Philips North America LLC v. Advanced Imaging Services, Inc.

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 PHILIPS NORTH AMERICA LLC, No. 2:21-cv-00876-JAM-AC 12 Plaintiff, 13 v. ORDER DENYING PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION 14 ADVANCED IMAGING SERVICES, INC., d/b/a Advanced Imaging 15 Parts; and WANG XIUYUAN a/k/a Sean Wang, 16 Defendants. 17 18 This case involves a dispute between a manufacturer of 19 medical equipment, Philips North America LLC (“Philips” or 20 “Plaintiff”), and a business which contracts with hospitals and 21 clinics to repair and maintain that equipment, Advanced Imaging 22 Services. See Compl. ¶¶ 1-2, ECF No. 1. After Philips updated 23 its software to require login credentials to access certain items 24 within the systems, Advanced Imaging Services acquired a fake 25 login so that it could continue servicing the equipment. Id. 26 ¶¶ 34-41. Philips then filed this action and requested 27 preliminary injunctive relief. Mot. for Prelim Inj (“Mot.”), ECF 28 No. 6. Because Philips has failed to meet its burden of 1 demonstrating irreparable harm is likely, this motion for a 2 preliminary injunction is denied. 1 3 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 4 Philips develops, manufacturers, and sells medical imaging 5 systems. Compl. ¶ 19. To support and maintain those systems, 6 Philips has developed proprietary information, documentation, and 7 software for servicing, which it refers to as its Customer 8 Service Intellectual Property (“CSIP”). Id. ¶ 20. Philips 9 grants individuals varying levels of access to its CSIP depending 10 on their position and contractual terms. Id. ¶ 23. CSIP Level 0 11 materials are available to anyone in the United States who 12 requests access. Id. Level 1 materials are available to Philips 13 employees and customers with a valid contract and non-disclosure 14 agreement. Id. Philips reserves CSIP Level 2 access for 15 authorized Philips employees and specific trade partners under 16 contract, and Level 3 access for only a subset of service 17 specialists within Philips. Id. 18 Philips has developed and implemented measures to protect 19 the confidentiality of its CSIP. Id. ¶¶ 24-26. For example, 20 Philips’ Integrated Security Tool (“IST”), a digital rights 21 management solution, prevents unauthorized access to Philips’ 22 CSIP. Id. ¶ 27. Philips generates a user-specific IST 23 certificate that controls the documents and service tools the 24 user is entitled to access. Id. Each IST certificate is valid 25 for 30 days and must be renewed, otherwise the IST certificate 26

27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for September 28, 2021. 1 expires. Id. ¶ 29. Thus, a customer who enters into a service 2 contract with nondisclosure terms may access certain service 3 tools not available to a customer who has not. Id. ¶ 30. 4 Founded in 2013, Advanced Imaging Services is in the 5 business of servicing and maintaining CT and MRI equipment owned 6 by hospitals and medical clinics, including Philips equipment. 7 Sean Wang Decl. (“Wang Decl.”) ¶ 5, ECF No. 30-4. Most 8 manufacturers of medical equipment have a one-year warranty for 9 parts and service of their equipment. Id. ¶ 11. After the 10 warranty expires however, some hospitals and medical clinics hire 11 third-party companies, like Advanced Imaging Services, to 12 maintain and repair their equipment. Id.; see also Decl. of 13 Zachery White (“White Decl.”) ¶ 7, ECF No. 30-5. Advanced 14 Imaging Services contracts directly with hospitals and medical 15 clinics, including St. John’s Healthcare Center and SimonMed 16 Beverly Hills, to repair and service the equipment owned by these 17 facilities. See Wang Decl. ¶ 12, Exs. 1-5; White Decl. ¶ 8; 18 Decl. of Adam Setzler (“Setzler Decl.”) ¶ 17, ECF No. 30-3. 19 Advance Imaging Service contends that a few years after it 20 entered into service contracts with St. Johns and SimonMed, 21 Philips conducted a firmware update on its systems, requiring an 22 IST certificate in order to prevent third-party companies like 23 Advanced Imaging Service from conducting service or repairs on 24 its machines. Wang Decl. ¶ 23. 25 Advanced Imaging Services has never been issued an IST 26 certificate beyond CSIP Level 0. Compl. ¶ 36. However, a 27 Philips employee observed Sean Wang, the Chief Operating Officer 28 of Advanced Imaging Services, using false login credentials to 1 access the Philips systems. Id. ¶¶ 34-36; Wang Decl. ¶ 3. 2 Philips’ subsequent investigation revealed that Advanced Imaging 3 Services has used false IST accounts to gain unauthorized access 4 to Philips’ proprietary CSIP a few times in order to continue 5 servicing the equipment. Id. ¶ 35. 6 In response, Philips filed this action against Advanced 7 Imaging Services and Sean Wang (“Defendants”) alleging: 8 (1) violation of the Computer Fraud and Abuse Act; (2) violation 9 of California’s Comprehensive Computer Data Access and Fraud Act; 10 (3) violation of the Digital Millennium Copyright Act; 11 (4) violation of the Defend Trade Secrets Act; (5) violation of 12 California’s Uniform Trade Secrets Act; (6) violation of the 13 California Unfair Trade Practices Act; and (7) fraud. See 14 generally Compl. Defendants moved to dismiss Plaintiff’s first, 15 second, fourth, fifth, and seventh causes of action, which the 16 Court granted in part and denied in part. See Order Granting in 17 Part and Den. in Part Mot. to Dismiss, ECF No. 86. Specifically, 18 the Court granted Defendants’ motion to dismiss the seventh cause 19 of action for fraud with prejudice. Id. at 10. The Court 20 declined to dismiss the remaining claims. Id. 21 Presently before the Court is Plaintiff’s motion for a 22 preliminary injunction to (1) prohibit Defendants from accessing 23 or circumventing Philips’ CSIP and other proprietary computer 24 systems and information; (2) require Defendants identify all 25 individuals they disclosed such information to, all the times 26 they used the CSIP to service the systems, and all individuals 27 who provided them information to access the systems; and 28 (3) require Defendants return any Philips’ CSIP or other 1 information within their control.2 Notice of Mot. for Prelim. 2 Inj. at 1, ECF No. 5. In seeking this injunction Plaintiff 3 relied only on its Computer Fraud and Abuse Act; California’s 4 Comprehensive Computer Data Access and Fraud Act; and Digital 5 Millennium Copyright Act claims. See generally Mot. Defendants 6 opposed this motion. Opp’n, ECF No. 30. Plaintiff replied. 7 Reply, ECF No. 84. The parties also submitted supplemental 8 briefing. Pl.’s Suppl. Br. in Supp. of Mot., ECF No. 72; Defs.’ 9 Suppl. Br. in Opp’n, ECF No. 75; Defs.’ Suppl. Br. on 10 Recommendation and Final Rule, ECF No. 89; Pl.’s Suppl. Br. on 11 Recommendation and Final Rule, ECF No. 90. For the reasons set 12 forth below the Court denies Plaintiff’s motion. 13 II. OPINION 14 A preliminary injunction is “an extraordinary remedy that 15 may only be awarded upon a clear showing that the plaintiff is 16 entitled to such relief.” Winter v. Nat. Res. Def. Council, 17 Inc., 555 U.S. 7, 22 (2008). An injunction may be granted only 18 where the movant shows that (1) they are likely to succeed on 19 the merits, (2) they are likely to suffer irreparable harm in 20 the absence of preliminary relief, (3) the balance of equities 21 tips in their favor, and (4) an injunction is in the public 22 interest. Id. at 20. “A preliminary injunction may also be 23 appropriate if a movant raises serious questions going to the 24 merits and the balance of hardships tips sharply towards it, as

25 2 Defendants point out that because Plaintiff’s requested injunction is, in part, mandatory, Plaintiff’s burden is higher. 26 See Opp’n at 12 (citing Garcia v. Google, Inc., 786 F.3d 733, 740 27 (9th Cir. 2015)). Plaintiff failed to address this. However, as discussed below, this is immaterial, as Plaintiff has failed to 28 meet even the more lenient standard. 1 long as the second and third Winter factors are satisfied.” 2 Disney Entera., Inc. v. VidAngel, Inc., 869 F.3d 848, 856 (9th 3 Cir. 2017). The moving party bears the burden of meeting all 4 factors of the Winter test. See All. for the Wild Rockies v. 5 Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). 6 “[P]laintiffs must establish that irreparable harm is 7 likely, not just possible, in order to obtain a preliminary 8 injunction.” Id. at 1131. “An injunction will not issue if the 9 person or entity seeking injunctive relief shows a mere 10 possibility of some remote future injury, or a conjectural or 11 hypothetical injury.” Park Vill. Apartment Tenants Ass’n v. 12 Mortimer Howard Trust, 636 F.3d 1150, 1160 (9th Cir. 2011) 13 (internal quotation marks and citations omitted). Moreover, 14 “[s]peculative injury does not constitute irreparable injury 15 sufficient to warrant granting a preliminary injunction.” 16 Caribbean Marine Servs. Co., Inc. v. Baldrige, 844 F.2d 668, 674 17 (9th Cir. 1988). 18 Here, Plaintiff has failed to meet its burden of showing 19 irreparable harm is likely. Philips alleges Defendants’ 20 continued violations will cause harm to their reputation, loss 21 of costumers, loss of goodwill, and dilution of the value of its 22 rights and confidential information. See Mot. at 14. To 23 support these contentions, Plaintiff relies on an affidavit of 24 Jacqueline Dickson, the program manager for customer service 25 intellectual property governance of Philips. Dickson’s First 26 Aff. ¶ 1, ECF No. 5-2.3 She states that “[i]f Defendants 27 3 Defendants filed evidentiary objections to Dickson’s affidavit. 28 See Def.’s Ev. Obj., ECF 30-1. These objections are preserved 1 continue with their unauthorized access and use of Philips’ 2 proprietary CSIP to service the Philips systems, there is an 3 immediate risk of further dilution of the value of Philips’ 4 proprietary CSIP, lost business because of the damage to 5 Philips’ brand, and indeed, the potential for real harm to 6 patients and medical providers who rely on Philips systems.” 7 Id. ¶ 29. But such conclusory statements, without any concrete 8 factual support, fail to demonstrate that harm is likely as 9 opposed to merely possible. See Am. Passage Media Corp v. Cass 10 Commc’ns, Inc., 750 F.2d 1470, 1473 (9th Cir. 1985) (finding an 11 insufficient showing of irreparable harm in part because the 12 submitted affidavits from plaintiff’s own executives were 13 conclusory and without sufficient factual support); see also 14 Goldie’s Bookstore, Inc. v. Superior Court of State of Cal., 739 15 F.2d 466, 472 (9th Cir. 1984) (noting loss of goodwill and 16 customers could not support a finding of irreparable injury when 17 based on speculation). 18 The cases relied on by Plaintiff are inapposite. Indeed, 19 many relied on an outdated standard requiring merely a showing 20 of possible harm. See Mot. at 14 (citing Rent-A-Ctr., Inc. v. 21 Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 22 (9th Cir. 1991) (evaluating whether plaintiff made its required 23 showing of a possibility of irreparable harm); Stuhlbarg Int’l 24 Sales Co. v. John D. Brush & Co., 240 F.3d 832, 840-41 (9th Cir.

25 for the record but overruled for purposes of the Court’s consideration of the motion for preliminary injunction. Because 26 the procedures for a preliminary injunction are less formal, a 27 court may rely on evidence that would otherwise be inadmissible under the Federal Rules of Evidence, including hearsay. Johnson 28 v. Couturier, 572 F.3d 1067, 1083 (9th Cir. 2009). 1 2001) (same)). Even still the plaintiffs’ harms were more 2 plausible than here. For example, in Stuhlbarg, a trademark 3 dispute led to the movant’s products being detained by U.S. 4 Customs. 240 F.3d at 835. Thus, it was not just possible that 5 the movant would suffer irreparable harm but certain, as Customs 6 would continue to detain their products absent an injunction. 7 See id. at 840-41. It was also clear how that would result in 8 loss of customers and goodwill, as the company would be unable 9 to fulfill its orders. See id. Contrastingly here, while 10 Plaintiff has presented evidence that Defendants accessed their 11 CSIP to service certain equipment, it failed to offer anything 12 other than speculation as to how this will affect Plaintiff or 13 its customers. 14 Further, Defendants’ evidence of the contractual agreements 15 it must abide by undermine Plaintiff’s harm arguments. For 16 example, Plaintiff argues Defendants’ unauthorized access may 17 cause harm because it will allow them access to confidential 18 patient data and other private information. See Mot. at 15. 19 But the fact Defendants have confidentiality agreements with the 20 hospitals and clinics which require them to treat patient 21 information as confidential and comply with applicable privacy 22 laws, belies this concern. See Wang Decl. ¶ 15, Exs. 1-5. 23 Additionally, Plaintiff contends Defendants may cause harm by 24 modifying the systems. Mot. at 15. But Defendants, whose own 25 business and reputation depends on properly servicing and 26 maintaining the equipment, and is also contractually obligated 27 to, seem to have little incentive to do so. Moreover, even if 28 Plaintiff’s fears were realized, it seems more plausible that eee ee OO

1 the hospitals would blame Defendants, who they have hired to 2 service and maintain the machines, than the manufacturer should 3 something go awry. See Setzler Decl. 9 7; White Decl. @ 8. 4 Because Plaintiff has failed to meet its burden of 5 demonstrating that irreparable injury is likely in the absence 6 of an injunction, the Court need not address the remaining 7 Winter factors. See Ctr. for Food Safety v. Vilsack, 636 F.3d 8 1166, 1174 (9th Cir. 2011). 9 Til. ORDER 10 For the reasons set forth above, the Court DENIES 11 Plaintiff’s Motion for Preliminary Injunction. 12 IT IS SO ORDERED. 13 Dated: December 20, 2021 14 kA 18 teiren staves odermacr 7008 16 17 18 19 20 21 22 23 24 25 26 27 28