:1 (defense closing); Ex. B, Jury

Instructions, at ¶¶ 68-69. It is only fair and reasonable to conclude that the first jury followed the

Court’s instructions, and the invitation of the parties, and deducted this 25% from USI
32

MidAtlantic’s gross revenues – both for those proposals in the pre-February 2002 period and for

those proposals in the post-February 2002 period that will be the subject of the damages re-trial.

There is no reason for defendants to now have the opportunity, on re-trial, to prove up

new and different or additional expense categories. This constraint arises not only from the

Reexamination Clause – since the first jury already applied this deduction to the post-February

2002 period – but also from basic procedural considerations of fairness. See, e.g., 11 Charles

Alan Wright et al., Federal Practice & Procedure 2d § 2803, at 50 (in the new trial context,

“[d]ecisions respecting the admission of additional witnesses and proof should be guided by

considerations of fairness and justice to all parties”).

Courts have regularly emphasized that new trials are not vehicles to be used by a party

“to ‘plug the holes’ of a case” unsuccessfully presented at the first trial. Cleveland v. Piper

Aircraft Corp., 985 F.2d 1438, 1450 (10th Cir. 1993). As the Cleveland court noted, “[i]t is

always easy in hindsight for counsel to realize that there may be a better way to try a case the

second time around.” Id. at 1449. An important guiding principle here is whether the defendant

had an adequate opportunity at the first trial of the action to present the additional evidence it

now seeks to use for the first time at a second trial. Thus, in Martin’s Herend Imports, Inc. v.

Diamond Gem Trading United States Co., 195 F.3d 765 (5th Cir. 1999), the Fifth Circuit

affirmed the court’s exclusion of new evidence from the defendant because the defendant had

failed to provide “any explanation of why it did not offer it at the first trial.” Id. at 775; see also

Total Containment, Inc. v. Dayco Prods., Inc., 177 F. Supp. 2d 332, 338-39 (E.D. Pa. 2001)

(Schiller, J.) (excluding newly-proferred theories first offered at a second trial when the party

“made a tactical decision not to do so at the prior trial.”).
33

Here, defendants had ample opportunity to offer evidence in support of “deductible cost”

categories other than the 25% reduction for producer commissions. Defendants elected not to

make a broader “deductible cost” claim. For instance, in their pretrial memorandum, defendants

listed certain income statements and balance sheets, for the 1998 through 2004 period (DTX

133-146), and identified a USI “consultant” named Joseph E. Wilson, Jr. as a person with

knowledge about these expenses. Defendants chose to not rely on this evidence, representing in

writing that they had “decided not to present the testimony of Joseph Wilson or to seek to

introduce the financial statements identified as Defendants’ Exhibits 133 through 146 . . . at

trial.” Ex. I, June 14, 2006 Letter from Zemaitis.

17

This strategic decision – and defendants’

broader decision to confine their deductible cost claim to only USI MidAtlantic producer

commissions – should continue to bind the defendants during the damages retrial. See, e.g.,

Total Containment, 177 F. Supp. 2d at 338-39.

At the damages re-trial, defendants should not be permitted to present any evidence or

argument in support of Section 504(b) “deductible costs” other than what was presented at the

first trial – that is, a claim that the gross revenues received by USI MidAtlantic (only) should be

reduced by 25% to account for producer commissions.

CONCLUSION

For the reasons set forth above, The Graham Company respectfully requests that this

Court grant plaintiff’s motion and limit the scope of the jury issues to be decided at a second

damages trial to a determination of the amount of “gross revenues,” within the meaning of

17 Defendants’ letter was prompted by The Graham Company’s motion in limine to exclude this

evidence for failing to meet the legal prerequisites for proving “deductible costs” under Section 504(b).

See D.I. 101. The defendants’ letter mooted the motion. In the event the Court does permit defendants to

pursue broader deductible cost categories at the damages re-trial, The Graham Company would renew its

prior motion in limine to exclude defendants’ financial statement exhibits and Mr. Wilson’s testimony.
34

Section 504(b) of the Copyright Act, that are attributable to infringements occurring after

February 8, 2002.

Dated: July 10, 2007 WOODCOCK WASHBURN LLP

By: /s/ David J. Wolfsohn

David J. Wolfsohn (Atty. ID # 57974)

Aleksander J. Goranin (Atty. ID # 92452)

Cira Centre, 12

th

Floor

2929 Arch Street

Philadelphia, PA 19104

(215) 568-3100

Attorneys for Plaintiff
CERTIFICATE OF SERVICE

I hereby certify that on July 10, 2007, a true and correct copy of the foregoing Plaintiff’s

Pretrial Motion Concerning the Proper Scope of Jury Issues and Trial Presentations for the

Second Damages Trial, together with supporting materials, were served on the following in the

manner indicated below:

By ECF Notification, Hand Delivery and Email

Thomas E. Zemaitis, Esquire

Pepper Hamilton LLP

300 Two Logan Square

18

th

and Arch Streets

Philadelphia PA 19103-2799

By Overnight Delivery and Email

Floyd Abrams, Esquire

Cahill Gordon & Reindel LLP

80 Pine Street

New York NY 10005-1702

Attorneys for Defendants

/s/ David J. Wolfsohn

David J. Wolfsohn