Contract analysis

I. PURPOSE This memorandum summarizes the preliminary damages assessment prepared in coordination with Dr. Ellen Marchetti, CPA, CFF, of Lakeshore Forensic Accounting Group, LLC, who was retained as our forensic accounting expert on June 8, 2023, to quantify the economic harm suffered by Plaintiffs as a result of Crescendo Digital Media, Inc.'s ("Crescendo" or "Defendant") unauthorized exploitation of Mariana Fonseca

II. DAMAGES ANALYSIS A. Data Reviewed Dr. Marchetti's team at Lakeshore Forensic Accounting Group, LLC (200 South Wacker Drive, Suite 3100, Chicago, IL 60606) has conducted an extensive review of the financial and transactional data relevant to quantifying Plaintiffs' damages. The following categories of materials have been reviewed and analyzed as of the date of this memorandum:

1. Crescendo's initial discovery production — Bates Nos. CDM-000001 through CDM-004218, consisting of: • Streaming logs from the Crescendo Stream platform, which detail on a track-by-track basis the number of streams attributable to each of Fonseca's compositions and sound recordings during the infringement period; • Content management system ("CMS") records, which reveal how Crescendo categorized and tracked the lic

2. Historical royalty statements from Thornfield Music Administration, Inc. (catalog administrator; principal: Raymond O. Sato, President; 6363 Wilshire Boulevard, Suite 410, Los Angeles, CA 90048), which administers Fonseca's publishing catalog on behalf of Flor de Luna Publishing, LLC. These statements provide a baseline for the royalty income Fonseca should have received during the infringement period and permitte

3. Publicly available market rate data for comparable digital licensing transactions in the streaming and business-to-business sublicensing space. Dr. Marchetti consulted industry rate databases, published licensing surveys, and publicly available terms from comparable platforms to establish the fair market value of the rights Crescendo exploited without authorization.

4. The expired Peregrine Music Group, LLC blanket license agreement, which was effective January 1, 2016, and expired by its express terms on December 31, 2018. Peregrine Music Group, LLC ("Peregrine") itself ceased operations in November 2018, approximately one month before the license's contractual expiration date. This agreement is the sole license upon which Crescendo bases its "good faith reliance" defense, and

5. U.S. Copyright Office registration certificates for all forty-seven (47) compositions at issue (Registration Nos. PA 1-742-891 through PA 2-318-406) and all thirty-two (32) sound recordings at issue (Registration Nos. SR 0-891-220 through SR 1-104-773). Dr. Marchetti reviewed these certificates to confirm the scope of registered works and to verify the timeliness of registration for purposes of statutory damages a

III. LITIGATION STRATEGY UPDATE A. Early Neutral Evaluation The Early Neutral Evaluation conference was held on May 15, 2023, before Magistrate Judge Patricia L. Alvarez. Both parties appeared through counsel, and each side presented a summary of its liability and damages positions. Judge Alvarez's comments during the ENE conference were notable and, on the whole, highly favorable to Plaintiffs' position. In particul

1. Good faith / innocent infringement (17 U.S.C. § 504(c)(2)). This is Crescendo's principal defense and the one most likely to receive substantive attention from the Court. Crescendo argues that it reasonably relied on the expired Peregrine blanket license in continuing to use Fonseca's works, and that its infringement was therefore innocent within the meaning of § 504(c)(2), which permits a reduction of statutory d

2. Implied license. Crescendo argues that an implied license arose from the prior course of dealing between Fonseca (through Peregrine) and Crescendo, authorizing Crescendo's continued use of the works after the Peregrine license expired. This defense is weak. Implied licenses require evidence of the copyright holder's affirmative intent to grant a license. See Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 558-59 (9t

3. Estoppel. Crescendo argues that Fonseca's delay in discovering and asserting her infringement claims estops her from now pursuing them. This defense is weak. Fonseca had no obligation to monitor Crescendo's platform for unauthorized uses of her works. She discovered the infringement through a routine audit conducted by Thornfield Music Administration, Inc. in late 2022 and acted promptly thereafter by retaining co

4. Laches. This defense is substantially similar to the estoppel argument and is equally weak. Fonseca engaged Calderwood & Harkness LLP on February 20, 2023, shortly after discovering the infringement, and sent the cease-and-desist letter on March 6, 2023 — less than four months after the Thornfield audit identified the unauthorized uses. There was no unreasonable delay. Moreover, laches is generally not available a

5. Failure to mitigate damages. Crescendo argues that Fonseca should have discovered the infringement sooner and taken steps to stop it, thereby mitigating her damages. This defense is weak. There is no affirmative duty on the part of a copyright holder to police a licensee's or former licensee's compliance with the terms of an expired agreement. Fonseca maintained an ongoing administration arrangement with Thornfiel

6. Statute of limitations (17 U.S.C. § 507(b)). Crescendo argues that claims for infringement occurring prior to February 20, 2020 — three years before the matter was opened at the Firm — are time-barred under the three-year statute of limitations applicable to copyright claims. This defense warrants substantive attention but is ultimately weak on the facts and the law. Under the "Discovery rule" adopted by the Ninth

IV. CONCLUSION AND NEXT STEPS In summary, Plaintiffs' damages case against Crescendo Digital Media, Inc. is strong and well-supported by the evidence produced to date. The quantified back-royalty floor of $1,087,200 — derived from Crescendo's own platform data and verified by Dr. Marchetti's forensic analysis — provides a solid baseline for settlement negotiations. The statutory damages exposure Crescendo faces is su

1. Contact Hargrove, Pennington & Cao LLP (Denise K. Whitford) to schedule mediation and confirm mutual agreement to the process;

2. Engage Ashgrove Equity Partners Dispute Resolution Services, LLC and request the Honorable Gerald T. Nakashima (Ret.) as mediator, with a target mediation date in mid-July 2023;

3. Begin preparation of the confidential mediation brief, incorporating the liability analysis from Christy Bauer's March 20, 2023 memorandum and the damages analysis set forth herein; and

4. Coordinate with Dr. Ellen Marchetti and Lakeshore Forensic Accounting Group, LLC to finalize the damages presentation, including summary exhibits and demonstratives suitable for use during the mediation session. I am available to discuss this memorandum and the foregoing recommendations at any time. Please let me know how you would like to proceed. Respectfully submitted, Peter Vassiliev Associate, intellectual Pr