When Blackbeard’s flagship, the Queen Anne’s Revenge, was discovered off the North Carolina coast in 1996 after a decade of searching, whatever treasure might have been with it when it found a watery grave in 1718 had been lost to the tides of time. But as any fan of Titanic lore will tell you, a sunken ship courses with an altogether different booty: the tales that can be told about it.

That was the (gold) coin of the realm in Intersal, Inc. v. Wilson, 2024 NCBC 3. Intersal, a marine research and recovery firm, had a permit from defendant North Carolina Department of Natural and Cultural Resources to search for the QAR and a deal that it could keep 75% of the coins or precious metals it might find. That arrangement was later modified so that Intersal’s take from the find would instead flow from its rights to develop and market writings, films, and other accounts of the search and discovery. 2023 NCBC 15, ¶¶ 9, 13.

The contracting parties ran their ships aground over Intersal’s allegations that the defendants breached the rules governing the production and use of digital images and other media. Intersal alleged violations of provisions governing how displayed images were time coded, watermarked, and linked to specified websites – including its own. No treasure chests would be required to tote around the alleged damages, but at a proposed range of $15.6 million to $259.3 million it’d be a weighty check. 2024 NCBC 3, ¶¶ 4-5.

The Business Court had to decide how much of the expert testimony that allegedly substantiated those figures a jury would get to hear. The parties didn’t differ as to the qualifications of expert Jeffrey Sedlik, or the relevance of his testimony. Their hang-up was the third prong of North Carolina’s Rule 702 test for admitting expert opinions: its reliability.

Professor Sedlik’s damages model was addressed to quantifying the alleged improper use of images by the defendants, or the extent to which they allowed others to do so. As Judge Earp noted, while the parties’ agreement didn’t give Intersal an ownership interest in the Department’s images, it “did place restrictions and limitations on Defendants’ use of that media so that there was the potential for Intersal to profit.” Id. ¶¶ 17-18.

Sedlik relied on a model typically used in copyright infringement cases that analogizes to lost licensing fees as a damages measure. The Business Court found the methodology could be reliable beyond a copyright context because the alleged breaches of the access and use limitations that benefitted Intersal “were analogous to damages that result from breach of media licensing or use agreements.” Id. The Court approvingly cited a New York court’s explanation that the “hypothetical licensing model” was reasonable because “when 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.” Id. ¶ 19 (quoting Fair Isaac Corp. v. Fed. Ins. Co., 447 F. Supp. 3d 857, 875 (D. Minn. 2020)).

The damages model produced an estimated calculation of $5.2 million, but Sedlik proposed multipliers tied to the scarcity of images in question and competitive use that ballooned the figure. Judge Earp observed that federal courts have allowed evidence regarding multipliers in the calculation of the fair market value of an image in copyright cases, and found the vehicle permissible here. The Court noted that it was up to a jury “to decide whether to accept their use.” Id. ¶ 21.

The parties had a side dispute over the extent of Sedlik’s ability to define terms and phrases in the parties’ agreement. The Court noted experts are permitted to define “terms of art, or language peculiar to certain trades, business, etc.” Id. ¶ 25 (quoting Stewart v Raleigh & Augusta Air Line R.R. Co., 141 N.C. 253, 263 (1906)). “However,” Judge Earp held, “offering definitions of words and phrases used in ordinary parlance does not assist the jury.” Id.

Takeaways

• Of course, there are a treasure trove of resources from which the legend of Edward Teach can be sketched. But, just for the fun of it check out, instead, Blackbeard’s Ghost, Disney family fare from 1968.

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