Health Indus. Bus. Commc'ns Council Inc. v. Animal Health Inst.

481 F.Supp.3d 941

HEALTH INDUSTRY BUSINESS COMMUNICATIONS COUNCIL INCORPORATED, Plaintiff,

v.ANIMAL HEALTH INSTITUTE, et al., Defendants.

No. CV-19-05088-PHX-MTL

United States District Court, D. Arizona.

Signed August 24, 2020

Nikia Lee Gray, Quarles & Brady LLP, Tucson, AZ, Otto Edwin Hinks, Quarles & Brady LLP, Phoenix, AZ, for Plaintiff.

Brett L. Dunkelman, Colin F. Campbell, David B. Rosenbaum, Osborn Maledon PA, Phoenix, AZ, Jon Myer Talotta, Pro Hac Vice, Hogans Lovells US LLP, Tysons, VA, for Defendant Animal Health Institute.

Michael R. Annis, Pro Hac Vice, Rudolph A. Telscher, Jr., Pro Hac Vice, Husch Blackwell LLP, St. Louis, MO, Robert Sessions Case, Pro Hac Vice, Husch Blackwell LLP, Dallas, TX, Dan W. Goldfine, Elizabeth B. N. Garcia, Husch Blackwell LLP, Phoenix, AZ, for Defendant DXC Technology Services LLC.

ORDER

Michael T. Liburdi, United States District Judge

Before the Court is the motion to dismiss filed by Defendants Animal Health Institute ("AHI") and DXC Technology Services LLC ("DXC") (collectively, "Defendants"). (Doc. 20.) Defendants move to dismiss all twelve of Plaintiff's claims. As discussed herein, the motion is granted in part and denied in part.

I. BACKGROUND

A. Plaintiff and the HIN System Database

Plaintiff Health Industry Business Communications Council Incorporated ("HIBCC" or "Plaintiff") is a "non-profit standards development organization that develops and administers the preeminent auto-identification and data transfer standards used in the healthcare industry." (Doc. 1 ¶ 8.) This includes its "proprietary" Health Industry Number ("HIN") System Database. Plaintiff developed the HIN System Database in the 1980s because the previous process for procuring materials in the healthcare industry was a "highly complicated activity." (Id. ¶¶ 8, 9.) HIN System Database users include drug and medical device manufacturers, distributors, hospitals, clinics, group purchasing entities, and medical provider offices. (Id. ¶ 11.) The HIN System Database is a "centrally administered, carefully maintained database of unique identifiers"—the HINs. (Id. ¶ 12.)

Each HIN is a "creative 9-digit alphanumeric character" with three components:

the first six characters of the identifier comprise the "base HIN" which identifies a healthcare entity at a particular location, the seventh character is a check digit for verifying the accuracy of the first six characters, and the last two characters are a suffix that uniquely identify a specific ship-to location, alternative location, or functional affiliation within the particular healthcare entity.

(Id. ¶ 13.) Each HIN "provides a unique and compressed way of identifying trading partners with ease." (Id. ) Plaintiff receives approximately 175,000 requests for HIN assignments each year. (Id. at 5 ¶ 15.) Prior to the actions giving rise to this lawsuit, Plaintiff asserts that the HIN System database was the only nine-digit alphanumeric identifier for trading partners. (Id. ¶ 19.) Plaintiff has obtained two registered HIN trademarks, an unregistered mark, and "numerous copyrights." (Id. ¶¶ 23, 30.)

B. AHI and DXC

AHI is a trade association for animal medicine manufacturers in the veterinary health industry. It is the central authority and governing body for the "AHI-EDI Special Project" (the "Animal Health Institute, Electronic Data Interchange Special Project") and the AHI-EDI Council. AHI-EDI Special Project members include manufacturers, vendors, and distributors dealing in animal medications, health devices, or other animal-related products. (Id. ¶¶ 37-39.)

On February 2, 1996, Plaintiff and AHI entered into an agreement (the "AHI Agreement") for AHI-EDI Special Project members to license a portion of the HIN System Database "relating to animal health trading partners" (hereinafter the "HIN System Animal Health Database"). (Id. ¶¶ 41, 42.) Pursuant to the AHI Agreement, Plaintiff also created a separate "Producer File" subset of the HIN System Animal Health Database for entities "primarily engaged in the keeping, grazing, or feeding of livestock for the sale of livestock or livestock products (including serums)." (Id. ¶ 46.)

DXT is an information technology software company. Plaintiff asserts that DXC has had a separate contract with AHI to administer the AHI-EDI Special Project since 1995. As such, the AHI Agreement required Plaintiff to provide DXC with access to the HIN System Animal Health Database. In this way, DXC served as an "IT intermediary" between Plaintiff and AHI. (Id. ¶¶ 50-53.) On February 19, 1996, DXC¹ also entered into a HIN System Data License Use Agreement with Plaintiff (the "DXC Agreement").

C. Defendants’ Alleged Misconduct

From 1996 through January 2019, Plaintiff "regularly" received requests for HIN identifiers from AHI-EDI participants. (Id. ¶ 59.) AHI-EDI participants are a "significant portion" of Plaintiff's customer base. (Id. ¶ 62.) Plaintiff alleges that, beginning in late 2018, Defendants knowingly misled Plaintiff while it "intentionally, knowingly, improperly coerced, induced, and/or diverted" AHI-EDI participants by creating a new and competing identification system. Defendants termed the new system the "AHN" ("Animal Health Number") system.

Specifically, Plaintiff alleges that by no later than November 2018, Defendants had "conspired and collaborated" to improperly use Plaintiff's property, including the HIN System Animal Health Database, the Producer File, and the HINs themselves, to create a new and competing identifier that is "structurally identical" to the HIN identifier. The new system also contains a records database copied from the HIN System Animal Health Database. (Id. ¶¶ 72-73.) Plaintiff also alleges that when AHI-EDI participants requested new HIN identifier assignments during this period, Defendants withheld those requests from Plaintiff and provided them with AHN identifiers instead. (Id. ¶ 76.) Plaintiff asserts that it began to receive complaints from confused customers in March 2019. (Id. at ¶¶ 92-94.) It also states that Defendants have created the false impression that Plaintiff "endorses, sponsors, is affiliated with or otherwise connected with" Defendants and the AHN system. (Id. ¶¶ 96-99; 104-105.)

On May 10, 2019, AHI notified Plaintiff that the AHI-EDI Project "decided to terminate HIBCC's services" effective July 1, 2019. (Id. ¶ 109.) Plaintiff states that Defendant informed AHI-EDI participants, without authority and incorrectly, that Plaintiff would continue to provide HIN identifiers and access to the HIN System Database through the end of 2019. (Id. ¶ 111.) Plaintiff states that Defendants "made these statements to encourage customers to adopt and/or try the AHN system, thinking they would still be able to hold on to their HIN identifiers" and to access Plaintiff's database for the rest of the year. (Id. ¶ 113.) Plaintiff asserts that Defendants have acted knowingly and willingly, and that because of their actions, Plaintiff "has lost and will further lose" its customers. (Id. ¶¶ 133-135.)

D. Procedural History

Plaintiff filed the Complaint against AHI and DXC on September 4, 2019. (Doc. 1.) It asserts claims for trade dress infringement, trademark infringement and unfair competition, and false advertising under the Lanham Act; unfair competition, trademark infringement, breach of contract, tortious interference with contractual relationships, tortious interference with prospective relationships, civil conspiracy, and breach of the implied covenant of good faith and fair dealing under Arizona law; copyright infringement under the Copyright Act; and seeks a permanent injunction. Defendants filed the pending motion on November 27, 2019. (Doc. 20.) Plaintiff filed a response on January 22, 2020. (Doc. 24.) Defendants filed a reply on January 31, 2020. (Doc. 27.) Oral argument was held on August 24, 2020.

II. LEGAL STANDARD

A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief" such that the defendant is given "fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Fed. R. Civ. P. 8(a)(2) ; Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ). Dismissal under Rule 12(b)(6) "can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1988). A complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle it to relief." Williamson v. Gen. Dynamics Corp. , 208 F.3d 1144, 1149 (9th Cir. 2000).

The Court must accept material allegations in the Complaint as true and construe them in the light most favorable to Plaintiff. North Star Int'l v. Arizona Corp. Comm'n , 720 F.2d 578, 580 (9th Cir. 1983). "Indeed, factual challenges to a plaintiff's complaint have no bearing on the legal sufficiency of the allegations under Rule 12(b)(6)." See Lee v. City of Los Angeles , 250 F.3d 668, 688 (9th Cir. 2001). Review of a Rule 12(b)(6) motion is "limited to the content of the complaint." North Star Int'l , 720 F.2d at 581.

III. ANALYSIS

Defendants argue eight independent grounds for dismissal which, combined, would dismiss all twelve of Plaintiff's claims. The Court will address Defendants’ arguments in turn. Ultimately, the Court will dismiss, without prejudice, Plaintiff's claims for tortious interference with contractual relationships (Count VII) and breach of the implied covenant of good faith and fair dealing (Count X).

A. Trade Dress

Defendants first move to dismiss Plaintiff's claim for trade dress infringement (Count I). The Lanham Act prohibits any person from using another's trade dress in commerce in connection with any goods or services. 15 U.S.C. § 1125(a). Trade dress refers generally to the total...