Exeltis USA Inc. v. First Databank, Inc.

Filing 222

ORDER by Judge Haywood S. Gilliam, Jr. GRANTING ( 168 , 209 ) MOTION FOR SUMMARY JUDGMENT.(ndrS, COURT STAFF) (Filed on 2/17/2021)

Case 4:17-cv-04810-HSG Document 222 Filed 02/17/21 Page 1 of 16

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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EXELTIS USA INC.,
Plaintiff,

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v.

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ORDER GRANTING MOTION FOR
SUMMARY JUDGMENT
Re: Dkt. Nos. 168, 209

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FIRST DATABANK, INC.,
Defendant.

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United States District Court
Northern District of California

Case No. 17-cv-04810-HSG

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Pending before the Court is Defendant First Databank, Inc.’s motion for summary

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judgment. See Dkt. No. 168.1 The Court heard argument on this motion. For the reasons detailed

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below, the Court GRANTS the motion.

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I.

BACKGROUND

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A.

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The parties are familiar with the largely undisputed facts of this case, and the Court only

Factual Background

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briefly summarizes them here as relevant to the pending motion for summary judgment. Plaintiff

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Exeltis USA Inc., a prenatal vitamin manufacturer, filed this action on August 17, 2017, against

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Defendant, challenging the new coding system that Defendant intended to implement for

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Plaintiff’s products in its pharmaceutical database called “MedKnowledge.” See Dkt. No. 160

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(“FAC”). According to Plaintiff, Defendant’s database is used by “payors,” including pharmacy

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benefit managers (“PBMs”) and Medicaid and private insurance providers to determine whether

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products are covered by public and private insurance plans. See id. at ¶¶ 1, 16, 53–58, 62–64; see

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Defendant initially filed its motion for summary judgment provisionally under seal, Dkt. No.
168, and later filed an unredacted version of the same motion after the Court denied the motion to
seal, Dkt. No. 209.

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also Dkt. No. 180-8, Ex. 15; Dkt. No. 179-10, Ex. 16 (“Lettrich Depo.”) at 16:6–23:24; See Dkt.

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No. 172 (“Lupinetti Decl.”) at ¶¶ 3–4.

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Defendant offers payors licenses to the MedKnowledge database, which includes
numerous fields, including clinical, descriptive, and pricing data about tens of thousands of

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pharmaceutical products. See Lupinetti Decl. at ¶¶ 2, 4, 9. Payors may use the database as part of

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their system to adjudicate claims and determine, based on the rules that the payors establish,

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whether to reimburse for specific products. See Lettrich Depo. at 16:6–21:24. Historically, the

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“class value” field in the MedKnowledge database indicated whether manufacturers identified

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their products as prescription-only. See Lupinetti Decl. at ¶¶ 9–10; see also Dkt. No. 179-2, Ex.

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18 at 29. Code “F” identified product labels that indicated prescription or physician supervision

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United States District Court
Northern District of California

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was required, including prescription prenatal vitamins, and “O” identified when the product label

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did not contain any dispensing limitations. See Dkt. No. 172-1, Ex. A.

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In May 2017, Defendant announced that it would revise its coding system. See Dkt. No.

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172-4, Ex. D; Dkt. No. 172-5, Ex. E. Defendant proposed adjusting the class value field to

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identify whether federal law requires a prescription. See id. Under this revamped class value

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field, code “O” would signify “[p]roducts with no federal legal prescription requirement.”

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Id. Under this new system, prescription prenatal vitamins would receive an “O” value. See Dkt.

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No. 172-5, Ex. E. Then in September 2018, Defendant announced a new plan: the creation of a

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new class value, “Q,” which would include all prenatal vitamins (both prescription and over-the-

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counter). See Dkt. No. 180-12, Ex. 38, at Ex. A at 3–4. Under this plan, class values “O” and “F”

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would be limited to drugs and medical devices as specified below:

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F – Prescription drugs or medical devices as defined in the Food Drug
and Cosmetic Act (FDCA), including bulk drug ingredients
O – Non-prescription drugs or medical devices
Q – Products that are neither drugs nor devices, such as dietary
supplements (including prenatal and other vitamins), medical foods,
herbal preparations, and bulk flavorings or colorants.

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See id. at 4.
Plaintiff alleges that these coding changes would falsely characterize its prenatal vitamins
as over-the-counter and mislead users of the database. See FAC at ¶¶ 93–109. Plaintiff further
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urges that Defendant’s new coding “will cause patients to lose coverage for prescription prenatal

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vitamins,” which are critical to preventing birth defects. Id. at ¶¶ 111–16. Plaintiff asserts that by

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October 14, 2019, Defendant implemented the coding change as to most of Plaintiff’s prescription

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prenatal vitamins—and many sold by other companies—in Defendant’s database. See Dkt. No.

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196 at ¶ 4. Based on these allegations, Plaintiff brings five causes of action against Defendant for

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(1) violating 15 U.S.C. § 1125(a)(1) of the Lanham Act; (2) violating California’s Unfair

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Competition Law prohibiting “unlawful, unfair, [and] fraudulent” conduct; (3) false advertising

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under Cal. Bus. & Prof. Code §§ 17500 et seq.; (4) intentional interference with prospective

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economic advantage; and (5) trade libel. See FAC at ¶¶ 117–160.
B.

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United States District Court
Northern District of California

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On December 21, 2017, the Court denied Plaintiff’s motion for a preliminary injunction,

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denied Defendant’s motion to strike the state law claims under California’s anti-SLAPP statute,

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and denied Defendant’s motion to dismiss all claims under Federal Rule of Civil Procedure

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12(b)(6). See Dkt. No. 57. Defendant appealed the Court’s denial of its special motion to strike

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on January 2, 2018. See Dkt. No. 58 (No. 18-15001). On October 4, 2019, the Ninth Circuit

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issued a memorandum disposition holding that Plaintiff’s filing of an amended complaint mooted

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the appeal of the anti-SLAPP denial. See Exeltis v. First Databank, No. 18-15001, Dkt. No. 62

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(9th Cir. Oct. 4, 2019). Following months of discovery, Defendant now moves for summary

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judgment. See Dkt. No. 168.

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II.

Procedural History

LEGAL STANDARD
Summary judgment is proper when a “movant shows that there is no genuine dispute as to

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any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

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A fact is “material” if it “might affect the outcome of the suit under the governing law.” Anderson

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v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And a dispute is “genuine” if there is evidence

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in the record sufficient for a reasonable trier of fact to decide in favor of the nonmoving party. Id.

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But in deciding if a dispute is genuine, the court must view the inferences reasonably drawn from

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the materials in the record in the light most favorable to the nonmoving party, Matsushita Elec.

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Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88 (1986), and “may not weigh the evidence
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or make credibility determinations,” Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997),

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overruled on other grounds by Shakur v. Schriro, 514 F.3d 878, 884–85 (9th Cir. 2008). If a court

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finds that there is no genuine dispute of material fact as to only a single claim or defense or as to

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part of a claim or defense, it may enter partial summary judgment. Fed. R. Civ. P. 56(a).

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III.

DISCUSSION
Defendant has moved for summary judgment as to all of Plaintiff’s claims. See Dkt. No.

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168. First, Defendant challenges Plaintiff’s Lanham Act, false advertising, and unfair competition

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law claims. Defendant contends that its database is not commercial speech and that Plaintiff

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cannot raise a genuine dispute as to whether its speech—reclassifying Plaintiff’s prenatal vitamins
as “[p]roducts that are neither drugs nor devices” under Class “Q”—could be found false or

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United States District Court
Northern District of California

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misleading. See Dkt. No. 168 at 12–31. Second, Defendant challenges Plaintiff’s intentional

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interference and trade libel claims, arguing that there is no evidence of actual malice. See id. at

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33–35.

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A.

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Lanham Act, False Advertising, and Unfair Competition Claims
i.

The Database Is Not Commercial Speech

Much as they did at the preliminary injunction stage in this case, the parties dispute

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whether the MedKnowledge database constitutes commercial speech. Plaintiff can only succeed

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on its Lanham Act and state law claims for violations of the FAL and UCL if Defendant’s

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database is commercial speech.2 Defendant urges that it is undisputed that it “has no economic

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motivation whatsoever to publish an ‘O’ or ‘Q’ for Exeltis’s products.” See Dkt. No. 168 at 12.

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In response, Plaintiff contends that the database is integral to commercial transactions by which

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“The Lanham Act prohibits any person from misrepresenting her or another person’s goods or
services in ‘commercial advertising or promotion.’” See Ariix, LLC v. NutriSearch Corp., No. 1955343, 2021 WL 221878, at *4 (9th Cir. Jan. 22, 2021) (citing 15 U.S.C. § 1125(a)(1)(B)).
Commercial advertising or promotion, in turn, is defined as: “(1) commercial speech, (2) by a
defendant who is in commercial competition with plaintiff, (3) for the purpose of influencing
consumers to buy defendant’s goods or services, and (4) that is sufficiently disseminated to the
relevant purchasing public.” Id. (emphasis added) (citing Coastal Abstract Serv., Inc. v. First Am.
Title Ins. Co., 173 F.3d 725, 735 (9th Cir. 1999)). Courts have also clarified that “California’s
consumer protection laws, like the unfair competition law, govern only commercial speech.”
Rezec v. Sony Pictures Entm’t, Inc., 116 Cal. App. 4th 135, 140 (Cal. Ct. App. 2004); see also
Kasky v. Nike, Inc., 27 Cal. 4th 939, 953–56, 962 (Cal. 2002), as modified (May 22, 2002).
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payors determine whether to reimburse for specific products under their respective insurance

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plans. See Dkt. No. 180 at 28–31.

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As this Court has previously explained, the law is not “clear” about “what type of speech
qualifies as commercial speech.” United States v. Schiff, 379 F.3d 621, 626 (9th Cir. 2004); cf.

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Kasky, 27 Cal. 4th at 956–60, 969 (applying Supreme Court precedent and declining to articulate a

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separate test for distinguishing commercial and noncommercial speech under the California

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Constitution). Although the Supreme Court has held that the “core notion of commercial speech”

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encompasses “speech which does no more than propose a commercial transaction,” see Bolger v.

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Youngs Drug Prod. Corp., 463 U.S. 60, 66 (1983) (quotation omitted), courts have been reluctant

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to articulate a bright-line rule to identify commercial speech that falls outside this “core” zone. Cf.

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United States District Court
Northern District of California

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City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 419 (1993) (acknowledging “the

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difficulty of drawing bright lines that will clearly cabin commercial speech in a distinct

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category”); Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of New York, 447 U.S. 557,

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579 (1980) (Stevens, J., concurring) (cautioning that commercial speech should “not be defined

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too broadly lest speech deserving of greater constitutional protection be inadvertently

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suppressed”). Rather, the “commercial speech analysis is fact-driven,” and courts “try to give

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effect to a common-sense distinction between commercial speech and other varieties of speech.”

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See Ariix, 2021 WL 221878, at *5 (quotations omitted). “Where the facts present a close

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question,” the Supreme Court has identified three non-exhaustive factors for courts to consider as

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part of the commercial speech analysis: (1) whether the speech is an advertisement; (2) whether

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the speech refers to a particular product; and (3) whether the speaker has an economic motivation

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for publication. See Ariix, 2021 WL 221878, at *5 (citing Bolger, 463 U.S. at 66–68); see also

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Kasky, 27 Cal. 4th at 969 (applying the same three-factor test under Bolger).

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Plaintiff acknowledges that to the extent the database is commercial speech, it falls outside

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the “core” commercial speech zone. See Dkt. No. 205 (“Hearing Tr.”) at 35:21–37:8.

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Defendant’s database provides information about third-party pharmaceutical products (including

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Plaintiff’s prenatal vitamins), not its own products. Other third parties then use this information as

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part of their claims adjudication systems to determine whether to reimburse for these
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pharmaceutical products. “The United States Supreme Court has never decided whether false

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statements about a [third party’s] product or service . . . would properly be categorized as

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commercial speech.” See Kasky, 27 Cal. 4th at 962. Still, in denying Defendant’s motion to

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strike, the Court left open the possibility that Plaintiff might be able to establish that the database

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was commercial speech, reasoning that “payors’ actual use of the database and the database’s

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primacy in actually effectuating reimbursement decisions may suggest that the database is

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commercial in nature.” See Dkt. No. 57 at 23. Now, after the parties conducted extensive

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discovery, Plaintiff contends that the database should be considered commercial speech because it

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operates as a “payment screen” that is “used to consummate a commercial transaction” in payors’

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United States District Court
Northern District of California

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claims adjudication systems. See Hearing Tr. at 36:24–37:8.
Plaintiff does not address the three Bolger factors directly. As to the first, however, there

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can be little dispute that the database is not in the form of a traditional advertisement. See Hearing

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Tr. at 32:5–7. Although the database provides information about thousands of pharmaceutical

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products, it is not directed, or even generally available, to the individuals who may ultimately

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purchase these products (i.e., patients or healthcare providers). Plaintiff suggests that the database

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is nevertheless commercial because it provides a service to payors, who rely on the information it

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contains. See Dkt. No. 180 at 24–25. Such an argument, however, proves too much. Under this

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interpretation, a phone book could be considered commercial speech because it too provides a

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service—the collection of residential, business, and consumer information—on which readers may

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rely for their own commercial ends. The Ninth Circuit, however, has held that phone books are

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noncommercial speech. See Dex Media W., Inc. v. City of Seattle, 696 F.3d 952, 957 (9th Cir.

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2012); cf. Ariix, 2021 WL 221878, at *6 (noting that a guidebook which rated nutritional

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supplements was not a traditional advertisement).

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As to the second Bolger factor, the database clearly references thousands of specific

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products. Yet the Ninth Circuit has explained that this factor may “not shed much light” on

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whether speech is commercial. See Ariix, 2021 WL 221878, at *6 (comparing a newsletter

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containing investment advice, which may be considered commercial speech, with product reviews,

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which generally are not considered commercial speech). The commercial speech analysis
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therefore turns on the third factor – whether Defendant had an economic motivation for the

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speech. Plaintiff argues that (1) Defendant provides commercial services to payors, and even

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promotes itself as “helping drive [payors’] business success,” Dkt. No. 180-22, Ex. 76; (2) the

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class value field, in particular, is used by payors “to process reimbursements,” Dkt. No. 180-23,

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Ex. 86; and (3) Defendant is paid an annual fee based on payors’ use of the database “to pay or

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deny a claim,” Dkt. No. 179-11, Ex. 17 at 11. See Dkt. No. 180 at 24–25; see also Hearing Tr. at

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31:9–35:20. In short, Plaintiff suggests that the database is commercial speech because Defendant

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has an economic interest in third parties’ use of the database for commercial purposes.
Plaintiff points to various witnesses who describe the significance of the class value field

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in payors’ reimbursement determinations.3 See Dkt. No. 180 at 20–28. For example, Phillip

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United States District Court
Northern District of California

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Lettrich, Defendant’s “primary point of contact” for “retail pharmacies, PBMs, and payors,”

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testified during his deposition that payors use the class value field as part of the algorithms they

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create in their claims adjudication systems to “determine coverage or noncoverage.” See Dkt. No.

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179-10, Ex. 16 (“Lettrich Depo.”) at 14:22–26:24, 68:12–73:16. Thus, a patient may go to a retail

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pharmacy to purchase a product; a pharmacist can look up the patient’s insurance information and

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the specific product in the payors’ claims adjudication system; and the pharmacist can determine

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within seconds whether the insurance provider approves or denies coverage for that product, as

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well as the amount of any copayment. See id. at 18:5–21:13. Plaintiff also proffers evidence that

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payors have expressed how important the class value field is to their claims adjudication systems.

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One PBM, for example, confirmed that the class value field “is utilized in [its] coding logic” and

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that the class value field “drive[s] coverage of vitamins at point of sale.” See, e.g., Dkt. No. 179-

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49, Ex. 67. However, these facts only underscore that third parties—not Defendant—use the

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information as part of their own commercial transactions.
Plaintiff next identifies evidence that Defendant is aware that payors rely on the class value

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field in making coverage determinations. Defendant’s Senior Vice President and Editorial

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The Court understands that Defendant argues that much of Plaintiff’s proffered evidence is
inadmissible hearsay. See Dkt. No. 189 at 6. Nevertheless, because the Court finds that this
evidence, even when considered in its entirety, is insufficient to raise a material dispute of fact, the
Court need not decide whether it is admissible.
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Director, Patrick Lupinetti, acknowledged that he had been “told primarily by manufacturers” that

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payors use the class value field as a “payment screen,” and that in practice “products classified as

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F are more likely to be paid than O.” See Dkt. No. 179-16, Ex. 22 (“Lupinetti Depo.”) at 99:7–

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100:17, 101:13–23. Similarly, James Breen, a First Databank clinical success department

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employee, testified during his deposition that he had heard from other employees that payors had

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“systems set up where they will allow products coded as ‘F’ to be reimbursed, but they will screen

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out products that are coded as ‘O.’” See Dkt. No. 179-3, Ex. 2 (“Breen Depo.”) at 33:7–35:22.

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Plaintiff also highlights that Defendant explained in a presentation to its parent company that the

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“Class field has become a default requirement by many payers for reimbursement of a claim; if we

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classify a product as an ‘O’ a claim for it is commonly rejected.” See Dkt. No. 179-12, Ex. 18, at

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United States District Court
Northern District of California

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29. But Plaintiff has failed to explain why Defendant’s knowledge of how payors use the database

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when making reimbursement determinations somehow implicates Defendant in those transactions.

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Plaintiff does not suggest that Defendant is actually making these reimbursement determinations

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or determining what is or is not covered under a specific insurance plan. Rather, Plaintiff’s

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evidence simply indicates that certain information in Defendant’s database (e.g., whether the

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product is labeled as prescription or over-the-counter) can drive payors’ decisions.

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Plaintiff further suggests that Defendant’s editorial decisions in maintaining and updating

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the database are driven by Defendant’s customers’ (i.e., payors’) feedback, and that Defendant is

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compensated based on payors’ use of the database. See Dkt. No. 180 at 23–24; Dkt. No. 179-11,

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Ex. 17. For example, Defendant acknowledged that it has contacted “key customers” in assessing

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the impact of making coding changes to the database. See Breen Depo. at 54:1–57:19. Defendant

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acknowledges that it maintains a “customer advisory panel” that is intended to “provide input and

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insight on potential editorial changes to First Databank.” Id. Plaintiff further points out that

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Defendant is paid an annual fee based on payors’ use of the database “to pay or deny a claim,”

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Dkt. No. 179-11, Ex. 17 at 11. Although Defendant appears to dispute this interpretation, Plaintiff

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at least suggests that Defendant’s compensation increases when a payor either pays or denies more

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claims in the aggregate. See Hearing Tr. at 13:22–14:10. But again, this merely underscores that

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Defendant has an incentive to provide the information that its customers require in a format that is
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useful to them. There is no question that Defendant has an incentive to sell its database and for its

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customers to use it. But as the Supreme Court has noted:

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If a newspaper’s profit motive were determinative, all aspects of its
operations—from the selection of news stories to the choice of
editorial position—would be subject to regulation if it could be
established that they were conducted with a view toward increased
sales. Such a basis for regulation clearly would be incompatible with
the First Amendment.

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Pittsburgh Press Co. v. Pittsburgh Comm’n on Human Relations, 413 U.S. 376, 385 (1973);

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accord Ariix, 2021 WL 221878, at *6 (“A simple profit motive to sell copies of a publication or to

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obtain an incidental economic benefit, without more, does not make something commercial
speech. Otherwise, virtually any newspaper, magazine, or book for sale could be considered a

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United States District Court
Northern District of California

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commercial publication.”).

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The Ninth Circuit’s recent opinion in Ariix, LLC v. NutriSearch Corp. offers an instructive

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comparison. 2021 WL 221878, at *5–9. In Ariix, a nutritional supplement company brought a

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false advertising claim against the publisher of a nutritional supplement guide, which the

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defendants stated was “an evidence-based book” without any “particular bias.” See id. at *2. The

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plaintiff argued that the guide was in fact “rigged” and that the defendants had an undisclosed

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financial arrangement with one of the plaintiff’s competitors, Usana, to rate Usana’s supplements

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as the best. Id.at *2–3. In analyzing whether the guide constituted commercial speech, the Ninth

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Circuit noted that “[o]n its face, the Guide purportedly describes the science of nutritional

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supplements and provides ratings for various nutritional supplement products,” and thus “does not

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appear to propose a commercial transaction.” Id. at *5. The court then considered the Bolger

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factors, specifically whether the defendant “acted primarily out of economic motivation” in

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publishing the guide. See id. at *6. The court explained that “economic motivation is not limited

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simply to the expectation of a direct commercial transaction with consumers,” but also can

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“involve[] indirect benefits.” Id. at *7.

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In finding that the guide was commercial speech, the Ninth Circuit emphasized that its

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decision was “a narrow one that is tied specifically to the troubling allegations in this case.” Id. at

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*8. The Ninth Circuit highlighted that according to the allegations in the complaint, the
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defendant’s CEO was paid inflated speaking fees in exchange for better reviews of Usana’s

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products; the defendant adjusted its rating criteria to favor Usana and thwart competitors from

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receiving the guide’s top rating; and the entire guide was in fact created to increase Usana’s sales.

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Id. at *2–3, 7. Based on these facts, the court concluded that the plaintiff had plausibly alleged

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that the defendants “published the Guide mainly with the economic goal of furthering their own

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self-interests beyond simply benefiting from sales of the publication” or “to inform consumers

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about nutritional supplements.” Id.at *7. The Ninth Circuit contrasted the “informational” aspects

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of the guide, including “the benefits and science of nutritional supplements,” with the “allegedly

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rigged ratings of nutritional supplements,” and concluded that the guide was “more like a

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sophisticated marketing sham rather than a product review guide.” Id. at *8–9.

United States District Court
Northern District of California

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No such facts exist here. Although Plaintiff repeatedly calls the class value field a

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“payment screen,” see, e.g., Dkt. No. 180 at 1, 5, 22, Plaintiff does not allege, let alone offer facts

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to support, that Defendant has somehow colluded with payors to establish which products will or

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will not be reimbursed. To the contrary, Plaintiff’s own evidence suggests that some payors

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complained to Defendant that the proposed coding changes would require them to undertake

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substantial work to change their algorithms. One PBM explained that the new “Q” code “would

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probably not work for us,” because the PBM was concerned with whether a product was

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prescription or over-the-counter. See Dkt. No. 179-14, Ex. 20 at 2. The PBM further noted that

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the coding change would require more “sophisticated programming” on the PBM’s part, and said

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that it likely would “not be the only [] client upset by this [new coding] announcement.” Id. In

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short, Plaintiff has not identified what direct or indirect benefit Defendant may receive for

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changing the manner in which it codes prescription prenatal vitamins, aside from selling licenses

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to its database.

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Plaintiff relies heavily on First Resort, Inc. v. Herrera, 860 F.3d 1263, 1271–76 (9th Cir.

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2017), and Handsome Brook Farm, LLC v. Humane Farm Animal Care, Inc., 700 F. App’x 251,

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264 (4th Cir. 2017), to argue that the database qualifies as commercial speech. See Dkt. No. 180

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at 24, 28–30. But in First Resort, the speaker was a pro-life medical clinic, and the speech was

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online “promotional advertising” to solicit “patronage of the clinic.” First Resort, 860 F.3d at
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1268, 1273–74. The Ninth Circuit concluded that the online advertising served the clinic’s “clear

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economic motivation” to fundraise by attracting new clients. Id. at 1276. Significantly, the clinic

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in First Resort conceded that it was “advertising and participating in a competitive marketplace for

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commercially valuable services.” Id. at 1274. The Ninth Circuit concluded that the case thus

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involved a “classic example[] of commercial speech.” Id. But as Plaintiff has already

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acknowledged, this case does not. See Hearing Tr. at 32:5–7.
In Handsome Brook Farm, the defendant sent an email to grocery retailers reporting that

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the plaintiff, an egg producer, lacked certifications for its representations that its eggs were organic

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and pasture raised. See Handsome Brook Farm, 700 F. App’x at 252–53. The email urged the

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retailers to consider changing to a different egg supplier. In finding that the email constituted

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United States District Court
Northern District of California

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commercial speech, the Fourth Circuit reasoned that the defendant had an economic motive for

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sending the email because the defendant certified certain egg producers as “humane,” and

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defendant received revenue from the eggs sold with its “Certified Humane” label. Id. at 258.

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Here, in contrast, Plaintiff does not argue that Defendant is paid more (or at all) based on whether

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a payor decides to pay or deny a claim for a specific product. The Court finds that First Resort

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and Handsome Brook Farm are thus inapposite.
As this Court foresaw in its order denying Plaintiff’s motion for a preliminary injunction,

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“there is no ready limiting principle under Plaintiff’s proposal: any speech could be commercial if

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eventually relied on by third-party actors who conduct business.” See Dkt. No. 57 at 11. Having

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considered the totality of the circumstances, the Court finds that there is no genuine dispute of

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material fact precluding the conclusion that the database is noncommercial speech as a matter of

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law. Plaintiffs’ Lanham Act, FAL, and UCL claims thus fail on this basis.4

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ii.

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Even if the database were considered commercial speech, Plaintiff’s Lanham Act claim

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The Database Is Not for Purpose of Influencing Consumers to Buy
Defendant’s Products or Services

also independently fails because not all commercial speech is actionable under the Lanham Act.

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Because the Court finds that the database does not constitute commercial speech, it need not
decide whether the coding changes are false or misleading.
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As noted above, “[t]he Lanham Act prohibits any person from misrepresenting her or another

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person’s goods or services in ‘commercial advertising or promotion.’” See Ariix, 2021 WL

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221878, at *4 (citing 15 U.S.C. § 1125(a)(1)(B)). Commercial advertising or promotion, in turn,

4

is defined as: “(1) commercial speech, (2) by a defendant who is in commercial competition with

5

plaintiff, (3) for the purpose of influencing consumers to buy defendant’s goods or services, and

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(4) that is sufficiently disseminated to the relevant purchasing public.” Id. (citing Coastal

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Abstract, 173 F.3d 735) (emphasis omitted).5 Here, Defendant argues that the database was not

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issued “for the purpose of influencing consumers to buy defendant’s goods or services.” Dkt. No.

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168 at 19–20. In response, Plaintiff suggests that this element is no longer required to find
actionable “commercial advertising or promotion” under the Lanham Act. See Dkt. No. 180 at 29.

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United States District Court
Northern District of California

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Relying on the Supreme Court’s opinion in Lexmark Int’l, Inc. v. Static Control Components, Inc.,

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572 U.S. 118 (2014), Plaintiff contends that it is enough that Defendant “falsely and deceptively

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described [Plaintiff’s] products in a manner that will cause [Plaintiff] and its customers significant

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harm.” See id.
Again, the Ninth Circuit’s recent opinion in Ariix is instructive. There, the majority

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ultimately remanded the case for the district court to determine in the first instance whether the

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nutritional supplement guide was intended to influence consumers to buy the defendants’ goods.

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See Ariix, 2021 WL 221878, at *10. The court did not, however, suggest that this element was

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abrogated by Lexmark. Cf. Ariix, 2021 WL 221878, at *14, (Collins, J., dissenting) (finding

20

explicitly that this “limitation also flows from the statutory language and remains valid after

21

Lexmark”). Rather, in a footnote, the majority advised the district court that “it may be useful to

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determine whether the defendants and Usana [a nutritional supplement manufacturer] had an

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agency relationship.” See id. at *10, n.10. If “the defendants were acting as agents of Usana and

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therefore had a vested interest in the goods that Usana sold,” the majority reasoned that “might be

25

enough to satisfy this element.” Id. Here, there is no suggestion that the database is intended to

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Although the Ninth Circuit has not yet weighed in, see Ariix, 2021 WL 221878, at *9, other
courts have found that the Supreme Court’s opinion in Lexmark appears to have abrogated the “in
competition” prong. See Genus Lifesciences Inc. v. Lannett Co., Inc., 378 F. Supp. 3d 823, 844
(N.D. Cal. 2019) (collecting cases).
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influence consumers to buy any of Defendant’s own goods or services. The database does not list

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any of Defendant’s own products or additional services. Rather, the database itself is Defendant’s

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product.

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The dissent in Ariix recognized that “there may be other endorsers who have such a direct

5

financial stake in specific sales of a product—such as a cut of each sale—that it may likewise be

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fair to say that they are thereby advertising their own product. Ariix, 2021 WL 221878, at *14.

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But Plaintiff has not advanced such an argument. Instead, Plaintiff states broadly that Defendant

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is “foundational to how prescription products are marketed and sold.” See Dkt. No. 180 at 29.

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Plaintiff further notes that Defendant “promotes itself on its website as an advertiser of sorts,
telling manufacturers: ‘You tell us. We tell the world.’” See id. at 29–30 (citing Dkt. No. 180-23,

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United States District Court
Northern District of California

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Ex. 77). Plaintiff thus suggests that Defendant and its database are integral to how manufacturers’

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products are sold. Id. (citing Dkt. No. 179-27, Ex. 37 at 179:2–24); see also Dkt. No. 179-15, Ex.

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21 at ¶¶ 23, 35–63, 65–66. Yet even if this is true, it is undisputed that the products listed in the

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database are not Defendant’s own.

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And Plaintiff does not proffer any facts to suggest that Defendant has an “agency

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relationship” with the manufacturers or any other sort of “financial stake in specific sales of a

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product,” such that Defendant has “a vested interest in the goods that [it] sold.” See Ariix, 2021

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WL 221878, at *10, 14, & n.10. Instead, Plaintiff acknowledges that Defendant is paid by payors

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and PBMs who license the database from Defendant. See Dkt. No. 180 at 24–25; see also Dkt.

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No. 179-11, Ex. 17 at 11. At most, Plaintiff suggests that Defendant tailors its database in the

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hope that payors will continue to license the database. That is not enough. Cf. Ariix, 2021 WL

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221878, at *15 (rejecting as insufficient evidence that defendant “wrote obsequious reviews in the

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hope that Usana would be pleased and buy more Guides or give [the CEO] speaking

24

engagements”). Plaintiff’s Lanham Act claim thus fails as a matter of law on the independent

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ground that the database is not “commercial advertising or promotion” as required under 15

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U.S.C. § 1125(a)(1)(B).

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B.

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Defendant next contends that Plaintiff’s intentional interference with prospective economic

Intentional Interference and Trade Libel

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advantage and trade libel claims fail because there is no evidence that Defendant acted with actual

2

malice. See Dkt. No. 168 at 33–34. As the California Supreme Court has explained, “[i]n order to

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advance society’s interest in free and open discussion on matters of public concern and to avoid

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undue self-censorship by the press, the First Amendment establishes a broad zone of protection”

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for speech, and the California Constitution “independently establishes a zone of protection that is

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broader still.” See Blatty v. New York Times Co., 42 Cal. 3d 1033, 1041 (Cal. 1986). Such

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protections “apply to all claims whose gravamen is the alleged injurious falsehood of a statement,”

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regardless of the claim’s label. Id. at 1042. Thus, here, Plaintiff has the ultimate burden of

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establishing by clear and convincing evidence that Defendant published a substantially false
statement and acted with actual malice in doing so. See id. at 1042, 1047–48; see also Unelko

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United States District Court
Northern District of California

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Corp. v. Rooney, 912 F.2d 1049, 1057–58 (9th Cir. 1990) (applying the actual malice standard to

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claims for trade libel and tortious interference with business relationships).

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“Actual malice consistently has been deemed subjective in nature, provable only by

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evidence that the defendant ‘realized that his statement was false or that he subjectively

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entertained serious doubt as to the truth of his statement.’” See Newton v. Nat’l Broad. Co., 930

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F.2d 662, 511, n.30 (9th Cir. 1990) (quoting Bose Corp. v. Consumers Union of U.S., Inc., 466

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U.S. 485, 515 (1984)); see also Sutter Health v. UNITE HERE, 186 Cal. App. 4th 1193, 1210

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(Cal. Ct. App. 2010) (describing “[t]he standard of actual malice [as] a daunting one” and noting

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that the evidence “must be of such a character as to command the unhesitating assent of every

20

reasonable mind”).

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Defendant argues that both its initial proposal to reclassify Plaintiff’s prenatal vitamins as

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“O” and its final decision to reclassify Plaintiff’s prenatal vitamins as “Q” convey entirely true

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information. See Dkt. No. 168 at 33–34. Under the initial proposal, the revamped class value

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field, code “O,” would signify “[p]roducts with no federal legal prescription requirement.” See

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Dkt. No. 172-4, Ex. D; Dkt. No. 172-5, Ex. E. Defendant urges that as a dietary supplement,

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Plaintiff’s products have “no federal legal prescription requirement.” See id. at 26–28. And under

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the new coding system that Defendant instituted, Class “Q” is defined as “[p]roducts that are

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neither drugs nor devices.” Defendant further argues that Plaintiff’s products are dietary
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Case 4:17-cv-04810-HSG Document 222 Filed 02/17/21 Page 15 of 16

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supplements and not drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”). Id. at 25–

2

28. Defendant contends on these bases that Plaintiff cannot establish actual malice.
In response, Plaintiff contends that Defendant acted with the required actual malice

3
4

because Defendant was aware of the confusion that its coding change would cause, and

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Defendant’s Senior Vice President and Editorial Director harbored “loath[ing]” and “distaste for

6

prescription prenatal vitamins.” See Dkt. No. 180 at 33–34 (citing Dkt. No. 179-25, Ex. 34 and

7

Dkt. No. 179-26, Ex. 35). For example, Plaintiff points to an email in which Mr. Lupinetti called

8

prescription prenatal vitamin manufacturers “mountebanks.” See Dkt. No. 179-26, Ex. 35.

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Reading these statements in their entirety, however, Mr. Lupinetti appears to be questioning the
veracity of these manufacturers’ labels. He notes that some manufacturers “are claiming they

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United States District Court
Northern District of California

10

make prescription products but are not self-identifying as manufacturers of prescription products.”

12

See id. He also cites concern that the FDA is not adequately regulating manufacturers’ claims, and

13

states that “prescription versions [of prenatal vitamins] can charge $3.00 a pill as opposed to two

14

cents.” See Dkt. No. 179-25, Ex. 34.
Even accepting Plaintiff’s theory that Mr. Lupinetti and others harbored personal animus

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against prescription prenatal vitamin manufacturers, this does not create any genuine issue of fact

17

as to whether Plaintiff can show clear and convincing evidence of actual malice. The actual

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malice standard asks whether the speaker made a false statement while knowing it was false or

19

subjectively entertaining serious doubt as to its truth. The Court understands that Plaintiff

20

contends the new coding system is confusing, and that it is false as to its prescription prenatal

21

vitamins. But none of Plaintiff’s evidence suggests that Defendant thought its new coding system

22

was false generally, or false as applied to Plaintiff’s products. Rather, the evidence before the

23

Court—and indeed the very existence of this litigation—indicates that Defendant believed, and

24

believes, that the new coding system is accurate. The actual malice standard is a demanding one,

25

and the Court finds that there is no evidence in the record sufficient for a reasonable trier of fact to

26

find actual malice by clear and convincing evidence. Plaintiff’s intentional interference and trade

27

libel claims thus fail.

28

//
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IV.

CONCLUSION
Accordingly, the Court GRANTS Defendant’s motion. The clerk is directed to enter

judgment in favor of Defendant and to close the case.
IT IS SO ORDERED.
Dated: 2/17/2021
______________________________________
HAYWOOD S. GILLIAM, JR.
United States District Judge

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