INTERSAL, INC. v. WILSON, 2024 NCBC 3

STATE OF NORTH CAROLINA
COUNTY OF WAKE
IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
15 CVS 9995
INTERSAL, INC.,
Plaintiff,
v.
D. REID WILSON, Secretary, North
Carolina Department of Natural and
Cultural Resources; NORTH
CAROLINA DEPARTMENT OF
NATURAL AND CULTURAL
RESOURCES; THE STATE OF
NORTH CAROLINA; and FRIENDS
OF QUEEN ANNE’S REVENGE, a
Non-Profit Corporation,
Defendants.
ORDER AND OPINION ON
DEFENDANTS’ MOTION IN LIMINE
TO EXCLUDE THE OPINION
TESTIMONY OF JEFFREY SEDLIK
1. 	THIS MATTER is before the Court on Defendants’ Motion in Limine to
Exclude the Opinion Testimony of Jeffrey Sedlik (the “Motion”), (ECF No. 204).
2. 	Having considered the Motion, the related briefing, and the arguments of
counsel at a hearing on the Motion, the Motion is hereby GRANTED in part and
DENIED in part, as provided below.
Kilpatrick Townsend & Stockton, LLP, by Dustin T. Greene, Richard J.
Keshian, Elizabeth Winters, and Kyleigh E. Feehs, for Plaintiff Intersal,
Inc.
Intersal, Inc. v. Wilson, 2024 NCBC 3.

North 	Carolina 	Department 	of 	Justice, 	by 	Michael 	Bulleri, 	Amar
Majmundar, Brian D. Rabinovitz, Orlando L. Rodriguez, and Charles
G. Whitehead, for Defendants D. Reid Wilson, et al.
Earp, Judge.
I. 	FACTUAL AND PROCEDURAL BACKGROUND
3. 	The facts surrounding this case have been recounted at length in the Court’s
previous orders. 	See, e.g., Intersal, Inc. v. Wilson, 2023 NCBC LEXIS 29, at **2-21
(N.C. Super. Ct. Feb. 23, 2023).
4. 	Relevant to the Motion, Plaintiff seeks damages for Defendants’ alleged
breaches of Section 16(b) of the 2013 Agreement.1 	In support of their position,
Plaintiff intends to offer the expert testimony of Jeffrey Sedlik, a professor of
licensing practices and the application of copyright law in the visual arts, and an
internationally-recognized 	professional 	photographer 	who, 	among 	other
achievements, has served in high-level positions for trade associations and standard-
setting bodies in the photography, advertising, product marketing, technology, and
design industries. 	(See Expert Report of Professor Jeffery Sedlik [“2020 Sedlik
Report”] 2-5, ECF No. 219.2.)
1 Section 16(b) states in part:
1) All non-commercial digital media, regardless of producing entity, shall
bear a time code stamp, and watermark (or bug) of Nautilus and/or D[N]CR,
as well as a link to D[N]CR, Intersal, and Nautilus websites, to be clearly and
visibly displayed at the bottom of any web page on which the digital media is
being displayed.
2) D[N]CR agrees to display non-commercial digital media only on D[N]CR’s
website.
(2013 Settlement Agreement, Section 16(b), ECF No. 106, Ex. 1.)

5. 	Professor Sedlik uses a “hypothetical licensing model” to calculate Plaintiff’s
damages at an estimated $5.2 million before he applies multipliers for both image
scarcity and competitive use. 	With the multipliers, Professor Sedlik estimates
Plaintiff’s damages at between approximately $15.6 million and $259.3 million.
(Supp. Report of Jeffrey Sedlik 3, ECF No. 219.4.)
6. 	After full briefing, the Court held a hearing on the Motion on 12 January
2024. (Not. of H’rg, ECF No. 248.) The Motion is now ripe for consideration.
II. 	LEGAL STANDARD
7. 	The Court’s determination is controlled by Rule 702(a) of the North Carolina
Rules of Evidence.2 	“Whether expert witness testimony is admissible under Rule
702(a) is a preliminary question that a trial judge decides pursuant to Rule 104(a).”
State v. McGrady, 368 N.C. 880, 892 (2016). 	The trial court’s focus “‘must be solely
. . .[the] 	principles 	and 	methodology’ 	used 	by 	the 	expert,”’ 	rather 	than 	“‘the
2 Rule 702(a) provides in pertinent part:
(a) If scientific, technical or other specialized knowledge will assist the trier of
fact to understand the evidence or to determine a fact in issue, a witness
qualified as an expert by knowledge, skill, experience, training, or education,
may testify thereto in the form of an opinion, or otherwise, if all of the following
apply:
(1) The testimony is based upon sufficient facts or data.
(2) The testimony is the product of reliable principles and methods.
(3) The witness has applied the principles and methods reliably to the facts of
the case.
N.C. R. Evid. 702(a).

conclusions that they generate.”’ Wallace v. Maxwell, 270 N.C. App. 639, at *12 (2020)
(quoting Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 595 (1993)).
8. 	North 	Carolina’s 	Rule 	702 	“is 	now 	virtually 	identical 	to 	its 	federal
counterpart and follows the Daubert standard for admitting expert testimony.”
Safety Test & Equip. Co. v. Am. Safety Util. Corp., 2016 NCBC LEXIS 100, at **5
(N.C. Super. Ct. Dec. 16, 2016) (citing McGrady, 368 N.C. at 884). 	In applying this
standard, 	North 	Carolina 	courts 	may 	seek 	guidance 	from 	the 	federal 	courts.
McGrady, 368 N.C. at 888.
9. 	Determining 	admissibility 	involves 	a 	“three-step 	framework—namely,
evaluating qualifications, relevance, and reliability.” 	Id. at 892. 	Each of the three
requirements must be satisfied in order for the expert’s testimony to be admissible.
Id. at 889. Moreover, “[t]he burden of satisfying Rule 702(a) rests on the proponent
of the evidence[.]” State v. Gray, 259 N.C. App. 351, 355 (2018).
10. 	Defendants 	do 	not 	challenge 	Professor 	Sedlik’s 	qualifications 	or 	the
relevance of his testimony. Their objections center on the reliability of his opinions.
To be reliable, the testimony must be (1) “based upon sufficient facts or data,” (2) “the
product of reliable principles and methods,” and (3) the expert must have “applied
the principles and methods reliably to the facts of the case.” Rule 702(a)(1)-(3). This
reliability analysis will necessarily vary from case to case, and “the trial court has

discretion in determining how to address the three prongs of the reliability test.”
McGrady, 368 N.C. at 890 (citation omitted).3
11. 	An 	expert’s 	testimony 	is 	not 	helpful 	to 	the 	jury 	and, 	therefore, 	is
inadmissible, when the expert does not use specialized knowledge to help the jury
understand the evidence or determine a fact in issue. See Braswell v. Braswell, 330
N.C. 363, 377 (1991) (“When the jury is in as good a position as the expert to determine
an issue . . . [the expert’s testimony] is not helpful to the jury.”). 	See also State v.
Wilkerson, 295 N.C. 559, 569 (1978) (framing admissibility as a question of “whether
the witness because of his expertise is in a better position to have an opinion on the
subject than is the trier of fact.”).
12. 	In addition, an expert may not testify as to “whether legal conclusions
should be drawn or whether legal standards are satisfied.” HAJMM Co. v. House of
Raeford Farms, Inc., 328 N.C. 578, 587 (1991). 	The expert may testify to “the
underlying factual premise, which the fact finder must consider in determining the
legal conclusion to be drawn therefrom, but may not be offered as to whether the legal
conclusion should be drawn.” Norris v. Zambito, 135 N.C. App. 288, 292 (1994)
(emphasis in original).
13. 	Experts, however, may explain technical terms used in a contract “to explain
the meaning of such terms as an aid in interpreting the instrument.” Smith v. Childs,
112 N.C. App. 672, 681 (1993).
3 Because North Carolina Rule of Evidence 702 adopts “virtually the same language from”
Federal Rule of Evidence 702, federal case law is instructive, but not controlling, on these
issues. State v. McGrady, 368 N.C. 880, 888 (2016).

14. 	Ultimately, “[t]he decision to either grant or deny a motion in limine is
within the sound discretion of the trial court.” 	State v. Fristsch, 351 N.C. 373, 383
(2000). 	See also LaVecchia v. N. Carolina Joint Stock Land Bank of Durham, 218
N.C. 35, 41 (1940) (“The competency of a witness to testify as an expert is a question
primarily addressed to the sound discretion of the court[.]”).
III. 	ANALYSIS
15. 	Defendants first contend that Professor Sedlik’s hypothetical licensing
model is inapplicable because this is not a copyright infringement case. Further, they
argue that even if the hypothetical licensing model could be used, Professor Sedlik
failed to properly apply it because (1) his valuation improperly assumed all images
were equal in value to his benchmark images, failing to account for the specific
composition of each image; (2) he based his calculations on the asking prices provided
on stock photography websites rather than on the prices at which the images actually
sold; (3) he ignored the fact that Intersal does not own the copyrights for the images;
and (4) he did not take into account that some images were available for free as public
records; and (5) his use of scarcity and competitive use multipliers was arbitrary and
speculative. 	(Defs.’ Br. Supp. Mot. in Limine Exclude Testimony Jeffrey Sedlik
[“Defs.’ Br.”] 4-18, ECF No. 205.)
16. 	Plaintiff disagrees, arguing that the hypothetical licensing fee methodology
is appropriate because the alleged breaches in this case are analogous to cases
involving breach of a licensing or use agreement. Moreover, Plaintiff maintains that
Professor Sedlik’s application of this methodology is reliable because (1) he did view

each of the images at issue; (2) he only considered the objective aspects of each usage
at issue and identified appropriate benchmarks based on those objective criteria; (4)
copyright ownership is irrelevant; and (5) the scarcity and competitive use multipliers
have been widely accepted by different courts. 	(Pl.’s Resp. Defs.’ Mot. in Limine
Exclude Op. Testimony Jeffrey Sedlik [“Pl.’s Resp.”] 3-12, ECF No. 237.)
17. 	After close review, the Court concludes that Plaintiff has satisfied the
requirements of Rule 702(a) with respect to Professor Sedlik’s damages testimony.
All the parties agree that this is not a copyright infringement case. Nevertheless, it
is a case in which Plaintiff asserts that Defendants have improperly used (or allowed
others to improperly use) images in violation of Plaintiff’s legal rights. 	(See Third
Am. Compl. ¶¶ 35, 63-67, ECF No. 106.) 	The source of those legal rights – contract
vs. copyright law – does not determine whether analogizing to a lost licensing fee is
a reliable way to measure damages. 	Indeed, no party points the Court to a case
stating that Professor Sedlik’s approach is unreliable when used outside of the
copyright context.
18. 	While the 2013 Agreement did not give Intersal “an ownership right in
DNCR’s digital media,” the Agreement did place restrictions and limitations on
Defendants’ use of that media so that there was the potential for Intersal to profit.
Thus, the damages resulting from Defendants’ alleged breaches of these access and
use limitations are analogous to damages that result from breach of media licensing
or use agreements. 	Indeed, Defendants’ expert agreed that paragraph 16(b) of the

2013 Agreement “seems like” a limit on DNCR’s use of digital media, like a
photography use agreement. (Dep. of Brian Buss 73:23-76:4, ECF 173.12.)
19. 	Courts have recognized that expert opinions based on the hypothetical
licensing 	model 	are 	admissible 	in 	cases 	involving 	breach 	of 	licensing 	or 	use
agreements. See, e.g., Fair Isaac Corp. v. Fed. Ins. Co., 447 F. Supp. 3d 857, 875 (D.
Minn. 2020) (applying New York law) (holding that a hypothetical license fee was a
reasonable measure of damages because “[w]hen ‘a breach of contract causes a
plaintiff to lose an income-producing asset and that asset has a determinable market
value, a plaintiff may seek to recover that value.’” (quoting Safka Holdings, LLC v.
iPlay, Inc., 42 F. Supp. 3d 488, 493 (S.D.N.Y. 2013))); Artifex Software, Inc. v.
Hancom, Inc., No. 16-cv-06982-JSC, 2017 U.S. Dist. LEXIS 147637, at *7 (N.D. Cal.
Sept. 12, 2017) (holding that “the jury can use the value of the commercial license [for
software] as a basis for any damages determination,” in case involving use of software
that was beyond the use permitted by the parties’ licensing agreement); Neva, Inc. v.
Christian Duplications Int’l, Inc., 743 F. Supp. 1533, 1550-51 (M.D. Fla. 1990)
(determining that jury properly awarded damages for breach of contract based on a
“reasonable royalty to which Plaintiffs would have been entitled if the [defendant]
had properly negotiated a license to commercialize the narrations with Plaintiffs.”);
cf. Blue Ocean Labs., Inc. v. Tempur Sealy Int’l, Inc., No. 1:15CV331, 2015 U.S. Dist.
LEXIS 173487, at *16 (M.D.N.C. Dec. 31, 2015) (holding that “the proper measure of
damages for [use of plaintiff’s confidential information beyond the terms of the

contract] is the license fee that the defendant would have paid had it not breached
the contract.”).
20. 	Other courts have embraced the hypothetical licensing model as a reliable
theory of damages. 	See, e.g., Davis v. The Gap, Inc., 246 F.3d 152, 166-72 (2d Cir.
2001) (concluding that the hypothetical licensing model was appropriate as a measure
of damages); Leonard v. Stemtech Health Sci., No. 08-067-LPS-CJB, 2013 U.S. Dist.
LEXIS 138446, at *17-20 (D. Del. Sept. 23, 2013), aff’d, 834 F.3d 376 (3d Cir. 2016)
(finding Sedlik’s methodology reliable because of its objective calculation of the fair
market value of images and the fact that it has been accepted by courts in copyright
infringement cases); Under a Foot Plant, Co. v. Exterior Design, Inc., No. BPG-15-
871, 2017 U.S. Dist. LEXIS 132998, at *11-12 (D. Md. Aug. 18, 2017) (holding that
Sedlik’s 	testimony 	was 	reliable 	because 	he 	fully 	explained 	and 	defended 	his
methodology); Navarro v. P&G, No. 1:17-cv-406, 2021 U.S. Dist. LEXIS 43140, at *12-
20 (S.D. Ohio Mar. 8, 2021) (admitting Sedlik’s lost licensing theory of damages). But
see Brittney Gobble Photography, LLC v. Sinclair Broad. Grp., Inc., No. SAG-18-
03403, 2021 U.S. Dist. LEXIS 222009, at * 17-18 (D. Md. Nov. 17, 2021) (excluding
Sedlik’s testimony because it was unsupported by the specific facts of the case).
21. 	Regarding Sedlik’s use of scarcity and competitive use multipliers, the Court
recognizes 	that 	several 	federal 	courts 	have 	held 	that 	while 	multipliers 	are
impermissible under the Copyright Act as penalties, they may be used to calculate an
image’s fair market value. See e.g., Leonard v. Stemtech Int’l, Inc., 834 F.3d 376, 392-
94 (3d Cir. 2016) (holding that multipliers may be used to calculate images’ fair

market value); D’Pergo Custom Guitars, Inc. v. Sweetwater Sound, Inc., No. 17-cv-
747-LM, 2020 U.S. Dist. LEXIS 1359, at *20-21 (D. N.H. Jan. 6, 2020) (admitting
Sedlik’s calculations using competitive use and scarcity multipliers and emphasizing
that 	cross-examination 	was 	the 	proper 	mechanism 	to 	challenge 	their 	use).
Defendants are free to cross-examine Sedlik on his use of multipliers. It will be up to
the jury to decide whether to accept their use.
22. 	Defendants contend that certain of Sedlik’s opinions are, in reality, legal
conclusions that improperly invade the province of the jury. 	Specifically, they
maintain that Sedlik should not be permitted to (1) characterize Nautilus’s $15,000
settlement payment as a retroactive license fee for five images; (2) provide definitions
of commonly-used terms that appear in the 2013 Agreement; (3) interpret the
language of the 2013 Agreement; or (4) opine on Defendants’ culpability with respect
to alleged breaches of the 2013 Agreement. (Defs.’ Br. 18-19.)
23. 	In contrast, Plaintiff asserts that Sedlik’s use of the Nautilus $15,000
settlement 	payment 	and 	his 	definitions 	of 	technical 	terms 	used 	in 	the 	2013
Agreement are appropriate. 	Intersal concedes, however, that Sedlik may not opine
on Defendants’ state of mind or culpability with respect to alleged breaches of the
2013 Agreement. (Pl.’s Resp. 12-14.)
24. 	As for Sedlik’s use of Defendants’ settlement payment to Nautilus, the Court
concludes that Sedlik may reference the payment as a factual matter for whatever
weight the jury wishes to assign it. The Court reserves a ruling with respect to Rule
403 should the testimony stray into that which may confuse or mislead the jury.

25. 	Defendants contest the admissibility of Sedlik’s definitions of the terms and
phrases “non-commercial,” “digital media,” “regardless of the producing entity,” “shall
bear a time code stamp,” “shall bear . . . a watermark (or bug) of Nautilus and/or
DCR,” “shall bear . . . a link to D[N]CR, Intersal, and Nautilus websites, to be clearly
and visibly displayed at the bottom of any web page on which the digital media is
being displayed,” “display non-commercial digital media only on D[N]CR’s website,”
and “Promotion Opportunities.” 	(2020 Sedlik Report 22-23.) 	Experts may define
“terms of art, or language peculiar to certain trades, business, etc.” 	See Stewart v.
Raleigh & Augusta Air Line R.R. Co., 141 N.C. 253, 263 (1906). 	However, offering
definitions of words and phrases used in ordinary parlance does not assist the jury.
Accordingly, terms peculiar to the production or use of visual images, such as “digital
media,” “time code stamp,” and “watermark (or bug),” are technical terms that
Professor Sedlik will be permitted to explain to a jury. However, terms such as “non-
commercial,” “producing entity,” “[website] link,” and “promotion opportunities” are
not unique to the industry and are commonly used. Professor Sedlik’s view of what
these terms mean would not assist the jury and is inadmissible.
26. 	Moreover, in no event may Professor Sedlik offer his interpretation of the
2013 Agreement. 	It is up to the Court to interpret unambiguous contract
provisions and to the jury to interpret ambiguous ones. See Smith, 112 N.C. App. at
681 (“A contract which is plain and unambiguous on its face will be interpreted by
the court as a matter of law; however, if the contract is ambiguous, interpretation of
the contract is a question for the jury.”). 	In Section D of his September 2020

Report, Sedlik discusses the “meaning and effect” of various provisions of the 2013
Agreement. (2020 Report 21-24.) To the extent Professor Sedlik’s testimony veers
into the realm of legal conclusions regarding DNCR’s obligations under Section
16(b) of the 2013 Agreement, those conclusions would not assist the jury and are
inadmissible. See e.g., Norris, 135 N.C. App. at 292 (prohibiting an expert from
testifying on whether law enforcement’s conduct was grossly negligent or showed
reckless disregard for others’ safety); Navarro v. P&G, 2021 U.S. Dist. LEXIS
43140, at *32 (excluding several of Sedlik's “opinions that were actually poorly
disguised legal conclusions.”).
27. 	The Court has reviewed the balance of Defendants’ challenges and find that
they go to the weight of Sedlik’s testimony, rather than to its admissibility. 	Improper
assumptions or misunderstandings of the facts can be explored on cross-examination.
See Leonard, 834 F.3d at 390 (“Stemtech’s disagreement with the calculation
methodology and the underlying assumptions Sedlik made about which images and
uses were similar to those in this case goes to the weight given to his testimony,
rather than admissibility.”). 	See also Bazemore v. Friday, 478 U.S. 385, 400 (1986)
(“Normally, failure to include variables will affect the analysis’ probativeness, not its
admissibility.”); Pope v. Bridge Broom, Inc., 240 N.C. App. 365, 374 (2015) (“[the]
Court does not examine whether the facts obtained by the witness are themselves
reliable” – that “is a question of the weight to be given the opinion, not the
admissibility of the opinion.” (emphasis in original) (quoting United States v. Crabbe,
556 F. Supp. 2d 1217, 1223 (D. Colo. 2008))); Insight Health Corp. v. Marquis

Diagnostic Imaging of N.C., LLC, 2017 NCBC LEXIS 14, at *48-49 (N.C. Super. Ct.
Feb. 24, 2017) (emphasizing that a challenge to the expert’s understanding of the
facts goes to the testimony’s weight rather than its reliability).
28. 	WHEREFORE, the Court, in its discretion, hereby GRANTS in part and
DENIES in part the Motion. 	Professor Sedlik will be permitted to offer his expert
opinion regarding any damages Intersal incurred as a result of Defendants’ alleged
breaches of paragraph 16 of the 2013 Agreement. He will also be permitted to offer
definitions of technical terms or terms of art used in the production and publication
of images. 	On the other hand, Professor Sedlik will not be permitted to offer
definitions 	of 	commonly 	used 	words 	or 	phrases, 	and 	he 	may 	not 	offer 	his
interpretations of the 2013 Settlement Agreement or legal conclusions regarding
Defendants’ liability.
IT IS SO ORDERED, this the 2nd of February, 2024.
/s/ Julianna Theall Earp
Julianna Theall Earp
Special Superior Court Judge
for Complex Business Cases