The opinion of the court was delivered by: John F. Keenan, United States District Judge
This action stems from the claim of Plaintiff Kargo Global, Inc. ("Kargo") that its "KARGO" trademark was infringed by Defendant Advance Magazine Publishers, Inc.'s ("Advance"'s) publication of the now-defunct Cargo magazine. This Opinion addresses (1) Advance's motion to preclude the consumer confusion survey and testimony of Kargo's expert, Dr. Jacob Jacoby; (2) Advance's motions to preclude the reports and accompanying testimony of Kargo's damages experts, Thomas Nelson and Gary Singer; (3) Advance's motion to preclude the "rebuttal" reports and accompanying testimony of Plaintiff's experts Russell Winer, who defends Jacoby's opinion, and Leon Kaplan, who defends Singer's opinion; (4) Advance's motion to preclude Kargo from introducing certain damages evidence as a sanction for Kargo's alleged discovery violations; and (5) Kargo's motion to preclude portions of the report and testimony of Advance's expert, Itamar Simonson, regarding the purported bias of Kargo's experts and the results of a study conducted by Advance that shows that there is no awareness of Kargo's brand among consumers.
For the following reasons, Advance's motion to preclude the consumer confusion survey and testimony of Dr. Jacoby is granted. Advance's motions to preclude the reports and testimony of Kargo's damages experts, Thomas Nelson and Gary Singer, are also granted. Advance's motion to preclude the reports and testimony of Kargo's "rebuttal" experts is dismissed as moot. Advance's motion to preclude Kargo from offering certain damages evidence is in part granted, in part denied, and in part dismissed as moot. Kargo's motion to preclude portions of the testimony of Advance's expert, Itamar Simonson, is in part dismissed as moot and in part denied.
Plaintiff Kargo is a distributor of online content to wireless devices. Kargo's direct customers are wireless carriers and publishers of online content who use Kargo's services and software to deliver wireless features, such as magazine text, ringtones, and video games, to cellphones, pagers, and other personal wireless electronic devices. Kargo's mark frequently appears alongside the brand of the wireless carrier or publisher (in the form, for example, of "[magazine title] POWERED BY KARGO") when an individual downloads content into his or her cellphone or other wireless device.
Defendant Advance (d/b/a Condé Nast) publishes numerous well-known print magazines. Advance launched Cargo magazine and its companion website, cargomag.com, in March 2004. Cargo was essentially a men's shopping magazine, targeted toward males aged 20-45. Cargo reviewed and promoted clothes, cars, electronic gadgets, and other luxury items which presumably were of interest to its target audience. Although Cargo occasionally reviewed or promoted wireless devices and features, the magazine devoted only a small percentage of its overall content to coverage of wireless goods and services. Cargo had a relatively short life span of twenty issues. The last issue (listed as the May 2006 issue) appeared in April 2006 and the website was shut down in July 2006.
Kargo commenced this action on January 24, 2006, asserting causes of action for false designations of origin, false descriptions and representations, and trademark infringement in violation of the Trademark Act of 1946 ("Lanham Act"), 15 U.S.C. §§ 1114, 1125(a), and for related state and common law claims. In its Complaint, Kargo alleged that Advance's use of the "cargo" name in Cargo magazine and on the cargomag.com website infringed on Kargo's registered "KARGO" trademark.*fn1 Kargo sought injunctive relief, damages for corrective advertising, Advance's profits from its infringement, compensatory damages (as treble damages pursuant to the Trademark Act), and punitive damages, and demanded a jury trial.
Pursuant to a stipulation between the parties, Advance ceased publication of Cargo after the appearance of the May 2006 issue and shut down the companion website in July 2006, thus rendering moot Kargo's claim for injunctive relief. In addition, Kargo evidently has relinquished its claim for Advance's profits, because, as Advance disclosed in discovery, Advance realized no profits but rather incurred losses of over $30 million in connection with the promotion and publication of Cargo.
Kargo's claims of liability are based on the theory of "reverse" confusion, in which a second comer, who is better known than the senior user, infringes on the senior user's mark, resulting in the mistaken belief among consumers that the senior user's goods or services are produced by the second comer. Thus, Kargo claims that the existence of Cargo magazine and its website caused prospective end users of products distributed by Kargo to believe that Kargo's offerings actually were produced by Cargo magazine. Although Kargo's Complaint alleged anecdotal confusion among Kargo's existing and prospective direct business-to-business customers, Kargo's claims now appear to be based solely on allegations of "reverse" confusion among individual end users. Kargo's theory of harm is that individuals who downloaded content into their personal wireless devices experienced "negative" confusion as a result of Cargo's infringement; therefore, those end users were and will continue to be less likely to use Kargo's services in downloading wireless content. In turn, Kargo contends, Kargo's direct business-to-business customers will be less likely to partner with Kargo. The sole evidence of actual confusion among end users that Kargo has offered is the consumer confusion survey that was designed by Kargo's expert, Dr. Jacob Jacoby (the "Jacoby Survey"), the results of which are described and analyzed in Jacoby's expert report (the "Jacoby Report").
Kargo contends that, as a result of the confusion caused by the existence of the Cargo magazine and website during the magazine's twenty-issue run, Kargo's brand suffered a loss in value of $5.02 million and that an award of $8.17 million is required to fund an extensive corrective advertising campaign to repair the damage caused by the confusion.*fn2 The instant motions were fully briefed and filed with the Court on April 27, 2007, and the Court heard oral argument on June 5, 2007.
I. Advance's Motion to Preclude the Consumer Confusion Survey and Report of Dr. Jacob Jacoby
Advance has moved pursuant to Rules 702 and 403 of the Federal Rules of Evidence to preclude the Jacoby Survey and Jacoby's accompanying testimony. The Jacoby Survey purports to show the existence of "reverse" confusion among prospective end users of wireless features offered by Kargo. Advance contends that the survey's methodology is so flawed as to render the survey, and Jacoby's proposed testimony regarding the survey, inadmissible.
(i) Dr. Jacoby's Qualifications
Although Advance's memorandum of law cites a number of cases in which Jacoby's surveys were criticized, and although Kargo, in its opposition brief, hotly defends Jacoby's renown as a survey expert and cites numerous cases in which courts have praised Jacoby's surveys, there is no real dispute regarding Jacoby's qualifications as an expert witness. Since 1973, Jacoby has designed and administered over 500 consumer confusion surveys and has qualified as an expert on survey research in over 150 cases. Citations to his scholarship on consumer surveys are sprinkled liberally throughout McCarthy on Trademarks and Unfair Competition, a leading treatise on trademark law. Jacoby is clearly a qualified expert on consumer confusion surveys.
(ii) Survey Methodology and Results
Jacoby was retained by Kargo in April 2006. He conducted two surveys on the likelihood of "reverse" confusion resulting from Advance's use of the "cargo" mark in connection with the publication of Cargo magazine and its companion website. One survey consisted of participants from the defendant's universe of prospective consumers (that is, prospective readers of Cargo magazine), and one consisted of participants from the plaintiff's universe of prospective consumers (that is, prospective end users of wireless features offered by Kargo).
Here, because Kargo is claiming that "reverse" confusion exists, the relevant survey for purposes of demonstrating actual consumer confusion is that of Kargo's universe of prospective purchasers. When "the relevant issue is whether consumers mistakenly believe that the senior user's products actually originate with the junior user, it is appropriate to survey the senior user's customers." Sterling Drug v. Bayer AG, 14 F.3d 733, 741 (2d Cir. 1994). Thus, only Jacoby's survey of Kargo's prospective universe of customers is relevant to show consumer confusion.*fn3
The Jacoby Survey purports to show that 15.5% of prospective consumers of wireless features offered by Kargo were "confused" in their belief that Kargo is sourced by or related to Cargo magazine. The survey was conducted as follows.
At Jacoby's direction, an internet survey firm invited some of its panel members to participate in the survey. For the survey of Kargo's universe, participants were required to be males, aged 17 to 45, who resided in the United States. In addition, participants who worked in advertising, marketing, or for a company that offered wireless cell phone services were excluded. Participants who did not read or skim a magazine at least once per month or did not own a cell phone or plan to buy a cell phone within the next year were also excluded. Further, participants who did not currently have or would not consider obtaining within the next year various wireless products for their cell phones (for example, ringtones, video games, music videos, and magazine content) were also excluded.
The qualifying participants were then permitted to take a multi-question internet survey, which took approximately seven minutes to complete.*fn4
The initial phase of the survey consisted of showing the respondents materials from Cargo magazine. Each respondent was first informed that he would be shown a cover of a magazine and then a representative page of that magazine. The respondent was then shown the cover from the September 2005 issue of Cargo, which displayed, among other things, the "CARGO" logo, a picture of the tennis player Andy Roddick, and several large-font "headlines" that announced the issue's contents (for example, "THE TOP CARS OF 2006"). Included on the cover was a prominently displayed picture of a cell phone, to the side of which was printed the headline "World's Most Distinctive Cell Phone". (Def. Mem. in Support of Def. Mot. to Exclude the Testimony of Pl.'s Survey Expert Dr. Jacob Jacoby ("Def. Mem. Exclude Jacoby"), Ex. C.)
Each participant was then shown a page from the interior of the September 2005 issue of Cargo that contained promotional features relating to the magazine's companion website. The page included the "CARGO" logo and the "cargomag.com" logo, above which was printed the heading "MORE AMAZING FEATURES AND PRODUCT REVIEWS ONLINE." The page also contained a promotional paragraph entitled "Cargo-to-Go", which displayed a picture of a Blackberry cellphone, and advertised the website's "Instant Replay" feature, which allowed visitors to cargomag.com to download content from Cargo, such as product reviews, into their cellphones. (Id., Ex. D.) Respondents were allowed to take as much time as they wished to examine the Cargo materials.
The next phase of the survey consisted of three short "distractor" questions, in which respondents were asked about their television viewing habits, attendance at sporting events, and the number of adults living in their households. According to Jacoby, the "distractor" questions were designed to be answered in 30 to 45 seconds.
The next phase consisted of showing the participants materials that contained the "KARGO" mark. Each participant was first informed that he would next be viewing a "magazine ad that appeared in Premiere magazine." (Id., Ex. B at 26, ¶ 44.) The respondent was then shown an advertisement for "Premiere Mobile", a service which allows cellphone customers to download Premiere's content onto their cellphones. The advertisement included the words "Powered by KARGO", with Kargo's logo prominently displayed in large font. (Id., Ex. E.)
Each respondent was then informed that the "next ad you will see is for a service available for cell phone users." (Id., Ex. B at 26, ¶ 45.) The respondent was then shown a blown-up picture of a Blackberry cellphone, with the "KARGO" logo displayed in large font above the picture. (Id., Ex. F.) Respondents were given as much time as they wished to examine the Kargo materials.
Each respondent then was asked a series of multiple choice questions designed to ascertain whether he believed there was any connection regarding source, business relationship, or sponsorship between the company that produced the materials for Cargo magazine and the company that produced the "ads" that displayed the "KARGO" logo. First, each respondent was asked a question intended to detect "source confusion":
Q4. If you have any thoughts about it, do you think these ads from Premiere Magazine and for the cell phone service you just saw...? do come from the same company that put out the magazine you looked at earlier in the survey do not come from the company that put out the magazine you ...