Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 1 of 14 Page ID #:913
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`Present: The
`Honorable
`
`James V. Selna, U.S. District Court Judge
`
`Lisa Bredahl
`Deputy Clerk
`Attorneys Present for Plaintiffs:
`Not Present
`
`Not Present
`Court Reporter
`Attorneys Present for Defendants:
`Not Present
`
`Proceedings:
`
`[IN CHAMBERS] Order Regarding Defendant’s Motion to Dismiss
`
`Defendant Biosense Webster, Inc. (“Biosense”) moved to dismiss Plaintiff
`Innovative Health LLC’s (“Innovative Health”) corrected second amended complaint
`(“CSAC”). Dkt. No. 60. Innovative Health opposed the motion. Dkt. No. 61. Biosense
`then filed its Reply. Dkt. No. 69.
`
`After the Court posted its tentative order, Biosense requested a hearing. Dkt. No.
`70. Innovative Health then responded. Dkt. No. 72. The Court finds that no hearing is
`necessary, but has addressed certain concerns Biosense raised below.
`
`For the following reasons, the Court DENIES the motion.
`
`I. BACKGROUND
`
`1.
`
`Factual Background
`
`The background is drawn from the allegations in Innovative Health’s CSAC. See
`CSAC, Dkt. No. 58. Only the portions of the factual background relevant to the instant
`motion are discussed.
`
`This action involves a dispute between two competitors in the market for cardiac
`mapping systems and catheters. Biosense manufactures and sells the CARTO 3 cardiac
`mapping system and ultrasound catheters (SOUNDSTAR and ACUNAV) and high-
`density mapping catheters (PENTARAY and LASSO) for use with the system. Id. ¶¶ 2,
`7.
`
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 2 of 14 Page ID #:914
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`The CARTO 3 cardiac mapping system tests the electrical activity of the heart to
`diagnose abnormal heart rhythms. Id. ¶¶ 2, 6, 7. During the procedure, the physician
`uses a variety of catheters and relies on a technician to operate the mapping system
`software. Id. ¶¶ 6, 15.
`
`Biosense describes itself as the “global leader” in cardiac mapping systems and has
`more than 50% of the systems installed in the United States. Id. ¶ 7. The FDA approved
`the CARTO 3 system for sale on October 13, 2009. Id.
`
`The FDA has also cleared Innovative Health to reprocess and sell the same
`catheters to hospitals one to three additional times for single use before disposal. Id. ¶¶ 1,
`7.
`
`i.
`
`Catheter Market
`
`Innovative Health alleges that Biosense has monopoly power in the nationwide
`markets or submarkets for high-density mapping and ultrasound catheters for use with the
`CARTO 3 mapping system. CSAC ¶ 27. Specifically, Biosense has been able to charge
`supracompetitive prices for high-density mapping and ultrasound catheters. Id. Biosense
`has also maintained a dominant share of the market (estimated at 99%). Id. ¶ 28.
`Biosense also restricts output in the market and existing competitors lack the capacity to
`expand their output to effectively compete with Biosense. Id. ¶¶ 29-30.
`
`Biosense has also caused significant barriers to entry in those markets. Id. ¶ 32.
`For example, “Biosense has ownership rights and exclusive licenses to patents blocking
`development of competing brands for use on the CARTO 3 system” and has brand name
`power as well. Id. ¶ 32. It has also “created a closed system for connecting high-density
`mapping catheters and ultrasound catheters.” Id. ¶ 33. Biosense uses Because of
`encryption technologies on catheters. Id. ¶ 34. For third-party re-processors competing
`against Biosense, a change in Biosense’s in encryption “during the development process,
`can add an additional 8 to 12 months to time needed to enter the market.” Id.
`
`Biosense also imposes additional barriers to entry into the catheter markets through
`its predatory conduct. Id. ¶¶ 37-51. For example, as a result of Biosense’s training
`programs, it “hires away clinical support personnel from the few hospitals handling their
`own CARTO 3 Clinical Support by offering significantly higher compensation once the
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 3 of 14 Page ID #:915
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`hospital has incurred the expense of training the specialist.” Id. ¶ 41. As a result of then
`imposing noncompete agreements of 18 months or more on its own clinical account
`specialists, it is also able to limit the supply of qualified CARTO 3 Clinical Support
`specialists. Id.
`
`ii.
`
`Clinical Support Market
`
`In the CSAC, Innovative Health claims that a relevant service market exists for
`CARTO 3 clinical support. CSAC ¶ 8.
`
`In the CSAC, Innovative Health discusses the role of CARTO 3 Clinical Support
`relative to the catheters Biosense also provides. Innovative Health alleges that this
`service is unique and difficult to provide. Specifically, “[i]f there is no CARTO 3
`Clinical Support, the cardiac mapping procedure does not get done.” Id. CARTO 3
`Clinical Support requires the use of an expert to guarantee proper use of CARTO 3
`hardware, software, and catheters. Id. These experts are hired by Biosense, which
`operates a clinical account specialist training program, including “extensive life
`classroom and one-on-one clinical training on the CARTO 3 that lasts 6 to 12 months.”
`Id. According to Innovative Health, these experts “are not reasonably interchangeable
`with other allied health professionals, such as radiographers or sonographers,” and
`hospitals “must use a trained CARTO 3 clinical support specialist for CARTO 3
`procedures regardless of any price increase in CARTO 3 clinical support.” Id.
`
`Not only is CARTO 3 Clinical Support difficult to provide, but also, Biosense is
`“the only option for CARTO 3 clinical support” in “almost every hospital in the United
`States.” Id. ¶ 9. “Very few hospitals provide their own CARTO 3 clinical support,” and
`“on information and belief, California has just one hospital that provides its own CARTO
`3 clinical support and has the capability to provide” similar training to what Biosense
`itself provides. Id. This is because hospitals do not have the ability to start their own
`CARTO 3 Clinical Support programs. Id.
`
`Biosense also does not provide its training materials to hospitals so they can
`manage CARTO 3 themselves: “[u]pon information and belief, Biosense has not
`provided its own clinical account specialist training program or any comparable program
`with live classroom and one-on-one clinical training to hospitals to train their staffs to
`provide their own CARTO 3 clinical support.” Id. Biosense also has been “the sole
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 4 of 14 Page ID #:916
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`outside supplier to hospitals in the market for CARTO 3 clinical support” and “none of
`the other cardiac mapping system manufacturers offer clinical support, or training for
`clinical support, on the CARTO 3.” Id. ¶ 10.
`
`Innovative Health also alleges “relevant geographic markets or submarkets for
`CARTO 3 clinical support based on the geographic pods organized by Biosense to
`provide CARTO 3 clinical support in the United States.” Id. ¶ 11. There are “hundreds
`of clinical account specialists” organized into these geographic pods. Id. “[O]ne or more
`clinical account specialists will service the cluster of labs in that pod or territory.” Id.
`
`iii.
`
`Separate Market
`
`Innovative Health alleges a separate market for its catheter markets. Id. ¶ 19. “The
`prices of catheters are set independently of the price for clinical support” and Biosense
`even “sells catheters of all kinds without clinical support.” Id. Hospitals also purchase
`other catheters – those not from Biosense – without clinical support. Id. ¶ 19.
`Moreover, hospitals even “prefer to purchase catheters separately from the clinical
`support and routinely do so in the absence of the case coverage policy.” Id. Hospitals
`can realize “even larger cost savings on the higher-priced catheters” provided by
`Biosense by doing so. Id.
`
`Historically, the aforementioned was the case, but Biosense has “since initiated a
`program more than ten years ago to provide clinical account specialists free of charge to
`provide case coverage to develop physician relationships, cultivate brand loyalty, and
`drive catheter sales.” Id. ¶ 20. Since Biosense started this program, “nearly all hospitals
`have switched their CARTO 3 clinical support to Biosense and become accustomed to
`receiving CARTO 3 clinical support for free. They have also lost the capability to
`provide their own CARTO 3 clinical support or train their staff to do so.” Id. ¶ 20.
`
`Whereas CARTO 3 clinical support is not provided as part of the contract for the
`purchase of the CARTO 3 system, “Biosense has implemented a written policy of
`refusing to provide case coverage by its clinical account specialists in support of
`physicians at hospitals on cases with Biosense high-density mapping and ultrasound
`catheters reprocessed by competitors.” Id. ¶¶ 19, 20. To that end, “Biosense will pull its
`clinical support for the CARTO 3 if the hospital intends to use a high-density mapping
`catheter or ultrasound catheter reprocessed by a third party on the case.” Id. ¶ 20.
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 5 of 14 Page ID #:917
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`Once a hospital has purchased a cardiac mapping system – which Innovative
`Health claims Biosense is shielded from competition on the initial price – it is also likely
`to continue using the existing system. Id. ¶¶ 21-26. Hospitals do so not only because of
`Biosense’s initial courting of hospitals by building relationships with them, but also
`because the CARTO 3 systems are “already used at their hospital and perceived to be the
`established standard of care at that hospital specifically or in their locale generally.” Id. ¶
`25. Moreover, hospitals will hesitate to purchase a new cardiac mapping system given
`the enormous cost of doing so, and because “very few hospitals even have staff qualified
`to operate any cardiac mapping system to get trained for switching to a new system.” Id.
`¶ 26.
`
`Biosense also provides clinical support for some catheters not provided by it. Id. ¶
`
`19.
`
`2.
`
`Procedural Background
`
`On August 18, 2020, the Court granted in part and denied in part Biosense’s
`motion to dismiss. Dkt. No. 45. In addition to the matters described below, the Court
`granted the motion to dismiss the exclusive dealing causes of action. Id. at 11.
`
`Thereafter, Biosense moved for partial reconsideration on other issues addressed in
`the Court’s Order. Biosense claimed that while the Court dismissed the causes of action
`as they related to clinical support because Innovative Health failed to plausibly allege
`market power for clinical support, the Court erred in finding that Innovative Health could
`plausibly plead tying. Dkt. No. 46. The Court agreed, finding that Innovative Health
`needed to allege market power, but failed to do so, and granted Innovative Health ten
`days to submit a corrected second amended complaint. Dkt. No. 58. On October 16,
`2020, Innovative Health filed its corrected second amended complaint. Dkt. No. 58.
`Biosense then moved to dismiss. Dkt. No. 60.
`
`Innovative Health now asserts 12 causes of action against Biosense: (1)
`monopolization in violation of the Sherman Act, 15 U.S.C. § 2 (high-density mapping
`catheters); (2) attempted monopolization in violation of the Sherman Act § 2 (high-
`density mapping catheters); (3) tying in violation of the Sherman Act § 1 (high-density
`mapping catheters); (4) exclusive dealing in violation of the Sherman Act § 1 (high-
`density mapping catheters); (5) tying in violation of the Cartwright Act, Cal. Bus. & Prof.
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 6 of 14 Page ID #:918
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`Code § 16720 (high-density mapping catheters); (6) exclusive dealing in violation of the
`Cartwright Act (high-density mapping catheters); (7) monopolization in violation of the
`Sherman Act § 2 (ultrasound catheters); (8) attempted monopolization in violation of the
`Sherman Act § 2 (ultrasound catheters); (9) tying in violation of the Sherman Act § 1
`(ultrasound catheters); (10) exclusive dealing in violation of the Sherman Act § 1
`(ultrasound catheters); (11) tying in violation of the Cartwright Act (ultrasound
`catheters); and (12) exclusive dealing in violation of the Cartwright Act (ultrasound
`catheters). See generally, id.
`
`Biosense limited its discussion and its motion to dismiss to Innovative Health’s
`tying claims (i.e., the third, fifth, ninth, and eleventh counts in the SAC). Dkt. No. 59 at
`23.
`
`II. LEGAL STANDARD
`
`Under Rule 12(b)(6), a defendant may move to dismiss for failure to state a claim
`upon which relief can be granted. A plaintiff must state “enough facts to state a claim to
`relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
`(2007). A claim has “facial plausibility” if the plaintiff pleads facts that “allow[] the
`court to draw the reasonable inference that the defendant is liable for the misconduct
`alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
`
`In resolving a 12(b)(6) motion under Twombly, the Court must follow a two-
`pronged approach. First, the Court must accept all well-pleaded factual allegations as
`true, but “[t]hreadbare recitals of the elements of a cause of action, supported by mere
`conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. Nor must the Court
`“‘accept as true a legal conclusion couched as a factual allegation.’” Id. at 678-80
`(quoting Twombly, 550 U.S. at 555). Second, assuming the veracity of well-pleaded
`factual allegations, the Court must “determine whether they plausibly give rise to an
`entitlement to relief.” Id. at 679. This determination is context-specific, requiring the
`Court to draw on its experience and common sense, but there is no plausibility “where the
`well-pleaded facts do not permit the court to infer more than the mere possibility of
`misconduct.” Id.
`
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 7 of 14 Page ID #:919
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`III. DISCUSSION1
`
`Tying occurs when “the seller conditions the sale of one product (the tying
`product) on the buyer’s purchase of a second product (the tied product).” Rick-Mik
`Enters. v. Equilon Enters., 532 F.3d 963, 971 (9th Cir. 2008) (internal quotation marks
`omitted). “The essential characteristic of an invalid tying arrangement lies in the seller’s
`exploitation of its control over the tying product to force the buyer into the purchase of a
`tied product that the buyer either did not want at all, or might have preferred to purchase
`elsewhere on different terms.” Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S.
`451, 464 n.9 (1992) (internal quotation marks and alterations omitted).
`
`The coercion element requires showing that the defendant has “market power in
`the tying product.” Illinois Tool Works Inc. v. Indep. Ink, 547 U.S. 28, 34 (2006); see
`also Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 13-14 (1984), abrogated by
`Illinois Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28,(2006) (“[W]e have condemned
`tying arrangements when the seller has some special ability—usually called ‘market
`power’—to force a purchaser to do something that he would not do in a competitive
`market.”). Coercion requires more than “mere and incidental sales pressure.” Paladin
`Assocs., Inc. v. Montana Power Co., 328 F. 3d 1145, 1160 (9th Cir. 2003).
`
`“[T]o establish that a tying arrangement is illegal per se, plaintiffs must prove three
`elements: (1) a tie between two separate products or services sold in relevant markets; (2)
`sufficient economic power in the tying product market to affect the tied market; and (3)
`an effect on a not-insubstantial volume of commerce in the tied product market. See Bhan
`v. NME Hosps., Inc., 929 F.2d 1410, 1411 (9th Cir. 1991). However, a “tying
`arrangement which is not unlawful per se may be invalidated under the ‘rule of reason’ if
`
`1At the outset, the Court acknowledges Biosense’s argument that the CSAC is an improper
`attempt to amend a complaint that adds nothing substantively new. Biosense claims that the Court did
`not permit Innovative Health the opportunity to amend its complaint, only ordering it to submit a
`corrected second amended complaint. Dkt. No. 60 at 6. While the Court did order Innovative Health to
`submit a CSAC, its earlier order on Biosense’s motion to dismiss granted it thirty days to replead.
`Subsequent to that order, Biosense filed a motion for reconsideration as well as a motion to dismiss
`while other matters were still pending. Moreover, to the extent that Innovative Health claims that
`certain discovery is required to verify its claims (a claim which Biosense asserts is unfounded), the
`Court also recognizes that the current posture of this case is at a motion to dismiss. Therefore, the Court
`will consider Innovative Health’s CSAC.
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 8 of 14 Page ID #:920
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`the party challenging the tie demonstrates that it is ‘an unreasonable restraint on
`competition in the relevant market.’” Cty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d
`1148, 1157 (9th Cir. 2001) (internal quotations omitted). Under the rule of reason
`analysis, a Court analyzes “the degree of harm to competition along with any
`justifications or pro-competitive effects to determine whether the practice is unreasonable
`on balance.” Oltz v. St. Peter’s Community Hosp., 861 F.2d 1440, 1445 (9th Cir.1988).
`
`i.
`
`Failure to Identify a Separate Tying Market
`
`“The definition of an antitrust ‘relevant market’ is typically a factual rather than a
`legal inquiry, but certain legal principals govern the definition.” Apple Inc. v. Psystar
`Corp., 586 F.Supp.2d 1190, 1196 (N.D. Cal. 2008) (citing Newcal Indus., Inc. v. Ikon
`Office Solution, 513 F.3d 1038, 1045 (9th Cir. 2008)). A product market comprises
`“products that have reasonable interchangeability for the purposes for which they are
`produced—price, use and qualities considered.” United States v. E.I. duPont de Nemours
`& Co., 351 U.S. 377, 406 (1956). Pursuant to these guidelines, “the relevant market
`must include ‘the group or groups of sellers or producers who have actual or potential
`ability to deprive each other of significant levels of business.’” Newcal Indus., 513 F.3d
`at 1045 (quoting Thurman Indus., Inc. v. Pay ‘N Pak Stores, Inc., 875 F.2d 1369, 1374
`(9th Cir.1989)).
`
`Accordingly, a complaint should be dismissed under Rule 12(b)(6) only where “the
`complaint’s ‘relevant market’ definition is facially unsustainable.” Newcal Indus., 513
`F.3d at 1045. Such a “facially unsustainable” relevant market definition may be found in
`cases where “the plaintiff fails to define its proposed relevant market with reference to
`the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a
`proposed relevant market that clearly does not encompass all interchangeable substitute
`products even when all factual inferences are granted in plaintiff’s favor.” Colonial Med.
`Group, Inc. v. Catholic Healthcare W., No. 09–2192 MMC, 2010 WL 2108123, at *3
`(N.D. Cal. May 25, 2010) (quoting Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124
`F.3d 430, 436 (3d Cir. 1997)).
`
`In its motion, Biosense first claims that Innovative Health has failed to define a
`plausible separate tying market for clinical support. Dkt. No. 60 at 9-13.
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 9 of 14 Page ID #:921
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`Key to Biosense’s argument is that “according to Plaintiff’s own allegations,
`Biosense neither currently sells, nor has it ever sold, clinical support for CARTO 3; no
`other entity has ever sold such support; and Biosense’s free clinical support program was
`put in place incidental to its product sales and not in response to demand for a separate
`product.” Id. at 10. Because, at base, there is no price for clinical support, and
`Innovative Health even concedes that Biosense has provided clinical support as only
`incidental to the purchase of Biosense’s products and not as a separate service, Biosense
`asserts Innovative Health cannot demonstrate a separate tying market. Id.
`
`Biosense also asserts that Innovative Health’s claims fail the purchaser demand
`test, as both “direct and indirect facts alleged show that clinical support is not an
`independent product.” Id. Biosense claims that the allegations of direct evidence support
`a single product, as, for example, at one time, “Biosense did not have the alleged tie, and
`customers still overwhelmingly chose Biosense's catheters.” Id. at 11. Indirect evidence
`also shows a single product because the fact that “more hospitals do not continue to
`self-support shows that there is insufficient demand for clinical support as a separate
`product”, something which began more than ten years ago. Id. at 12-13.
`
`In its Opposition, Innovative Health claims that the CSAC clarifies the relevant
`market to be CARTO 3 Clinical Support, i.e., the operation of the CARTO 3 during a
`cardiac mapping procedure. Opp’n at 12, Dkt. No. 61. CARTO 3 Clinical Support also
`has all the practical indicia of an economically distinct submarket, according to
`Innovative Health: “public recognition of the submarket as a separate economic entity,
`the product’s peculiar characteristics and uses, unique production facilities, distinct
`customers, distinct prices, sensitivity to price changes, and specialized vendors.” Id.
`Moreover, clinical support is not provided for free, but rather, is “a scarce resource” as
`hospitals “pay significant sums to provide their own clinical support.” Id. at 14. Only
`Biosense can provide Clinical Support for free because it receives other benefits in
`exchange for it. Id. Effectively, Innovative Health argues that the cost of the support
`service is borne out by consumers having to pay monopolistic prices to purchase the
`clinical support. Id. at 14-15. Innovative Health also contends there is evidence of
`demand (i.e., $400 million in annual sales) for catheters apart from clinical support as
`many customers would not purchase the tied product from Biosense when given a choice.
`Id. at 15-16. Lastly, the lack of new entry into the market is evidence of power in the
`tied market. Id. at 18.
`
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 10 of 14 Page ID #:922
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`The Court finds that Innovative Health has sufficiently demonstrated a relevant
`product market, at least at the pleading stage.
`
`A relevant market “encompasses notions of geography as well as product use,
`quality, and description. The geographic market extends to the area of effective
`competition’ ... where buyers can turn for alternative sources of supply. The product
`market includes the pool of goods or services that enjoy reasonable interchangeability of
`use and cross-elasticity of demand.” Tanaka v. Univ. of S. California, 252 F.3d 1059,
`1063 (9th Cir. 2001) (internal quotations omitted).
`
`First, there is significant training and expense dedicated to sustaining enough
`professionals to support the market, and CARTO-3 Clinical Support is recognized by
`hospitals, physicians, and Biosense as a specialty, all of which demonstrates the existence
`of a market for CARTO 3 Clinical Support. See CSAC ¶¶ 10-11. Moreover, the
`situation is analogous to that in Eastman Kodak Co. v. Image Tech. Servs.,Inc., 504 U.S.
`451 (1992).
`
`In Kodak, the Supreme Court found that because the record had indicated that
`services and parts in the past had been sold separately and were still sold separately to
`self-service equipment owners, there was sufficient evidence of two markets. Kodak, 504
`U.S. at 462. While Biosense disputes the applicability of Kodak, arguing that the record
`there reflected distinct product markets and that is not the case here. Reply at 6-9, Dkt.
`No. 69. In Kodak, the Supreme Court found the following:
`Evidence in the record indicates that service and parts have been sold separately in
`the past and still are sold separately to self-service equipment owners. Indeed, the
`development of the entire high-technology service industry is evidence of the
`efficiency of a separate market for service.
`Kodak, 504 U.S. at 462. Here, the CSAC alleges that hospitals in the past have provided
`their own clinical support. CSAC ¶ 20. Some hospitals continue to do so. Id. ¶ 9. The
`CSAC also alleges that some hospitals that do not currently provide their own clinical
`support would prefer to do so now too. Id. ¶¶ 44-46. Like in Kodak, for the customers
`“who self-service, for example, [and] would purchase parts without the service,” here, it
`is plausible that hospitals would procure clinical support from other sources.
`
`Second, the Court is persuaded that Biosense is not the only provider in the market
`– hospitals can also provide their own CARTO 3 Clinical Support – and therefore, this is
`CIVIL MINUTES - GENERAL
`CV-90 (06/04)
`Page 10 of 14
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 11 of 14 Page ID #:923
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`not the situation involving a single-branded market. See CSAC ¶10; see also Green
`Country Food Market, Inc. v. Bottling Group, 371 F.3d 1275, 1282 (10th Cir. 2004)
`(“Even where brand loyalty is intense, courts reject the argument that a single branded
`product constitutes a relevant market.”). The Court also disagrees with Biosense that the
`lack of a change in Biosense’s market share in catheters demonstrates a single market.
`Reply at 10. The CSAC asserts a rough timeline establishing when the case coverage
`policy came into effect, as well as when Biosense began circulating the letter attached to
`the CSAC (informing consumers of its case coverage policy). CSAC ¶¶ 38, 47. The
`claim that Biosense’s market share should have increased (when it was already had a high
`market share) does not necessarily follow. Unlawfully maintaining share is just as
`actionable as unlawfully increasing share.
`
`Finally, Innovative Health describes a geographic market or submarket for
`CARTO 3 clinical support, noting the related geographic pods that exist and that
`Biosense organizes its clinical support specialists accordingly. See CSAC ¶ 11.
`
`Outside of these two points, the Court finds that the allegations are sufficient to
`withstand a motion to dismiss given the significant case law that Courts should not
`dismiss these claims unless they are facially unsustainable. Much of the Parties attention
`has focused on the applicability of Kodak to the instant case. In Kodak, the Supreme
`Court also noted that “[e]nough doubt is cast on Kodak’s claim of a unified market that it
`should be resolved by the trier of fact.” Kodak, 504 U.S. at 464. Biosense requests that
`the Court prevent Innovative from even reaching that stage. The Court cannot comply
`with that request. See, e.g., Tanaka, 252 F.3d at 1063–64; Newcal Indus., 513 F.3d at
`1045 (“[S]ince the validity of the ‘relevant market’ is typically a factual element rather
`than a legal element, alleged markets may survive scrutiny under Rule 12(b)(6) subject to
`factual testing by summary judgment or trial.”).
`
`The Court addresses another issue Biosense cites in its request for hearing. Dkt.
`No. 70. Biosense claims that the Court has shifted its holdings while the substantive
`allegations have gone unchanged. But that is incorrect – since filing the original
`complaint, the first amended complaint, the second amended complaint, and the now
`operative corrected second amended complaint, Innovative Health has revised its claims.
`Therefore, the Court finds that Innovative Health plausibly alleges a separate product
`market.
`
`CV-90 (06/04)
`
`CIVIL MINUTES - GENERAL
`
`Page 11 of 14
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`Case 8:19-cv-01984-JVS-KES Document 73 Filed 12/11/20 Page 12 of 14 Page ID #:924
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 19-01984JVS(KESx)
`Innovative Health LLC v. Biosense Webster, Inc.
`Title
`
`Date Dec. 11, 2020
`
`ii.
`
`Failure to Allege Market Power in the Tying Market
`
`Biosense next claims that Innovative Health does not plausibly allege a separate
`product market for clinical support, first because there are no significant barriers to entry,
`and second, because all of its allegations concerning anticompetitive effects in the
`catheter markets are conclusory.
`
`Biosense asserts that the CSAC does not plausibly plead market power
`circumstantially because even its previous allegation that Biosense maintained a 95%
`share of the purported market is alone insufficient to infer market power absent any
`barriers to entry. Dkt. No. 26 at 14-15. Biosense also claims that the barriers to entry
`pled in Innovative Heatlh’s CSAC – i.e., the hiring and training of clinical support
`technicians, physician relationships, or the free effect of its support – do not constitute
`actual barriers because they are not significant enough to constrain the market. Id. at 15-
`17. Its assertions related to the hiring and training of clinical support technicians fail
`because, first, these are not new allegations, and second, hospitals operated the CARTO 3
`without Biosense clinical support before Biosense’s clinical support program. Id. at 15.
`
`Biosense also asserts that Innovative Health’s claims concerning the
`anticompetitive effects in the catheter markets are conclusory because first, Biosense has
`not foreclosed competition as it only has a 90% share of the market and second, because
`the only claimed point of reference is that Biosense catheters for CARTO 3 are 10-20%
`higher than competitor catheters. Id. at 19.
`
`In Opposition, Innovative Health first contends that the Ninth Circuit tests market
`product for a tying claim by examining whether a defendant possesses enough economic
`power in the tying market to coerce its customers into purchasing the tied product. Opp’n
`at 19. It claims that it does not need to demonstrate barriers to entry. According to
`Innovative Health, the CSAC alleges coercion because Biosense “refuses to provide the
`clinical support without the high-density and ultrasound catheters.” Id. at 20. It also
`alleges high market share because Biosense has a market share of more than 95% of th