Company Asks Court to Affirm Judgment in R&D Tax Credit Case

AUDIO TECHNICA U.S., INC.,
Plaintiff, Appellee,
v.
UNITED STATES OF AMERICA,
Defendant, Appellant.

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

ON APPEAL FROM THE FINAL JUDGMENT OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO

BRIEF OF APPELLEE, AUDIO TECHNICA U.S., INC.

Prepared and Submitted by:

John H. Dies
Robert G. Wonish
Jefferson H. Read
Jeremy M. Fingeret
ZERBE, MILLER, FINGERET, FRANK & JADAV, P.C.
3009 Post Oak Blvd., Suite 1700
Houston, Texas 77056
(713) 350-3529 Telephone
(713) 350-3607 Facsimile
jdies@zmflaw.com
rwonish@zmflaw.com
jread@zmflaw.com
jfingeret@zmflaw.com
Attorneys for Appellee

CORPORATE DISCLOSURE

The undersigned counsel of record certifies that the individuals and entities

listed below have an interest in the outcome of this case:

Audio Technica U.S., Inc., Plaintiff-Appellee

Audio Technica Corporation is the parent company of Plaintiff-Appellee

No publically held entities own 10% or more of stock Plaintiff-Appellee.

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TABLE OF CONTENTS

CORPORATE DISCLOSURE

TABLE OF AUTHORITIES

STATEMENT IN SUPPORT OF ORAL ARGUMENT

STATEMENT OF JURISDICTION

STATEMENT OF ISSUES

STATEMENT OF THE CASE

SUMMARY OF ARGUMENT

ARGUMENTS & AUTHORITIES

CONCLUSION

CERTIFICATE OF COMPIANCE

TABLE OF AUTHORITIES

Cases

Berger v. United States, 295 U.S. 78 (1935)

Chapoose v. Hodel, 831 F.2d 931 (10th Cir.1987)

Freeport-McMoRan Oil & Gas Company, 962 F.2d 45 (D.C.Cir. 1991)

Hatch v. Federal Energy Regulatory Comm'n, 654 F.2d 825 (D.C.Cir.1981)

In re Kreidle, 145 B.R. 1007 (Bankr. D. Colo.)

In re Testimony of Arthur Anderson & Co., 832 F.2d 1057 (8th Cir.1987)

Kopunec v. Nelson, 801 F.2d 1226 (10th Cir.1986)

Lorillard Tobacco Co. v. Chester, Willcox & Saxbe, 546 F.3d 752 (6^th Cir. 2008)

Louzon v. Ford Motor Co., 718 F.3d. 556 (6^th Cir. 2013)

Mirando v. U.S. Dep't of Treasury, 766 F.3d 540 (6^th Cir. 2014)

New Hampshire v. Maine, 532 U.S. 742, 121 S.Ct. 1808 (2001)

Ohio Fast Freight, Inc. v. U.S., 574 F.2d 316 (6^th Cir. 1978)

Pate v. U.S., 982 F.2d 457 (1993)

Reynolds v. C.I.R., 861 F.2d 469 (6^th Cir. 1988)

Smith v. Rock-Tenn Serv., Inc., 813 F.3d 298 (6^th Cir. 2016)

Snyder v. AG Trucking, Inc., 57 F.3d 484 (6^th Cir. 1995)

U.S. v. Brawner, 173 F.3d 966 (6^th Cir. 1999)

U.S. v. Gwilliam, 110 A.F.T.R.2d 2012-5589 (D. Utah, Aug. 14, 2012)

U.S. v. Luce, 713 F.2d. 1236 (1983)

U.S. v. Marrero, 651 F.3d 453 (6th Cir. 2011)

U.S. v. Portland Cement Co., 33 F.R.D. 513 (W.D.Tex. 1963)

Codes, Regulations and Rules

28 U.S.C. §7430

28 U.S.C. §1920

IRC §41

IRC §174

Rules

Federal Rule of Evidence 103

American Bar Association Model Code of Professional Conduct EC7-14 (1981)

Secondary Authorities

K. Davis, ADMINISTRATIVE LAW TREATISE, §8.9 at 198 (2^nd ed. 1978)

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STATEMENT IN SUPPORT OF ORAL ARGUMENT

Appellee requests oral argument.The Tax Credit for Increasing Research Activities has been referred to by the Tax Court as one of the most complex tax provisions in the tax code and the facts supporting a claim can be factually intensive. Oral argument may be needed to address potential implications on the Tax Code and related issues.

STATEMENT OF JURISDICTION

Appellee Audio Technica U.S., Inc. (“Audio Technica” or “Appellee”) agrees that jurisdiction before the Sixth Circuit Court of Appeals is proper. In agreeing to jurisdiction, Audio Technica does not concede the superfluous statements which constitute arguments in Appellant's Statement of Jurisdiction.

STATEMENT OF ISSUES

STATEMENT OF THE CASE

Audio Technica, the Plaintiff in the underlying matter, filed tax returns for tax years ending March 31, 2006, March 31, 2007, March 31, 2008, March 31, 2009 and March 31, 2010¹ claiming tax credits for research expenses incurred during the Tax Years at Issue. Final Judgment, RE 144. The IRS selected several tax years for examination including the Tax Years 2002-2004, the 2005-2009 years at issue, and Tax Year 2010. Id.

The Tax Years at Issue were tried to a jury who found in favor of Audio Technica in all five years. Final Judgment, RE 144. The Final Judgment found that Audio Technica substantially prevailed on the primary issue and awarded Audio Technica its reasonable court costs. Id.

Audio Technica requested a bill of costs under 28 U.S.C. sec. 1920. Audio Technica has not made any request for attorneys' fees, nor has the Court awarded any attorneys' fees. Final Judgment, RE 144, Pl. Req for Bill of Costs, RE 145, and Decision and Order, RE 149.

Appellant, the U.S. Government and the Defendant in the matter, filed two subsequent post-trial motions to dismiss for lack of subject matter jurisdiction. RE 128 and 131. After consideration of the Appellant's motions and Audio Technica's memorandums in response (RE 133 and 134), the District Court denied both motions. Order, RE 143.

On May 21, 2019, Appellant filed its notice of appeal. Notice of Appeal, RE 148. There are two issues identified by Appellant for appeal.

SUMMARY OF ARGUMENT

Audio Technica U.S., Inc., is a corporation with its principal place of business in Stow, Ohio. Audio Technica is a corporation, and global leader, that creates high-performance microphones, headphones, wireless systems, mixers and electronic products for commercial and home use. Audio Technica manufactures products that set quality, durability, and performance standards for live sound tours, broadcast and recording studios, and corporate and government facilities. Audio Technica microphones are chosen for critical government installations such as the U.S. House of Representatives and Senate, and for major broadcast events including the GRAMMY® awards and the Olympics.

At every level, Audio Technica was found to be performing qualified research activities and having incurred qualified research expenses during the tax years at issue in the instant litigation.

• The IRS Technical Advisor and engineer assigned to review the documents and interview witnesses found “little doubt” that Audio Technica's R&E department and all its employees performed qualified research and 100% of their annual wages qualified. Trial Transcript, RE 119 PageID # 1819:18-1822:19 and PageID # 1823:24-1828:16. Had the IRS followed their own technical advisor, Audio Technica would have been entitled to everything claimed and potentially more qualified research expenses than Audio Technica claimed.

• Two prior tax periods were litigated and resolved through stipulated settlements with attorneys from the Office of IRS Chief Counsel allowing Audio Technica tax credits. Trial Transcript, RE 119, PageID #1804:25-1805:18.

• The Tax years 2005-2010 were tried to a panel of eight (8) jury members, who, after a presentation of witness testimony and documentary evidence unanimously found in favor of Audio Technica. Final Judgment, RE 144. Audio Technica submitted over six thousand (6,000) pages of trial exhibits including contemporaneous project documents, design drawings, testing documents, testing data, patents, photographs, and summaries of voluminous evidence in support of its case.² Id. Audio Technical further called seven (7) fact witnesses to the stand to testify regarding the R&D performed by Audio Technica. Id. The jury found that Audio Technica conducted qualified activity in all years at issue. Id. The jury found that Audio Technica incurred qualified research expenses in all years at issue. Id. Following the unanimous jury verdict, the parties submitted their proposed calculations to the Court. Id.

• Defendant introduced no exhibits into evidence and called no witnesses to testify at trial. Def. Trial Brief, RE 102 and Final Judgment, RE 144.

• The Court issued a Final Judgment finding Audio Technica substantially prevailed. Final Judgment, RE 144.

Unfortunately, ten years after the final tax year at issue, Audio Technica cannot obtain final resolution because, despite Appellee substantially prevailing at trial, Appellant has chosen the strategy of victory by attrition. Almost a year after the Final Judgment was signed, and almost ten months after Appellant filed a notice of appeal, Appellant finally filed its Appellee Brief and decided to delay final resolution of this instant matter based on two frivolous arguments, one of which is entirely moot.

The facts and long history of this dispute argue that the Government is engage in a war of attrition so that a taxpayer will have to expend more money, and extensive time and labor to obtain the tax credit promised by Congress, in fact, more expense than the value of the tax credit.

Appellant's first asserted issue claiming that the Court's Order awarding costs is “unclear” is both inaccurate and moot as attorneys' fees have not been sought nor awarded. The Court's July 17, 2019 Decision and Order clearly states that the $9,941.36 fees that are specifically enumerated under section 1920 are awarded. There is no award of attorneys' fees in either the Final Judgment or Decision and Order on fees. Final Judgment, RE 144 and Order and Decision, RE 149. The travel costs of Appellee's counsel requested by Audio Technica were not awarded. Appellee has not appealed the Court's Order and Decision.

An appellate review and analysis of which party substantially prevailed is moot with regard to Appellant's concern Appellant may be asked to pay Audio Technica's attorneys' fees. This Court need not delve further into an analysis of which party prevailed to be entitled to attorneys' fees. In any event, it is clear that Audio Technica substantially prevailed in the jury trial. Audio Technica has not appealed the Final Judgment and does not complain of the jury's verdict. It is the Appellant that is unhappy with the judgment and has chosen to appeal.

Appellant, asserts that the government substantially prevailed against the taxpayer in this matter. The Jury Verdict provides otherwise. Jury Verdict for Plaintiff, RE 123. While the costs of this inefficient and wasteful government exercise do indeed exceed the amount awarded by the jury at trial, that is not the relevant test. For Audio Technica, prevailing was more than just a matter of dollars. Trial Transcript, RE 119, PageID # 1799:16-1800:15. Victory was obtained through findings from the Court and jury, as expressed in the Final Judgment, that Audio Technica did in fact conduct qualified research activities and incur qualified research expenses such that it was entitled to claim tax credits. The dispute is not over for Audio Technica, as there are other years which may be disputed given the history of its treatment by the IRS. The Final Judgment, based on the verdict of the jury, was that Audio Technica conducted qualified research in every year at issue and conducted research activities in the development of every business component at issue. This is a victory that can be used to address future examinations of similar research activities. For a taxpayer that has faced the long battle of attrition through examination and litigation as Audio Technica has, that is not a small thing. Moreover, the Appellant's positions were not substantially justified. Appellant lost on every issue before the Court, which is not surprising considering after extensive discovery, Appellant identified no exhibits and no witnesses to support Appellant's case. It is further evidence that Appellant's position is unjustified when the Appellee rejected its own technical advisor's findings in examination that Audio Technica did in fact perform research activities and incurred qualified research expenses, and that 100% of the R&E department's annual wages could have been claimed.

As to Appellant's second issue, the District Court ruled correctly on Audio Technica's Motion in Limine regarding the fixed based percentage. The Credit for Increasing Research Activities, IRC §41 (also known as the R&D tax credit) includes, in its calculation, a review of research performed by the taxpayer historically. Of the 2005-2009 Tax Years at issue in this case, the only tax year which Appellant complains of is the 2007 Tax Year.³ The qualified research expenditures (QREs) and gross receipts⁴ for tax years 1984 to 1988 were part of the calculation for the 2002-2004, 2007 and 2010 Tax Years. The IRS audited tax years 2002-2004 which were filed before the U.S. Tax Court (docket no. 17540). The IRS also audited tax year 2010 — which was thereafter filed before the U.S. Tax Court (docket no. 27948). In the U.S. Tax Court cases, the IRS stipulated that the proper fixed base percentage using the QREs and gross receipts from 1984 to 1988 was 0.92%. For the 2007 Tax Year, the historical period utilized to calculate the R&D tax credit were the same tax years 1983-1988. The IRS already litigated and settled the historical tax years 1983-1988 for the QRE amounts in question. Appellant put forth no evidence why those settled upon and agreed amounts in tax years 2002, 2003, 2004, and 2010 should be dismissed or set aside by the Court.

Not only does Appellant fail to state any basis for inconsistent positions, Appellant never identified in discovery, pre-trial disclosure, or evidence or through any witness testimony any alternative fixed base percentage which would be more appropriate. Moreover, even assuming the Court erred in its ruling on the motion in limine, the motion in limine only required that the Appellant approach the Court prior to submitting evidence on this issue. There was no evidence or witness identified or offered by Appellant which would contradict or otherwise change the previously twice-blessed, fixed base percentage.

ARGUMENTS & AUTHORITIES

A. Factual Background & Procedural History

Audio Technica designs and manufactures electronics. The company creates high-performance microphones, headphones, wireless systems, mixers and electronic projects for home and professional use. Final Judgment, RE 144. Audio Technica designs products in Stow, Ohio for live sound tours, broadcast and recording studios, corporate and government facilities. These high-performance microphones range from the gooseneck microphones utilized by Congress to shotgun microphones used by the NFL and microphones used in recording studios by big named artists.

Audio Technica engaged in qualified research activities and incurred qualified research expenses as defined in sections 41 and 174 of the Internal Revenue Code in the carrying on of its business during the Tax Years ending March 31, 2002, March 31, 2003, March 31, 2004, March 31, 2005, March 31, 2006, March 31, 2007, March 31, 2008, March 31, 2009, March 31, 2010, and March 31, 2011. Final Judgment, RE 144.

Tax years ending March 31, 2002 – March 31, 2005 were examined by the IRS and were eventually litigated in Tax Court, resulting in a settlement as reflected in the Decision Document signed by the United States Tax Court on April 12, 2011 in Docket No. 17540-09. Final Judgment, RE 144 and Trial Transcript, RE 119 PageID # 1778:13-1779:7 and Trial Transcript, RE 119, PageID #1781:1-23. The Commissioner also selected Audio Technica's remaining Form 1120 Income Tax Returns, for Tax Years ending March 31, 2006, March 31, 2007, March 31, 2008 and March 31, 2009, March 31, 2010, and March 31, 2011, for examination. Final Judgment, RE 144 and Trial Transcript, RE 119 PageID # 1804:25-1805:18.

The 2010 Tax year was also examined by the IRS as part of the same examination of the 2005-2009 Tax years that form the underlying basis of the current case. Final Judgment, RE 144 and Trial Transcript, RE 119 PageID # 1804:25-1805:18. When the IRS disallowed the claimed research tax credits and issued a notice of deficiency, the 2010 matter moved to litigation in Tax Court. Id. Such litigation on the 2010 tax year resulted in a specific calculation of Plaintiff's research expenses, including identifying each employee that performed qualified research, each supply expense that was allowable, and each contract research expense that was allowable. Id. As a result of the agreements reached, all calculations were finalized by and through the Filed Stipulation of Settled Issues filed Decision Document signed by the United States Tax Court on November 25, 2015 under Docket Number 27948. Final Judgment, RE 144 and Trial Transcript, RE 119 PageID # 1804:25-1805:18.

Examinations of Audio Technica included interviews and a site visit conducted by Eric Peters, a technical advisor and engineer consultant assigned by the Commissioner. Trial Transcript RE 119, PageID #1815:12-1816:4, PageID # 1816:13-1817:24, PageID # 181918-1822:19, and PageID #1823:24-1828:16. The examination resulted in an April 2, 2012 memorandum from the engineer and technical advisor stating:

“A plethora of activities of current R&E in process was discussed and some in depth with Jackie. An entire plant tour with discussion allowed for a reasonable understanding of the corporate product development process and operations . . .

From the interviews and plant visitation, it is this engineer's opinion that little doubt exists that Jackie's department, and all the employees reporting to her, appear to be performing R&E activities that qualify for tax purposes. It also appeared that R&E activities were their primary duties. It is also reasonable to believe from what was witnessed during the site visit that all of Jackie's department employees probably could qualify 100% of their annual wages as R&E based upon de minimis application.”

Pl. Amended Complaint, RE 23, PageID #201-202 (quoting April 2, 2012 Exam Memo.)⁵.

At trial, after detailing the tour of Audio Technica's R&E department and research testing and equipment (Trial Transcript, RE 119, PageID # 1819:18-1822:19 and #1823:24-1828:16), Peters testified as follows:

“Q. And finally, Mr. Peters, with respect to cooperation that you received from Mrs. Green and her team as you did your site visit, how did you feel about whether they were trying to assist you to genuinely get to the answer?

A. They did a very good tour. I mean, it supported that they were definitely doing the research credit that we thought they indeed were.”

Trial Transcript, RE 119, PageID # 1828:10-16.

Despite the IRS's own technical advisor's analysis, Appellant disallowed Audio Technica's claimed research credits and the instant lawsuit was filed in U.S. District Court for the Northern District of Ohio. Orig. Complaint, RE 1. From the outset of the case, Appellant pushed for wide-ranging discovery. Hearing on Mot to Compel 3d Depo. of Pl. Corp Rep., RE 52, PageID #792-798, and 803-804. Appellant sought the same corporate representative for deposition on three separate occasions. Id. Audio Technica produced over 500,000 pages of documents during discovery. Trial Transcript, RE 119, PageID #1798:23-1799:1.

In the months prior to trial in the instant case, Defendant initially refused to admit the admissibility, or even authenticity of any document, other than the tax returns, forcing Audio Technica to prepare witnesses and to prepare for the travel of custodians of records to appear at trial. Pl. Memo in Opp to Mot to Dismiss, RE 133, PageID # 2587. Only on the first day of trial, after forcing Audio Technica to incur significant cost and expense to prove up the authenticity of all documents at trial, did Defendant finally remove its objections to authenticity and admissibility of the exhibits. Id.

Despite having access to thousands of pages of contemporaneous documents showing Audio Technica's work and development activities and despite the fact that Defendant's own technical advisor during examination reviewed Audio Technica's documents and interviewed Audio Technica's employees and concluded that Audio Technica's engineering department should qualify at 100%, Defendant refused to stipulate to any facts except employee gross wages and Audio Technica's gross receipts. Parties Prelim Stmnt and Stip of Fact, RE 87, PageID #1176.

The remaining Tax Years 2005-2009, at issue before this Court, were presented at trial to a jury. Jury Verdict for Plaintiff, RE 123. On the days of June 25, 2018 through June 29, 2018, this action was tried before a panel of eight (8) jurors. Final Judgment, RE 144.

At trial, Audio Technica presented over six thousand (6,000) pages of documentation including project documents, design drawings, testing documents, testing data, patents, photographs, and summaries of voluminous evidence in support of its case which were admitted into evidence. Id. All of the documentary evidence presented at trial had been produced to Defendant by November 21, 2017, at least seven months before trial. Pl. Memo in Opp. To Mot. to Dismiss, RE 133, PageID #2597-2598. The documents which showed Audio Technica's research activities were the same documents which were available and presented to the IRS for examination. Id. at PageID #2591

The uncontroverted oral testimony of seven (7) fact witnesses was also presented. These fact witnesses included Jacqueline Green (former vice president of Audio Technica's R&D and Engineering Department), Michael Fuller (Audio Technica's vice president and controller), Eric Peters (the IRS engineer and technical advisor on the R&D tax credit during examination), Jeff Hicks (an engineer and former employee of Audio Technica), Chris Nighman (an Audio Technica employee who worked in the quality control and audio solutions departments), Jim Lappin (an Audio Technica engineer and product manager), and Kurt Van Scoy (an Audio Technica product manager). Trial Transcript, RE 117-122, generally. The witnesses presented at trial, in addition to other Audio Technica personnel, were all available during the IRS examination. Trial Transcript, RE 119 PageID #1816:13-1817:24 and # 1823:24-1828:16.

Defendant introduced no exhibits into evidence and called no witnesses. Final Judgment, RE 144, Def. Trial Brief, RE 102, and Trial Transcript, RE 122, PageID # 2094:22-25.

On June 29, 2018, the jury rendered a verdict in favor of the Plaintiff Audio Technica. Jury Verdict for Plaintiff, RE 123. A jury found by unanimous vote that Audio Technica engaged in qualified research activities and incurred qualified research expenses as defined in sections 41 and 174 of the Internal Revenue Code in the carrying on of its business during the relevant Tax Years. Id. The jury unanimously found that Audio Technica conducted qualified research activities in all five years at issue. Id. The jury unanimously found that Audio Technica incurred qualified research expenses in all five years at issue. Id.

On March 28, 2019, the Court issued the Final Judgment finding that Audio Technica substantially prevailed. Final Judgment, RE 144. The Final Judgment also awarded “reasonable court costs.” No mention is made in the Final Judgment of any award of attorneys' fees. Id.

After over 10 years of examination of Audio Technica, and two cases litigated in Tax Court, a full examination of the years at issue, discovery in the instant case, and the presentation of uncontroverted documentary evidence and oral testimony at trial resulting in a unanimous jury verdict, Defendant filed two post-verdict frivolous motions raising for the very first time a challenge to the Court's subject matter jurisdiction to even hear the case. March 27, 2019 Order, RE 143. The District Court denied both motions. March 27, 2019 Order, RE 143.

On April 17, 2019, Audio Technica filed a Request to Enter Bill of Costs totaling $44,687.60, which included Clerk & Marshall Fees, the Recorded Transcript Fees, Printing Fees, and Travel Expenses for Out-of-District Counsel, under Federal Rule of Procedure 54(d) and U.S.C. sec. 1920. Pl. Req. for Bill of Costs, RE 145, PageID # 2899. Audio Technica made no request for attorneys' fees under section IRC 7430. In fact, Audio Technica has made no request for attorneys' fees. Id.⁶

B. The District Court's Ruling on Court Costs Should be Affirmed.

1. The Standard of Review.

Audio Technica agrees with Appellant that the standard of review of the Decision and Order awarding court costs is whether the District Court abused its discretion.

2. The Issue of Attorneys' Fees is Moot.

Appellant's issue on appeal related to the Court's Final Judgment award of reasonable court costs is frivolous. Audio Technica has not sought attorneys' fees under IRC section 7430. Further, the Court has awarded no such attorneys' fees so there is no order or decision to appeal.

While Appellant tries to manufacture an issue of clarity from the Court's Final Judgment, there is no lack of clarity. The Final Judgment awards no attorneys' fees and makes no mention of I.R.C. §7430. Final Judgment, RE 144. Audio Technica has made no request for attorneys' fees and made no request under I.R.C. §7430. Pl. Req for Bill of Costs, RE 145.

Audio Technica's Requests for Costs seeks reasonable court costs, not attorney fees, under section 28 U.S.C. §1920. Pl. Req. for Bill of Costs, RE 145. Audio Technica sought no relief under I.R.C. §7430. Id.

The Court's Order and Decision, which Appellant does not argue is unclear, expressly and only provides that reasonable court costs are awarded to Audio Technica under 28 U.S.C. §1920. Order and Decision, RE 149, PageID # 2925.

The issue brought by Appellant is moot. The appeal on the issue — nine (9) months after the notice of appeal was filed — is frivolous.

3. Audio Technica Substantially Prevailed at Trial.

The issue related to attorneys' fees is moot, however, to the extent there is any question regarding who substantially prevailed at trial, there is no question that Audio Technica was the prevailing party.

A “Prevailing party” is defined in § 7430(c)(4)(A)(i) as a party:

“i) which —

(I) Has substantially prevailed with respect to the amount in controversy, or

(II) Has substantially prevailed with respect to the most significant issue or set of issues presented. .”

26 U.S.C. §7430(c)(4)(A)(i) (emphasis added).

When determining if a party has prevailed with respect to the most significant issue or set of issues, the court determines whether the success of an issue determines if a party receives the benefit of their suit. Kopunec v. Nelson, 801 F.2d 1226, 1228–29, (10th Cir.1986); see also Chapoose v. Hodel, 831 F.2d 931, 936 (10th Cir.1987) (“[P]laintiff may be a prevailing party for the purpose of an award of attorney fees if he succeeds on any significant issue in the litigation which achieves some of the benefits which the parties sought in bringing suit.”) (internal quotations omitted). Justification on

a minor issue does not defeat an award of attorney's fees for a taxpayer that has prevailed with respect to the most significant issue. In re Kreidle, 145 B.R. 1007, 1015 (Bankr.D.Colo.) (citing In re Testimony of Arthur Anderson & Co., 832 F.2d 1057, 1060 (8th Cir.1987)).

In the instant matter, the three primary issues were:

1) Was Audio Technica performing qualified research activities?

2) Did Audio Technica incur qualified research expenses? and

3) Did the amount of qualified research expenses incurred by Audio Technica increase from the base period?

The jury rendered a unanimous verdict in favor of the Plaintiff Audio Technica on all three (3) issues. Jury Verdict for Plaintiff, RE 123. The jury found by unanimous vote that Audio Technica engaged in qualified research activities and incurred qualified research expenses as defined in IRC sections 41 and 174 of the Internal Revenue Code in the carrying on of its business during the relevant Tax Years. Id. The jury unanimously found that Audio Technica conducted qualified research activities in all five years at issue. Id. The jury unanimously found that Audio Technica incurred qualified research expenses in all five years at issue. Id.

4. Appellant's Positions were not Substantially Justified.

Appellant claims its positions were substantially justified, however, the determination of whether Appellant was substantially justified at trial is unnecessary and irrelevant because Audio Technica did not seek attorney fees from trial. Notwithstanding, it is nonetheless clear that Appellant was not substantially justified in its position and that it has utilized strategies of delay from examination through the Final Judgment. A position is only substantially “justified” when it is justified to a degree that could satisfy a reasonable person [or has] reasonable basis both in law and fact. U.S. v. Gwilliam, 110 A.F.T.R.2d 2012-5589 (D.Utah, Aug. 14, 2012) (citing to Pate, 982 F.2d at 459.

The jury found for Audio Technica unanimously on the primary issue. Jury Verdict for Plaintiff, RE 123. There was no basis in fact for Appellant's refusal to concede any primary issue. There was no basis in fact for Appellant's position that Audio Technica did not perform research. Appellant had twice before examined, litigated and recognized Audio Technica performed research. There was no basis in fact for Appellant's position that no qualified research expenses were incurred. Appellant had twice before examined, litigated and recognized Audio Technica incurred qualified research expenses. There was no basis in fact for Appellant's refusal to accept the base period calculation which had twice before been litigated and agreed to by Appellant.

The only defense raised by Appellant was that Audio Technica did not meet its burden of proof, or in other words, did not provide sufficient evidence for a prima facie case. However, during examination, Eric Peters, the technical advisor who actually reviewed the documents, performed a site visit and interviewed the personnel, and had the necessary background, determined from the outset that Audio Technica's R&E department and all personnel that reported to it not only performed qualified research activities, but all annual wages could have been claimed at 100%. Peter's examinations of Audio Technica included interviews and a site visit Trial Transcript RE 119, PageID #1815:12-1816:4, PageID # 1816:13-1817:24, PageID # 181918-1822:19, and PageID #1823:24-1828:16.At trial, after detailing the tour of Audio Technica's R&E department and research testing and equipment (Trial Transcript, RE 119, PageID # 1819:18-1822:19 and #1823:24-1828:16), Peters testified as follows:

“Q. And finally, Mr. Peters, with respect to cooperation that you received from Mrs. Green and her team as you did your site visit, how did you feel about whether they were trying to assist you to genuinely get to the answer?

A. They did a very good tour. I mean, it supported that they were definitely doing the research credit that we thought they indeed were.”

Trial Transcript, RE 119, PageID # 1828:10-16.

Had Audio Technica claimed all such personnel at 100%, the result would have exceeded the credit claimed by Audio Technica. Additionally, two separate tax periods with the exact same base period (1984-1988) were extensively examined, and all three resulted in an agreement that the fixed base percentage should be 0.92%. Trial Transcript, RE 119, PageID # 1804:25-1805:18. The IRS examining agent actually calculated a more favorable fixed base percentage of.78%⁷. At trial, all seven witnesses testified in favor of Audio Technica and their testimony was uncontroverted.Trial Transcript, RE 117-122, generally. Over 6,000 pages of documents were introduced showing the project documents, design drawings, patents, photographs, financial documents including gross wages and W-2s of the employees were presented. Final Judgment, RE 144. The Appellant presented no witnesses to support its case and presented no exhibits to contradict Audio Technica's evidence. Id. Such facts, taken with the unanimous decision of the jury, and the Trial Court's Final Judgment fairly establishes that Appellant had no substantial justification for its defenses. To the extent, it is required to show Appellant had no substantial justifications, such has been clearly established. Based upon the clear history of case after case being brought or forced by the IRS against Audio Technica for the same issue and the government either conceding or losing each time – serious questions arise as to why this pattern of harassment continues.

C. The District Court's Order In Limine Should Be Affirmed.

Prior to trial both parties filed several motions in limine. One of Audio Technica's Motions in Limine asked to prevent the Appellant from trying to introduce evidence of an alternative base amount or fixed base percentage to the jury. The Court correctly granted Audio Technica's Motion in Limine for the following reasons: 1) the District Court correctly applied the principles of Judicial Estoppel; 2) the Appellant never disclosed any alternative base calculation; 3) the Appellant never identified any evidence, either by witness testimony or documentary evidence, of any alternative base calculation or base amount; 4) because the ruling did not prevent the Appellant from raising the single defense argued, that is that Audio Technica did not meet its burden of proof, it only prevented the Appellant from introducing evidence of alternative calculations; 5) the Appellant waived any argument that it was unfairly prevented from introducing evidence the Appellant would have introduced because the Appellant made no offer of proof to demonstrate what that evidence would be; and 6) even if the Court's Order were in error, which it is not, such error would be harmless because Appellant identified no witnesses or exhibits at all, magnifying the point that there was no evidence that would have been introduced which controverted the base calculation.

1. The Standard of Review

The Appellant is correct that the applicable standard of review on evidentiary rulings is abuse of discretion as recognized in Louzon v. Ford Motor Co., 718 F.3d. 556, 560 (6^th Cir. 2013). However, to the extent that Appellant suggests that the standard of review is different in the instant matter because it includes an issue involving the application of judicial estoppel principles, Appellant is incorrect. The Court's order granting Audio Technica's Motion in Limine is an evidentiary ruling. The Order on Motion in Limine states that Appellant may not introduce evidence of a fixed base amount different than the same base amount agreed to by Appellant in two prior litigation matters. The Order did not preclude the Appellant from arguing that Audio Technica did not meet its burden of proof on the base issue. The Limine Order prevented Appellant from introducing evidence of an alternative theory of base that had not been previously introduced and which no evidence had been previously identified by Appellant. As an evidentiary ruling, Louzon v. Ford Motor Co., 718 F.3d. 556, 560 (6^th Cir. 2013), cited by Appellant is controlling, and abuse of discretion is the correct standard of review on the Motion in Limine.

Additionally, even if a court abuses its discretion in granting a motion in limine or making other evidentiary ruling, such error is not a reversible error if the error is harmless. U.S. v. Marrero, 651 F.3d 453, 471 (6th Cir.2011) (“[R]eversal is appropriate only if the abuse of discretion was not harmless error, that is, only if the erroneous evidentiary ruling affected the outcome of the trial.” (internal quotation marks and brackets omitted).

2. The District Court Acted Correctly and Within Its Discretion.

a. The District Court correctly applied the principles of Judicial Estoppel.

As the District Court correctly identified, the only evidence in the record shows the Appellant consistently agreed that the fixed base percentage, arising from tax years 1984 to 1988, was.92%. Despite the prior two (2) litigation matters involving tax years 2002, 2003, 2004 and 2010 — and the present tax matter covering tax years 2005 to 2009 — all of the 2007 Tax Year Appellant complains of on appeal relied upon the 1984 to 1988 time frame to calculate the.92% fixed base percentage. IRS attorneys from the IRS Office of Chief Counsel had previously agreed that the.92% was the proper fixed base percentage for Audio Technica arising from tax years 1984 to 1988.

Tax years 2001-2004 were examined and were litigated in Tax Court resulting in a settlement as reflected in the Decision Document signed by the United States Tax Court on April 12, 2011 in Docket No. 17540-09. Resp to Mot to Compel, RE 58-2, Trial Transcript, RE 119, PageID #1778:13-1779:7, and RE 119, PageID #1798:23-1799:1. The 2010 Tax year was also examined (included in the same examination that forms the underlying basis of the instant case) and then litigated in Tax Court. Resp to Mot to Compel, RE 58-3, Trial Transcript, RE 119, PageID #1797:4-19, and RE 119, PageID #1798:23-1799:1. The Tax Court litigation on the 2010 Tax year resulted in a specific calculation of Audio Technica's research expenses, including identifying each employee that performed qualified research, each supply expense that was allowable, and each contract research expense that was allowable. Id.; see also Pl. Reply to Opp. To Motion in Limine, RE 103, RE 103-1, RE 103-2, and 103-3. The Parties also reached specific agreement as to Audio Technica's Fixed Base Percentage (.92%) arising from tax years 1984 to 1988. Id.; see also Trial Transcript, RE 119, PageID # 1797:4-19. As a result of the agreements that were reached, the calculations were finalized by and through the Filed Stipulation of Settled Issues filed decision document signed by the United States Tax Court on November 25, 2015 under Docket Number 27948.

In determining the amount of R&D tax credits, the calculation determines the amount of increase of qualified research expenses incurred from a determined base period. There are three potential base periods that may be used depending on the taxpayer's history, an 80's base period, start-up base period, or Alternative Simplified Computation (“ASC”) base period. A taxpayer may choose whether to apply the regular credit calculation or the alternative simplified calculation. If using a regular credit calculation, the 80s base period amount may be applied. The 80's base period always involves the same tax years, 1984-1988. Therefore, the Fixed Base Percentage for an 80's base period taxpayer remains the same regardless of the tax years where the tax credit is claimed.

Appellant already agreed in two different stipulated settlements that the correct fixed base percentage for Audio Technica for the 1984-1988 base period is.92%.⁸ In reaching a final Stipulation in Tax Year 2010, Appellant specifically rejected the fixed base percentage determined by its own IRS' Revenue Agent Report⁹ (which was more beneficial to Audio Technica) and only agreed and accepted the 0.92% fixed base percentage, which was less friendly to Audio Technica.

In short, Appellant twice previously agreed to stipulated settlements recognizing that Audio Technica's fixed base percentage of.92% for the 1984-1988 base time period was correct. The District Court correctly recognized that under the principles of judicial estoppel, and general principles of equity and fairness, Appellant should be estopped from introducing new theories or evidence asserting a different calculation in the instant matter for a previously litigated time period (1984 to 1988). Order, RE 114.

A party may be estopped from taking inconsistent positions in different litigation matters under the doctrine of judicial estoppel. The government is no exception.

The doctrine of judicial estoppel prevents a party who successfully assumed one position in a prior legal proceeding from assuming a contrary position in a later proceeding. Mirando v. U.S. Dep't of Treasury, 766 F.3d 540, 545 (6^th Cir. 2014) (citing to New Hampshire v. Maine, 532 U.S. 742, 749, 121 S.Ct. 1808 (2001)).

“Judicial estoppel is an equitable doctrine that preserves the integrity of the courts by preventing a party from abusing the judicial process through cynical gamesmanship, achieving success on one position, then arguing the opposite to suit an exigency of the moment.”

Lorillard Tobacco Co. v. Chester, Willcox & Saxbe, 546 F.3d 752, 757 (6^th Cir. 2008) (internal quotation marks and citation omitted).

The Supreme Court has noted that the “circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation of principle.” However, three factors may typically be used to help a court decide whether it applies.

First, courts may look at whether a party's later position is clearly inconsistent with its earlier position. See New Hampshire v. Maine, 532 U.S. 742, 750-51, 121 S.Ct. 1808 (2001). Second, courts often inquire whether the party succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled. Id. A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped. Id.

In Reynolds v. C.I.R., 861 F.2d 469 (6^th Cir. 1988), this Court reviewed a matter with applicable facts. In Reynolds, this Court held that the IRS was judicially estopped from assessment of tax on capital gains resulting from a sale of leasehold interest and mineral rights derived from the taxpayer's coal mine. The IRS had previously taken the position in a bankruptcy proceeding with the taxpayer's former spouse that the former spouse recognized income and was required to pay taxes on the capital gains from the sale of leasehold interests and mineral rights from the coal mine. The IRS entered into a stipulation with the former spouse binding her to pay taxes on the gain. Subsequently, the IRS shifted gears and pursued the taxpayer asserting that he had recognized capital gains and was required to pay taxes.

While recognizing that courts should exercise some restraint in applying estoppel to the Government when the circumstances show the left hand not being aware of what the right hand is doing, this Court noted that the doctrine should apply when the Government is conscious of a prior inconsistent position, that is the taking of an inconsistent position was a “knowing assault” upon the integrity of the judicial system. As stated in Reynolds:

“What we have in the case before us appears to be a knowing assault upon the integrity of the judicial system. There has been no claim that the IRS was not fully conversant with all the pertinent facts at the time of the stipulation with Mrs. Reynolds, and we can perceive no reason why the IRS should be allowed knowingly to take a position in one judicial proceeding, secure final judicial acceptance of that position, and then knowingly attempt to persuade a different court to accept a fundamentally inconsistent position.”

Reynolds v. C.I.R., 861 F.2d 469 (6^th Cir. 1988).

In the instant matter, to the extent Appellant attempted to assert the fixed base percentage was anything other than 0.92%, it was inconsistent with the position it took in the 2010 Tax Court litigation. Appellant was successful in its position as the resolution was based upon the 0.92% fixed base percentage, specifically raising the Fixed Base Percentage from 0.78% to 0.92% to the detriment of Audio Technica, and it secured final judicial acceptance of that position.

The District Court was correct in recognizing that allowing Appellant to introduce evidence or assert a position contrary to what was litigated and resolved in Tax Court, and which had not been timely disclosed by Appellant in any pleading or discovery response, would have imposed an unfair prejudice to Audio Technica, who had already been repeatedly examined and forced to Court three times. This despite acknowledgment on more than one occasion by its examining technical advisor and counsel that Audio Technica conducts research.

As recognized in prominent secondary authority, “The dominant law clearly is that an agency must either follow its own precedents or explain why it departs from them.” K. Davis, ADMINISTRATIVE LAW TREATISE, §8.9 at 198 (2^nd ed. 1978)(citing to several court opinions including Ohio Fast Freight, Inc. v. U.S., 574 F.2d 316 (6^th Cir. 1978)). The rationale for administrative consistency in treatment, in addition to obvious principles of fairness, are that inconsistency undermines the integrity of the administrative process. Hatch v. Federal Energy Regulatory Comm'n, 654 F.2d 825, 835 (D.C.Cir.1981).

Unlike common civil litigants, the Government has different duties, and is expected to seek the right answer as opposed to winning through attrition or gamesmanship.“United States counsel has greater responsibilities to the justicesystem.” See Freeport-McMoRan Oil & Gas Company, 962 F.2d 45 (D.C.Cir. 1991); see also U.S. v. Portland Cement Co., 33 F.R.D. 513, 515 (W.D.Tex. 1963) (noting government attorney has an obligation to see that justice is done and that full disclosure should be made in tax case instead of hiding behind governmental privileges.)

As Stated in Freeport-McMoRan Oil:

“The notion that government lawyers have obligations beyond those of private lawyers did not originate in oral argument in this case. A government lawyer is the representative not of an ordinary party to a controversy, the Supreme Court said long ago in a statement chiseled on the walls of the Justice Department, “but of a sovereignty whose obligation . . . is not that it shall win a case, but that justice shall be done . . .”

Freeport-McMoRan Oil, 962 F.2d at 47 (citing to Berger v. United States, 295 U.S. 78 (1935)).

And, as also stated in Freeport-McMoRan Oil:

“In fact the American Bar Association's Model Code of Professional Responsibility expressly holds a government lawyer in a civil action or administrative proceeding to higher standards than private lawyers, stating that government lawyers have the responsibility to seek justice, 'and should refrain from instituting or continuing litigation that is obviously unfair.”

Freeport-McMoRan Oil, 962 F.2d at 47 (citing to American Bar Association Model Code of Professional Conduct EC7-14 (1981).

The government has already failed to meet that standard and obligation by unnecessarily subjecting a single taxpayer to Court three (3) times on an issue which they have consistently conceded or otherwise lost.

The District Court's decision was carefully considered and correct. While, the District Court, applying the principles of judicial estoppel, precluded the Appellant from introducing evidence of an alternative base calculation, the District Court's Order did not preclude the Appellant from arguing its only timely disclosed defense, that Audio Technica did not meet its burden of proof. The burden argument was the defense asserted by Appellant with respect to the base calculation and the argument with respect to which Appellant failed to present to the jury.

b. Appellant never disclosed any alternative theory of base calculation.

The Court correctly granted Audio Technica's Motion in Limine because the Appellant never disclosed any other alternative theory of base calculation. While Appellant asks this Court to reverse the District Court's evidentiary ruling complaining that Appellant was not allowed to introduce evidence of an alternative base calculation, the Appellant has never disclosed Appellant's theory of what the alternative base calculation should be, or Appellant's alternative fixed base percentage, or Appellant's proposed base amount. To this day, Appellee has still not been provided an alternative base calculation. Appellant can neither show an alternative base calculation nor show where within the record one was presented in the trial record. The Appellant's Trial Brief filed June 12, 2018, the day after the Appellant's response to Audio Technica's Motion in Limine and ten days before the Court's ruling, did not identify any alternative theory of a base calculation, fixed base percentage or base amount. Def. Trial Brief, RE 102, Page ID #1303-06.¹⁰ In fact, there is no evidence in the record of any other base calculation put forward by the Appellant.

c. Beyond not introducing evidence of an alternative base period, Appellant tried to preclude the introduction of base evidence as irrelevant.

While Appellant's complaint on appeal is that Appellant was prevented from introducing evidence of another fixed base calculation or percentage, the record, established through bilateral discovery, is devoid of any evidence which Appellant intended or could have offered of a different base calculation. In fact, Defendant United States of America's Trial Brief does not identify any witness to be called by Appellant nor any exhibit to be introduced by Appellant.Def. Trial Brief, RE 102 and Final Judgment, RE 144, PageID # 2892-93. Not only did the Appellant not identify any witnesses or exhibits, Appellant objected to its own technical advisor and engineer that actually advised during the examination of the tax credit, reviewed the records and interviewed Audio Technica's personnel. Def. Trial Brief, RE 102, PageID # 1307. Appellant also objected to the introduction of any evidence of research occurring in any year outside the Tax years at issue or the 80's base years of 1984-1988 as being “Irrelevant to the extent the documents are for years other than the Years at Issue.” Def. Obj. to Pl. Wintess(sic) and Exhibit Lists, RE 111, PageID 1339. Specifically, Appellant objected to the introduction of Audio Technica's personnel files, Exhibits 61, 63, 64, 66, and 67, because they contained information for years outside of 1984-1988 (the 80s base period) and the years 2005-2009 (the Tax years at issue). Id. Appellant also moved to exclude all evidence, argument or testimony for research activities in tax years other than 2005-2009 on the basis that it was not relevant to the instant case. Def. Mot in Limine for Preclusion Regarding Prior Tax Years, RE 108, PageID 1336. Appellant asked the Court to exclude all evidence of all research activities and expenses from other potential base years. Id.

If Appellant actually intended to determine a different or alternative base calculation, this material would have been essential. Additionally, the trial transcript is also devoid of any effort to introduce any specific evidence of an alternative base calculation, either through witness testimony or documentary evidence. Trial Transcript RE, generally.

3. The Court's Limine Order did not prevent Appellant from asserting or presenting its substantiation defense to the base calculation of burden of proof.

The Court did not abuse its discretion because the Limine Order did not prevent the Appellant from raising the only defense Appellant asserted as to the base calculation; that is, that Audio Technica did not meet its burden of proof. The Order only prevented Appellant from introducing evidence of alternative base calculations for the fixed base percentage. Given Appellant never identified any alternative base calculation or evidence of another fixed base percentage, and fought to prevent possible evidence in this regard, there is no evidence in the record that Appellant was prevented from introducing any evidence related to the base calculation. There is no evidence in the record that Appellant was prevented from asserting, moving to admit documents, or fact witness testimony into evidence regarding its assertion that Audio Technica did not meet its burden of proof in regards to the base calculation.

In fact, the record reflects that Appellant's substantiation and burden of proof arguments were made to the jury in opening and closing arguments. Trial Transcript, RE 118, PageID # 1503:6-1504:14 and RE 122, PageID 2165:1-2166:19. In fact, Appellant's entire closing argument was an argument that Audio Technica did not meet its burden of proof showing the required elements. Trial Transcript, RE 122, PageID # 2156-2166:19. The jury instructions also instructed on the elements of the R&D credit and the burden of proof. Trial Transcript, RE 122, PageID #2097:9-2098:15 and 2104-2117.

4. Appellant Waived Any Right to Complain of Exclusion of Evidence Because Appellant Made No Offer of Proof.

Appellant waived any right to complain about any alleged exclusion of evidence for two reasons: 1) Appellant made no offer of proof showing what specific evidence was excluded; and 2) To the extent Appellant now asserts that another base period calculation should have been applied, Appellant agreed in a Joint Preliminary Statement that the base period at issue was the 80s base period of 1984-1988.

Federal Rule of Evidence 103 requires that to preserve error for the exclusion of evidence, a party must inform the court of the substance of the evidence unless the substance is apparent from the context. Snyder v. AG Trucking, Inc., 57 F.3d 484 (6^th Cir. 1995); see also U.S. v. Luce, 713 F.2d. 1236, 1241 (1983). The record is devoid of any offer of proof made by Appellant. Transcript, generally. The substance of the evidence is not apparent from the context because there is no theory that the Appellant put forward as to an alternative base calculation, nor is there any witness designation or exhibit designated by Appellant which would have provided the District Court, or Audio Technica, an indication of the evidence intended to be introduced.

Appellant claims in a footnote in its brief that there was no waiver because no objection was needed. However, the Smith v. Rock-Tenn Serv., Inc., 813 F.3d 298 (6^th Cir. 2016) and U.S. v. Brawner, 173 F.3d 966 (6^th Cir. 1999) cases cited by Appellant did not involve an order excluding evidence, but involved rulings that admitted evidence over the objections of the appealing party. The steps to preserve error are different where there is an asserted exclusion of evidence. An offer of proof must be made under Federal Rule of Evidence 103(a)(2). This longstanding requirement has not changed since the Sixth Circuit holding in Snyder v. AG Trucking, Inc., 57 F.3d 484 (6^th Cir. 1995) (affirming the lower court's ruling exclusion of testimony evidence because the appellant failed to lay a proper predicate at trial and because appellant failed to make an offer of proof). In Snyder, this Court held that the appellant had waived any right to complain of the exclusion of oral testimony offered at trial because no offer of proof was made under Federal Rule of Evidence 103.

Understandably, a reviewing court needs to understand what specific evidence was excluded. In this matter, Appellant's complaint is hollow as Appellant identifies no specific evidence, no witness testimony, and no specific document that was allegedly excluded. As expressed in United States v. Luce:

“Evidence that is excluded must be included in the record through an offer of proof so that the reviewing court may have a clear basis from which to determine whether an error has been made. When a defendant has not testified, we are similarly without sufficient information to determine conclusively whether evidence of prior convictions could properly have been used to impeach. Without the defendant's testimony, any evaluation on our part of the probative value or prejudicial effect of his prior conviction is more likely to be “problematical and purely speculative.”

713 F.2d. 1236, 1241 (1983) (emphasis added).

While the Court in Luce was referring to the probative value of testimony of a witness in a criminal matter, the basic principle is the same. Without an offer of proof, or specific indication of what allegedly excluded evidence would have shown, any judgment on the probative value of the evidence or the prejudicial effect is problematic and purely speculative.

In addition to Appellant's waiver in not making any offer of proof, and failing to identify any witness or documentary evidence that was excluded, Appellant waived any challenge to the introduction of evidence of base periods outside the 80s base period. The Parties were required to submit a Joint Preliminary Statement before trial. The Joint Preliminary Statement was filed June 8, 2018, just three days before Appellant opposed the Motion in Limine on alternative 80's base calculations.As part of the Joint Preliminary Statement, Appellant agreed to the following statement:

“. . . To qualify for tax credits, a company must conduct 'Qualified Research' and must incur 'Qualified Research Expenses.' Federal law also requires that the Qualified Research Expenses be increasing over the amount spent in the 'Base Period'.

For that reason, the parties to this case may address Audio-Technica's research activities and expenditures in the 2005-2010 Tax Period and also between the years 1984-1988.

You will be asked to make certain factual determinations related to the issue. Audio-Technica and the United States have agreed they will make the tax computations base on how you decide the factual issues.”

Parties' Joint Prelim. Statement and Stip. of Fact, RE 87, PageID #1176.

The Joint Preliminary Statement, agreed to and signed by Appellant, waives any challenge to the base period being other than the 80s base period.

5. Even Assuming the Court's Ruling Was in Error, Which it is Not, Such Alleged Error Would Be Harmless Because There Was No Evidence That Could Have Been Introduced of Any Other Base Amount.

For the same reasons, Appellant waived its right to complain of the Limine Order and alleged exclusion of evidence, Appellant has failed to establish that any alleged error of the Court was harmful. It is not sufficient to show that the order or ruling of a lower court was in error. Appellant must show that the alleged error was sufficiently harmful.

Reversal is appropriate only if the abuse of discretion was not harmless error, that is, only if the erroneous evidentiary ruling affected the outcome of the trial. See U.S. v. Marrero, 651 F.3d 453, 471 (6th Cir.2011). In the instant matter, Appellant cannot show the alleged erroneous ruling on a motion in limine affected the outcome of the trial from the exclusion of evidence, because: 1) Appellant has not identified any evidence which was excluded; 2) Appellant cannot identify the probative value or unfair prejudice in having the alleged evidence excluded; and 3) Appellant never designated any witness or exhibit to be introduced at trial in Appellant's Trial Brief or during trial itself.

Additionally, Appellant was never prevented from making its timely disclosed argument that Audio Technica allegedly failed to meet its burden of proof. Appellant's trial brief, which stated its arguments and defenses, only states that Audio Technica could not meet its burden of proof. Appellant's Trial Brief never identified any other defense to Audio Technica's research claim related to the base calculation. Appellant has not identified how Appellant was prevented from making or presenting this defense at trial, or to the jury. There is no support for the proposition after the fact that had Appellant been allowed to present evidence of a base calculation other than the.92% fixed base percentage, Appellant's presentation of its case would have been different, or the result would have been different than the unanimous decision of the jury. Appellant cannot even identify what evidence was precluded or what argument, that had been disclosed to the Court and Audio Technica's counsel, that Appellant was prevented from making to the jury.

There has been no showing of abuse of discretion or harmful reversible error. To reverse the Final Judgment that resulted from a unanimous jury verdict after a week-long trial and submission of hundreds of thousands of pages of documents and evidence.

CONCLUSION

For the forgoing reasons, and based upon the clear authority set forth herein, Appellee, Audio Technica U.S., Inc. asks the this Honorable Court to AFFIRM the Trial Court's Final Judgment. Appellee, Audio Technica U.S., Inc. further respectfully requests reasonable court costs and for attorneys' fees incurred in preparation of the briefing, preparation for oral argument, travel expenses, and attendance at oral argument, should such be had, due to the frivolous nature of the appeal, which was filed for the purpose of delaying the application of a duly determined jury verdict. Appellee, Audio Technica U.S., Inc. additionally respectfully requests any further relief, in law or equity, to which Audio Technica U.S., Inc. may be found to be entitled.

Respectfully submitted,

Jefferson H. Read
Texas Bar No. 24025605

OF COUNSEL:

John H. Dies
Robert G. Wonish
Jeremy M. Fingeret
Zerbe, Miller, Fingeret, Frank & Jadav, P.C.
3009 Post Oak Blvd., Suite 1700
Houston, Texas 77056
Telephone: (713) 350-3529
Facsimile: (713) 350-3607
jdies@zmflaw.com
rwonish@zmflaw.com
jfingeret@zmflaw.com

Attorneys for Appellee/Plaintiff