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Case 3:21-cv-04062-EMC Document 121 Filed 01/18/22 Page 1 of 29
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`GUARDANT HEALTH, INC.,
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`Plaintiff,
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`v.
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`NATERA, INC.,
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`Defendant.
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`Case No. 21-cv-04062-EMC
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`PUBLIC/REDACTED VERSION
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`ORDER GRANTING IN PART AND
`DENYING IN PART PLAINTIFF’S
`MOTION TO DISMISS OR STRIKE
`AMENDED COUNTERCLAIMS
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`Docket No. 95
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`
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`Plaintiff Guardant Health Inc. (“Guardant”) filed this action against Defendant Natera, Inc.
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`(“Natera”) alleging that Natera launched a “campaign of false and misleading advertising directed
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`at” its new product—“Reveal”—a liquid biopsy cancer assay for early-stage colorectal cancer.
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`See Docket No. 1 (“Compl.”) ¶ 1. Natera then filed amended counterclaims (“Amended
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`Counterclaims”) against Guardant, alleging that Guardant has engaged in a “campaign of false and
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`misleading commercial statements regarding the performance of [Reveal].” See Docket No. 90
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`(“Am. Countercl.”) ¶ 3.
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`Pending before the Court is Guardant’s motion to dismiss or strike Natera’s Amended
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`Counterclaims. See Docket No. 95 (“Mot.”). For the following reasons, the Court DENIES
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`Guardant’s motion to dismiss Natera’s Counts I–IV and GRANTS its motion to dismiss or strike
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`Natera’s Counts V– VIII without prejudice.
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`I.
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`BACKGROUND
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`A.
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`Factual History
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`A detailed factual background of this case can be found in the Court’s order denying
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`Natera’s motion for a preliminary injunction. Docket No. 86 (“PI Order”) at 1–2. For the
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`purposes of this motion, the following facts are relevant. The parties offer competing diagnostic
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`tools for colorectal cancer (“CRC”)—Guardant’s “tumor-naïve” Reveal and Natera’s
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`“tumor-dependent” Signatera assay. Am. Countercl. ¶ 28. Guardant bases its contentions that
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`Reveal works on “[p]eer reviewed data published by Parikh, et al., in the journal of Cancer
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`Research” (the “Parikh Study”). Compl. ¶ 20; see Aparna R. Parikh et al., Minimal Residual
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`Disease Detection using a Plasma-Only Circulating Tumor DNA Assay in Colorectal Cancer
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`Patients, 021 Clinical Cancer Res. OF1, available at
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`https://clincancerres.aacrjournals.org/content/early/2021/06/22/1078-0432.CCR-21-0410.full-
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`text.pdf. The senior authors of the study are Dr. Aparna Parikh and Ryan Corcoran who are both
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`faculty at the Harvard Medical School and members of the Department of Medicine, Division of
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`Hematology and Oncology, Massachusetts General Hospital (“MGH”) Cancer Center. Docket
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`No. 90-1 (the “Parikh Study” or the “Study”) at OF1. 38 of the 43 authors who undertook the
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`study are affiliated with MGH and the remaining five authors are Guardant personnel. Id. at OF8.
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`The Parikh Study evaluated if a plasma-only minimal/molecular residual data (“MRD”)
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`assay, i.e., Reveal, can detect circulating tumor DNA (“ctDNA”) “with clinically meaningful
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`specificity and sensitivity.” Id. at OF2. “Specificity” “measures the percentage of negative results
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`that are correctly identified among non-recurring patients.” Am. Countercl. ¶ 34. “A test with
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`high specificity is more likely to identify the absence of cancer in a blood sample when no MRD
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`is in fact present, as verified by a clinical ‘gold standard’ (e.g., the patient remains recurrence-free
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`or progression-free).” Id. “Sensitivity” “measures the percentage of positive results that are
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`correctly identified among recurring patients, as verified by a clinical ‘gold standard’ (e.g.,
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`subsequent clinical or radiographic recurrence).” Id. ¶ 33. “A test with high sensitivity is more
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`likely to detect the presence of ctDNA in a blood sample in which MRD is actually present.” Id.
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`The Study allegedly “shows that Reveal offers 91% recurrence sensitivity (i.e., ability to identify
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`which patients will recur based on ctDNA detection) and 100% positive predictive value for
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`recurrence (i.e., all patients Reveal identified as having a ‘positive’ ctDNA test result later
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`recurred).” Compl. ¶ 20.
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`The Study utilized the banked blood samples of patients from MGH collected at various
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`time points from August 2016 to May 2019. Parikh Study at OF1, OF2, OF7. It presented data at
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`a “landmark” timepoint, “defined as the plasma specimen drawn approximately 1 month after
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`completion of definitive therapy (surgery alone or completion of adjuvant therapy for patients who
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`received adjuvant treatment).” Id. at OF2. It assessed data at “longitudinal timepoints,” “defined
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`by patients who had subsequent draws after their ‘landmark’ timepoint.” Id. And it assessed data
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`from “surveillance” draws, defined as “a draw obtained within 4 months of clinical recurrence.”
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`Id. The “surveillance” draws were purportedly defined based on methods employed by a separate
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`study, the Reinert study, which evaluated the efficacy of Natera’s product, Signatera.1 Id.
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`“Patients without clinical follow-up available were excluded from the study. Analysis was
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`completed for patients with at least 1 year of follow-up and for the overall eligible cohort.” Id. at
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`OF3.
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`The Parikh Study reported that, “Landmark recurrence sensitivity and specificity were
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`55.6% and 100%. Incorporating serial longitudinal and surveillance (drawn within 4 months of
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`recurrence) samples, sensitivity improved to 69% and 91%.” Id. at OF1. Specifically, of 70
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`landmark evaluable patients—i.e., patients who had their plasma specimen drawn approximately
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`one month after completion of definitive therapy––17 patients had detectable ctDNA. Id. at OF4.
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`Of the 17 patients with detectable ctDNA, 15 patients recurred. Id. The Parikh Study reports that
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`landmark recurrence specificity was 100%, however, because the two patients, who had detectable
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`ctDNA but did not recur, had a follow-up of less than one year and the Study only accounted for
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`patients with at least one year of follow-up. Id. Therefore, when accounting for patients with at
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`least one year of clinical follow-up, 15 of 15 patients with detectable ctDNA recurred, meaning
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`the landmark recurrence specificity was 100%. Id. Additionally, of the 49 patients without
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`detectable landmark ctDNA, 12 patients recurred. Id. In other words, of the 27 patients who
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`recurred, Reveal detected ctDNA in 15 of them and therefore the landmark recurrence sensitivity
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`was 55.6% and the specificity was 100%. Id.; see also id. at OF6, Fig. 3b.
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`1 Reinert T., Henricksen TV, Christensen E. et al. study entitled “Analysis of Plasma Cell-Free
`DNA by Ultradeep Sequencing in Patients with Stages I to III Colorectal Cancer,” published in
`JAMA Oncology in 2019. Am. Countercl. ¶ 29.
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`Case 3:21-cv-04062-EMC Document 121 Filed 01/18/22 Page 4 of 29
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`Furthermore, after “incorporating serial longitudinal samples” the sensitivity for recurrence
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`prediction improved to 69% and after incorporating “surveillance” samples the sensitivity
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`improved to 91%. Id. at OF1. The Parikh Study explains that “sensitivity for recurrence
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`prediction can be improved with longitudinal plasma monitoring.” Id. Nine of 14 patients “who
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`recurred despite no detectable landmark ctDNA or who lacked landmark draws had at least one
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`evaluable longitudinal specimen at a later timepoint.” Id. By integrating the longitudinal
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`specimens, the sensitivity improved to 69% because of the 29 patients who recurred, Reveal
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`detected ctDNA in 20 patients. Id. at OF6, Fig. 3b. The Parikh Study also “assessed performance
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`in patients with evaluable ‘surveillance’ draws, defined as a draw within 4 months of clinical
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`occurrence, and observed that sensitivity improved to 91%.” Id. at OF4. Seven of the 29 patients
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`who recurred did not have a surveillance draw. Of the 22 patients who recurred and had a
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`surveillance draw, Reveal detected ctDNA in 20 out of 22 patients, and therefore the sensitivity
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`improved to approximately 91% under a “surveillance” analysis. Id. at OF6, Fig. 3b.
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`After it was peer-reviewed, the Parikh Study was published in the journal Clinical Cancer
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`Research, which is published by the American Association for Cancer Research. Id. at OF1.
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`Guardant has referred to the results of the Parikh Study in its advertisements to doctors, clinicians,
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`and biopharmaceutical companies as well as communications with stakeholders regarding Reveal.
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`See, e.g., Docket No. 90-2 at 18 (conference presentation); Docket No. 90-3 (press release about
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`Reveal’s commercial launch).
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`B.
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`Procedural History
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`On May 27, 2021, Guardant filed the instant action seeking to enjoin Natera “from
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`continuing to make or disseminate false or misleading statements about the performance of Reveal
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`and Signatera; to require Natera to retract, remove, and correct these false and misleading
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`advertising claims; and to recover damages.” Compl. ¶ 4. Guardant raises four causes of action in
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`its Complaint: (1) false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B);
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`(2) false advertising in violation of section 17500 of the California Business and Professions Code,
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`Cal. Bus. & Prof. Code §§ 17500–17509; (3) unlawful trade practices in violation of section
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`17200 of the California Business and Professions Code, Cal. Bus. & Prof. Code §§ 17200–17210;
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`and (4) common law unfair competition. Id. ¶¶ 56–81.
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`On June 2, 2021, Guardant filed a motion for a temporary restraining order (“TRO”)
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`seeking to enjoin Natera from making derogatory statements about Reveal at the American
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`Society of Clinical Oncology (“ASCO”) annual meeting. Docket No. 12 (“First TRO Mot.”). By
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`the Court’s instruction, the parties filed a joint statement under seal on June 5, 2021, where they
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`agreed not to make any direct head-to-head comparisons of the products until the Court had a
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`chance to rule on Guardant’s forthcoming motion for a preliminary injunction. See Docket No.
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`25-3 (“Joint Statement”).
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`On July 20, 2021, Natera filed its own TRO motion, alleging that Guardant is
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`“disseminating false and misleading statements inflating the performance of Reveal . . . as part of
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`a sweeping new ‘Product Launch’ sales campaign commenced on or around July 15, 2021.” See
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`Docket No. 62 (“Second TRO Mot.”) at 1. Specifically, Natera challenged the veracity of the
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`following statements from a July 15, 2021 advertising email from Guardant’s sales team to
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`physicians around the country:
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`“Reveal has higher specificity than CEA [carcinoembryonic antigen
`tests, which are the current standard of care] in the surveillance
`setting;
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`Reveal has a 91% sensitivity in the surveillance setting;
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`Reveal’s PPV [positive predictive value] is 100% and can have
`benefits in patients with stage 2 colorectal cancer, including
`identifying patients who may benefit most from adjuvant therapy;
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`and Reveal has a greater lead time for detecting MRD
`[minimal/molecular residual disease] than current methods.”
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`Id. at 8. It complained that these statements “either lack any support in the Parikh study— the only
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`published study that has ever reported the performance of Reveal in anything approximating a
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`‘surveillance’ setting—or severely distort what Parikh actually reported about Reveal,” id. at 5–8.
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`The Court acknowledged that district courts in the Ninth Circuit have generally issued preliminary
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`injunctions in false advertising and unfair competition cases only when it is clear that the
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`commercial speech at issue is “literally false.” PI Order at 8. It denied Natera’s motion because it
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`was not clear that Guardant’s statements were literally false. Id. at 12.
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`On June 22, 2021, Natera filed its original answer and counterclaims, alleging that
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`Guardant had engaged in a “campaign of false and misleading commercial statements regarding
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`the performance of [Reveal].” See Docket No. 48 (“Countercl.”) ¶ 3. On August 3, 2021,
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`Guardant filed a motion to dismiss, Docket No. 77, but Natera filed its Amended Answer and
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`Counterclaims on September 7, 2021, Docket No. 90. Natera alleges violations of (1) the Lanham
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`Act; (2) false advertising in violation of California Business & Professions Code § 17500; (3)
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`unlawful trade practices in violation of California Business & Professions Code § 17200; and (4)
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`common law unfair competition. Docket No. 90 (“Am. Countercl.”).
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`In its Amended Counterclaims, Natera challenges, for example, the following statements
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`made in Guardant’s marketing materials and communications: (1) claims of 91% longitudinal
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`sensitivity; (2) claims of 100% “surveillance” specificity; (3) comparisons of Reveal’s lead time
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`and specificity to the standard of care (CEA) in the “surveillance” context; (4) claims pairing
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`“surveillance” sensitivity with 100% specificity from different analyses; and (5) claims about
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`benefits of Reveal to early-stage patients (collectively, the “Challenged Statements”). Am.
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`Countercl. ¶¶ 45, 51, 56, 69–70, 100–01. On September 21, 2021, Guardant filed the present
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`motion to dismiss Counts I–IV of Natera’s Amended Counterclaims and to dismiss or strike
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`Counts V–VIII of the Amended Counterclaims. Docket No. 95. The motion hearing took place
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`on November 19, 2021. Docket No. 119 (“Hearing Tr.”).
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`II.
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`APPLICABLE LEGAL STANDARDS
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`A.
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`Rule 12(b)(6)
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`Federal Rule of Civil Procedure 8(a)(2) requires a complaint to include “a short and plain
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`statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A
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`complaint that fails to meet this standard may be dismissed pursuant to Rule 12(b)(6). See Fed. R.
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`Civ. P. 12(b)(6).
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`To overcome a Rule 12(b)(6) motion to dismiss after the Supreme Court's decisions in
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`Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),
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`a plaintiff's “factual allegations [in the complaint] must . . . suggest that the claim has at least a
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`plausible chance of success.” Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014) (internal
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`quotation marks omitted). The court “accept[s] factual allegations in the complaint as true and
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`construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St.
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`Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But “allegations in a
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`complaint . . . may not simply recite the elements of a cause of action [and] must contain sufficient
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`allegations of underlying facts to give fair notice and to enable the opposing party to defend itself
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`effectively.” Levitt, 765 F.3d at 1135 (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.
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`2011)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the
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`court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
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`Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a ‘probability requirement,’ but it
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`asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting
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`Twombly, 550 U.S. at 556).
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`If the court dismisses pleadings, it “should grant leave to amend even if no request to
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`amend the pleading was made, unless it determines that the pleading could not possibly be cured
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`by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).
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`B.
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`Rule 9(b)
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`Claims sounding in fraud or mistake are subject to the heightened pleading requirements of
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`Federal Rule of Civil Procedure 9(b), which requires that a plaintiff alleging fraud “must state with
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`particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). To comply with this
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`heightened pleading standard, the plaintiff must allege the “who, what, when, where, and how” of
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`the alleged fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). “The
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`plaintiff must set forth what is false or misleading about a statement, and why it is false.” Id.
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`Although the Ninth Circuit has not definitively spoken as to whether Rule 9(b) applies to
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`Lanham Act claims, “the better reasoned [district court] authority is that, where a Lanham Act
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`claim is predicated on the theory that the defendant engaged in a knowing and intentional
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`misrepresentation, then Rule 9(b) is applicable.” 23andMe, Inc. v. Ancestry.com DNA, LLC, 356
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`F. Supp. 3d 889, 908 (N.D. Cal. 2018). The false advertisement allegations in Natera’s Amended
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`Counterclaims expressly allege that Guardant knowingly or willfully deceived consumers. See,
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`e.g., Am. Countercl. ¶ 124 (“Guardant made these false and misleading statements knowingly and
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`willfully.”). UCL and FAL claims sounding in fraud are also subject to the Rule 9(b) standard.
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`See Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 964 (9th Cir. 2018). Therefore, the Court
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`will evaluate whether Natera’s Lanham Act, FAL, and UCL counterclaims satisfy Rule 9(b).
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`C.
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`Rule 12(f)
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`Rule 12(f) only allows a court to “strike from a pleading an insufficient defense or any
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`redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “Immaterial
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`matter is that which has no essential or important relationship to the claim for relief or the
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`defenses being pleaded.” Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993) (internal
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`quotation marks omitted), overruled on other grounds, Fogerty v. Fantasy, Inc., 510 U.S. 517
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`(1994). As indicated by the language of the rule, “‘[t]he function of a 12(f) motion to strike is to
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`avoid the expenditure of time and money that must arise from litigating spurious issues by
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`dispensing with those issues prior to trial . . . .’” Id. When ruling on a motion to strike, a court
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`views the pleading under attack in the light most favorable to the nonmoving party. See RDF
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`Media Ltd. v. Fox Broad. Co., 372 F.Supp.2d 556, 561 (C.D. Cal. 2005).
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`A. Motion to Dismiss Counts I–IV
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`III.
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`DISCUSSION
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`Guardant moves to dismiss Natera’s counterclaims under the Lanham Act and California’s
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`false advertising, unfair trade practices, and common law unfair competition statutes (“Counts
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`I-IV”). Mot. at 1. It focuses on the Lanham Act and does not separately argue for dismissal of
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`Natera’s California claims. See Mot. at 6–24.
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`1.
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`Lanham Act
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`A prima facie case under Section 43(a) of the Lanham Act requires the plaintiff to
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`demonstrate that: “(1) the defendant made a false statement either about the plaintiff's or its own
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`product; (2) the statement was made in a commercial advertisement or promotion; (3) the
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`statement actually deceived or has the tendency to deceive a substantial segment of its audience;
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`(4) the deception is material, in that it is likely to influence the purchasing decision; (5) the
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`defendant caused its false statement to enter interstate commerce; and (6) the plaintiff has been or
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`is likely to be injured as a result of the false statement, either by direct diversion of sales from
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`itself to the defendant, or by lessening of goodwill associated with the plaintiff's product.” Jarrow
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`Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002).
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`In Southland Sod Farms, the Ninth Circuit held that to “demonstrate falsity within the
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`meaning of the Lanham Act, a plaintiff may show that the statement was literally false, either on
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`its face or by necessary implication, or that the statement was literally true but likely to mislead or
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`confuse consumers.” Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir.
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`1997). A plaintiff can prove that an advertisement claim based on product testing is “literally
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`false” by either “attacking the validity of the defendant’s tests directly or by showing that the
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`defendant’s tests are contradicted or unsupported by other scientific tests.” Id. “If the plaintiff can
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`show that the tests, even if reliable, do not establish the proposition asserted by the defendant, the
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`plaintiff has obviously met its burden” of demonstrating literal falsity. Id. In addition, “[w]hen
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`evaluating whether an advertising claim is literally false, the claim must always be analyzed in its
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`full context” and therefore “courts have held that a claim can be literally false ‘by necessary
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`implication.’” Id. (internal citations omitted).
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`The court in Southland Sod Farms did not have occasion to address whether the test for
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`falsity is altered where the challenged statements relate to a scientific peer-reviewed study. The
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`Second and Fifth Circuits have addressed the issue specifically.
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`In ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), the Second
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`Circuit considered “when a statement in a scientific article reporting research results can give rise
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`to claims of false advertising under the Lanham Act . . . .” ONY, 720 F.3d at 496–98. It created a
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`safe harbor for statements drawn from “conclusions from non-fraudulent data, based on accurate
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`descriptions of the data and methodology underlying those conclusions, [and] on subjects about
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`which there is legitimate ongoing scientific disagreement,” holding that these kinds of “statements
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`are not grounds for a claim of false advertising under the Lanham Act.” Id. at 498. The Second
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`Circuit further explained that disputes about these kinds of statements should not be resolved by
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`courts but by the scientific public:
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`“[I]t is the essence of the scientific method that the conclusions of
`empirical research are tentative and subject to revision, because they
`represent inferences about the nature of reality based on the results
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`Case 3:21-cv-04062-EMC Document 121 Filed 01/18/22 Page 10 of 29
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`of experimentation and observation. Importantly, those conclusions
`are presented in publications directed to the relevant scientific
`community, ideally in peer-reviewed academic journals that warrant
`that research approved for publication demonstrates at least some
`degree of basic scientific competence. These conclusions are then
`available to other scientists who may respond by attempting to
`replicate the described experiments, conducting their own
`experiments, or analyzing or refuting the soundness of the
`experimental design or the validity of the inferences drawn from the
`results. In a sufficiently novel area of research, propositions of
`empirical “fact” advanced in the literature may be highly
`controversial and subject to rigorous debate by qualified experts.
`Needless to say, courts are ill-equipped to undertake to referee such
`controversies. Instead, the trial of ideas plays out in the pages of
`peer-reviewed journals, and the scientific public sits as the jury.”
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`ONY, 720 F.3d at 496–97.
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`However, ONY excepted from this general rule of deference disputes about statements made
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`in a peer-reviewed, published study that are “literally false,” i.e., where the study at issue was
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`“fabricated” or “fraudulently created.” Id. at 497. Courts can resolves these kinds of disputes
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`because if “the data were falsified, the fraud would not be easily detectable by even the most
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`informed members of the relevant scientific community.” Id.
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`The Fifth Circuit has distinguished the Second Circuit’s decision in ONY in situations where
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`the challenged statements are directed at customers instead of the scientific community. In Eastman
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`Chem. Co. v. Plastipure, Inc., 775 F.3d 230 (5th Cir. 2014), the Fifth Circuit affirmed an
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`injunction, which permanently enjoined the defendant from distributing a brochure that contained
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`excerpts of a peer-reviewed study, in part because “the Lanham Act prohibits false commercial
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`speech even when that speech makes scientific claims.” Eastman, 775 F.3d at 233. In contrast to
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`statements made within the academic literature and directed at the scientific community” in ONY
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`the plaintiff in Eastman “sought to enjoin statements made in commercial advertisements and
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`directed at customers.” Id. at 236. “In this commercial context, the First Amendment is no
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`obstacle to enforcement of the Lanham Act.” Id. (citing Zauderer v. Office of Disciplinary
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`Counsel of Supreme Court of Ohio, 471 U.S. 626, 638 (1985) (“The States and the Federal
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`Government are free to prevent the dissemination of commercial speech that is false, deceptive, or
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`misleading . . . .”)). The Fifth Circuit held that “[g]iven the applicable binding precedent, it is of
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`no moment that the commercial speech in this case concerned a topic of scientific debate.
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`Case 3:21-cv-04062-EMC Document 121 Filed 01/18/22 Page 11 of 29
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`Advertisements do not become immune from Lanham Act scrutiny simply because their claims
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`are open to scientific or public debate. Otherwise, the Lanham Act would hardly ever be
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`enforceable . . . .” Id.
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`The Ninth Circuit has not embraced the deferential approach employed in ONY. Nor has it
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`addressed the Fifth Circuit approach in Eastman Chemical. In the PI Order, however, the Court
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`relied on ONY to deny Natera’s motion for a preliminary injunction and the parties address ONY in
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`their briefing. As a result, the Court will analyze the motion to dismiss under both the ONY and
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`the Southland Sod Farms standards.2
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`Guardant relies heavily on the Court’s decision to deny Natera’s motion for a preliminary
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`injunction to contend that the Court should also dismiss Natera’s Amended Counterclaims in the
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`present motion. See Mot. at 7, 9. But a motion for preliminary injunction calls for a heightened
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`legal analysis that is not applicable at the pleading stage. Under Rule 12(b)(6), the issue is
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`whether the allegations—taken as true and from which all reasonable inferences are drawn on the
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`pleader’s favor—establish a “plausible” claim. Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 556.
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`In contrast, for a preliminary injunction, the issue is whether the moving party is likely to succeed
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`on the merits of its claims. See Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).
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`In the PI Order, the Court held that it could not hold that the challenged statements were
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`“clearly false before discovery and expert testimony is taken” at the “early preliminary injunction
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`stage.” Id. at 12. It also could not determine that Natera was “likely to succeed on its allegations
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`that [Guardant’s statements] are false” because there were “compelling reasons to conclude that
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`claims based on the validity of the Parikh Study—or any other peer-reviewed, non-fraudulent
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`scientific study—are likely ‘non-actionable’ in the context of false advertising.” Id. at 13. That
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`2 Although this Court distinguished Southland Sod Farms during the preliminary injunction stage,
`it acknowledges its applicability here, at the pleading stage. In the PI Order, the Court found that
`Southland Sod Farms “is of limited help in determining at the preliminary injunction stage, where
`a full record has yet to be developed, as to whether the [Guardant’s statements] which are entirely
`based on the peer-reviewed Parikh Study are literally false.” PI Order at 9. Southland Sod Farms
`was distinguishable because it involved an appeal of a summary judgement order where the
`district court had the benefit of a full record. Id. at 9–10. In contrast, at the pleading stage unlike
`the preliminary injunction stage, Natera does not have to show that the Challenged Statements are
`“literally false,” only that it is plausible that they are “literally false.”
`11
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`Northern District of California
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`

`

`Case 3:21-cv-04062-EMC Document 121 Filed 01/18/22 Page 12 of 29
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`said, it held that it was “not prepared to decide that [Guardant’s statements] are ‘non-actionable’”
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`at the preliminary injunction stage. Id. at 12.
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`Unlike in the PI context, Natera alleges here that the Parikh Study is based on fraudulent
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`data and inaccurate descriptions of the data and methodology. Opp. at 14–21; compare PI Order
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`at 11. It claims that Guardant’s marketing claims are “wholly unsupported or are based on a study
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`in which Guardant manipulated the methodology and analysis to reach predetermined
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`conclusions”; claims that must be accepted as true and construed in the light most favorable to it at
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`this pleading stage. Docket No. 100 (“Opp.”) at 1. For the reasons explained below, Natera’s
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`allegations are plausible. ONY is inapplicable to Natera’s counterclaims that allege that
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`Guardant’s statements are unsupported by the Parikh Study and these claims are plausible under
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`Southland Sod Farms. As for its claims about Guardant’s statements that are based on the Parikh
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`Study, it sufficiently pleads facts to satisfy even the ONY standard as well as the Southland Sod
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`Farms standard. Id. at 14–24.
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`Given that the Ninth Circuit has not adopted the deferential standard in ONY, nor any other
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`circuit, the Court refuses to dismiss Natera’s Counts I–IV under Rule 12(b)(6), especially at this
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`early stage of the proceedings where the issue is simply the plausibility of the asserted claims.
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`2.
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`Incorporation-by-Reference Doctrine
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`As a preliminary matter, Natera objects to Guardant’s repeated reliance on portions of the
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`Thereasa Rich Declaration, Docket No. 68, and Justin Odegaard Declaration, Docket No. 12-2,
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`that are not the basis of its pleadings. Opp. at 8 n.11, 12 n.14. In a motion to dismiss under Rule
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`12(b)(6), evidence beyond the pleading should generally not be considered. Khoja v. Orexigen
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`Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018). An exception to this rule is when the
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`document is incorporated by reference into the complaint. Id. The incorporation-by-reference
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`doctrine “is a judicially created doctrine that treats certain documents as though they are part of
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`the complaint itself.” Id. at 1

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