1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 ThermoLife International LLC, No. CV-18-02980-PHX-DWL
10 Plaintiff, ORDER
11 v.
12 Neogenis Labs Incorporated,
13 Defendant. 14 NeoGenis Labs, Incorporated,
15 Counterclaimant,
16 v.
17 ThermoLife International, LLC and Ronald L. Kramer, 18 Counterdefendants. 19
21 ThermoLife International, LLC (“ThermoLife”) and Human Power of N Company 22 (formerly known as NeoGenis Labs, Inc.) (“HumanN”) each hold patents related to the use 23 of nitrate technology. In this action, ThermoLife alleges that HumanN engaged in false 24 advertising and false marking by, among other things, marking three of its nitrate-related 25 products with inapplicable patent numbers, in violation of state and federal law. (Doc. 68.) 26 HumanN, in turn, asserts an array of counterclaims against ThermoLife and its founder, 27 Ronald L. Kramer (“Kramer”), including counterclaims for attempted monopolization and 28 tortious interference that were previously dismissed with leave to amend. (Doc. 113.) 1 HumanN has now filed an amended pleading in an attempt to cure the deficiencies 2 identified in the previous order (Doc. 117) and ThermoLife has again moved to dismiss 3 (Doc. 122). For the following reasons, ThermoLife’s motion is granted in part and denied 4 in part. 5 DISCUSSION 6 I. Legal Standard 7 To survive a motion to dismiss under Rule 12(b)(6), “a party must allege ‘sufficient 8 factual matter, accepted as true, to state a claim to relief that is plausible on its face.’” In 9 re Fitness Holdings Int’l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (quoting Ashcroft v. 10 Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff pleads 11 factual content that allows the court to draw the reasonable inference that the defendant is 12 liable for the misconduct alleged.” Id. (quoting Iqbal, 556 U.S. at 678). “[A]ll well- 13 pleaded allegations of material fact in the complaint are accepted as true and are construed 14 in the light most favorable to the non-moving party.” Id. at 1144-45 (internal quotation 15 marks omitted). However, the court need not accept legal conclusions couched as factual 16 allegations. Iqbal, 556 U.S. at 679-80. The court also may dismiss due to “a lack of a 17 cognizable legal theory.” Mollett v. Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 2015) 18 (internal quotation marks omitted). 19 “When ruling on a Rule 12(b)(6) motion to dismiss, if a district court considers 20 evidence outside the pleadings, it must normally convert the 12(b)(6) motion into a Rule 21 56 motion for summary judgment, and it must give the nonmoving party an opportunity to 22 respond.” United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). However, a court 23 may consider “certain materials—documents attached to the complaint, documents 24 incorporated by reference in the complaint, or matters of judicial notice—without 25 converting the motion to dismiss into a motion for summary judgment.” Id. at 908. 26 II. ThermoLife’s Exhibits 27 As a preliminary matter, HumanN objects to the three exhibits that were attached to 28 ThermoLife’s motion. (Doc. 125 at 3-4.) Exhibits A and C purport to be printouts from 1 HumanN’s website: Exhibit A is an article entitled “Top 9 Nitric Oxide Supplements and 2 Benefits” (Doc. 122-1) and Exhibit C is what appears to be a product page for HumanN’s 3 “SuperGrapes Chews” product (Doc. 122-3). Exhibit B purports to be a letter dated 4 February 26, 2019 that ThermoLife sent to Amazon accusing HumanN of patent 5 infringement. (Doc. 122-2.) 6 A. Exhibits A And C 7 HumanN argues that Exhibits A and C can’t be considered for purposes of the 8 pending Rule 12(b)(6) motion because website printouts are not, in general, subject to 9 judicial notice and “[n]either was attached to or referenced in the Amended 10 Counterclaims.” (Doc. 125 at 3.) ThermoLife responds that the Court may consider 11 Exhibits A and C because the printouts come from HumanN’s own website and are being 12 offered for the limited purpose of establishing HumanN’s knowledge of “other 13 supplements that economically compete with N-O supplements.” (Doc. 134 at 7 n.4.) 14 Exhibits A and C were not attached to HumanN’s amended counterclaims or 15 incorporated by reference in that pleading, so ThermoLife may rely on those materials only 16 to the extent they are subject to judicial notice. Under Federal Rule of Evidence 201(b), a 17 court may judicially notice a “fact that is not subject to reasonable dispute” if it is 18 “generally known within the trial court’s territorial jurisdiction” or if it “can be accurately 19 and readily determined from sources whose accuracy cannot reasonably be questioned.” 20 The purported printouts from HumanN’s website are not subject to judicial notice 21 at this stage. Other courts have found that non-governmental website printouts are not 22 judicially noticeable, even if they come from the non-movant’s website. See, e.g., Victaulic 23 Co. v. Tieman, 499 F.3d 227, 237 (3d Cir. 2007), as amended (Nov. 20, 2007) (district 24 court erred by taking judicial notice of claims on non-movant’s website when ruling on 25 motion to dismiss, both because a corporate website is “a marketing tool . . . [often] full of 26 imprecise puffery that no one should take at face value” and because “[t]aking a bare ‘fact’ 27 that is reflected not in the pleadings, but on a corporate website, and then drawing 28 inferences against the non-moving party so as to dismiss its well-pleaded claims on the 1 basis of an affirmative defense, takes us, as a matter of process, far too afield from the 2 adversarial context of litigation”); Salazar v. Driver Provider Phx. LLC, 2020 WL 3 5748129, *4 (D. Ariz. 2020) (declining to take judicial notice of information appearing on 4 non-movant’s website). See generally Silver v. Exec. Car Leasing Long-Term Disability 5 Plan, 466 F.3d 727, 731 n.2 (9th Cir. 2006) (noting that “materials from sources as diverse 6 as Yahoo!Health and the website for the Japanese Circulation Society . . . . were not 7 sufficiently reliable to be judicially noticeable”). Indeed, in at least two recent cases, 8 ThermoLife successfully invoked these principles to fend off requests by adversaries to 9 take judicial notice of party-website information. ThermoLife Int’l LLC v. BPI Sports LLC, 10 2021 WL 661981, *3 (D. Ariz. 2021); ThermoLife Int’l LLC v. Sparta Nutrition LLC, 2020 11 WL 248164, *1 (D. Ariz. 2020). ThermoLife makes no effort to explain why these 12 restrictions on judicial notice should “apply to thee but not to me.” 13 Nor is there merit to ThermoLife’s argument that the exhibits are judicially 14 noticeable for the limited purpose of assessing HumanN’s knowledge of “other 15 supplements that economically compete with N-O supplements.” By ThermoLife’s own 16 admission, Exhibits A and C are being offered to “demonstrate[e] facts that are common 17 sense because . . . there are other supplements that would help consumers train, increase 18 blood flow or any of the other benefits also attributable to N-O supplementation.” (Doc. 19 134 at 7 n.1, emphasis added. See also Doc. 122 at 7 [citing Exhibit A to argue that 20 HumanN “fails to explain how or why any of the nitric oxide supplements listed on its own 21 website are not economic substitutes for ThermoLife’s patented raw materials and 22 technology”].) ThermoLife is thus not asking the Court to take judicial notice of 23 HumanN’s knowledge but “to assume the truth of the disputed factual assertions contained 24 within” the websites. Cf. ThermoLife Int’l LLC v. NeoGenis Labs Inc., 2020 WL 6395442, 25 *4 (D. Ariz. 2020). The Court declines the invitation. Whether the statements on 26 HumanN’s website actually contradict HumanN’s theory of liability is a factual question 27 to be resolved, if necessary, at a different stage of this litigation. 28 … 1 B. Exhibit B 2 ThermoLife seeks to dismiss HumanN’s counterclaim for tortious interference with 3 business expectancy. (Doc. 117 ¶¶ 77-89, 121-31.) That claim is predicated on the 4 allegation that, “on or about March 8, 2019,” Kramer and ThermoLife falsely “reported to” 5 Amazon that several HumanN products listed on Amazon’s website infringed a particular 6 patent—the ’531 patent—held by ThermoLife. (Id. ¶ 79.) HumanN alleges these reports 7 of infringement were set forth in a “March 2019 letter.” (Id. ¶ 83.) 8 Exhibit B is a letter that ThermoLife purportedly sent to Amazon. (Doc. 122-2.) It 9 is dated February 26, 2019. (Doc. 122-2.) Significantly, although this letter accuses 10 HumanN of infringing an array of other patents held by ThermoLife, there is no mention 11 of the ’531 patent. (Id.) ThermoLife argues this letter is subject to judicial notice because 12 it “is the March 8, 2019 letter specifically referenced in Paragraph 79 of the Amended 13 Counterclaims.” (Doc 122 at 10 n.6.) ThermoLife further argues that the letter not only 14 requires dismissal of HumanN’s tortious interference claim, but also potentially subjects 15 HumanN’s counsel to Rule 11 sanctions, because it shows that ThermoLife never made 16 any infringement allegations to Amazon related to the ’531 patent (let alone false 17 accusations offered in bad faith). (Doc. 122 at 1-2, 9-11; Doc. 134 at 9-11.) HumanN 18 responds that Exhibit B can’t be considered at the motion-to-dismiss stage because it “was 19 not attached to the pleadings” and “is not accepted by all parties as authentic.” (Doc. 125 20 at 2, 4-5, 16.) 21 As an initial matter, although ThermoLife argues the Court may consider Exhibit B 22 via “judicial notice,” its arguments are in essence that the letter was incorporated by 23 reference. “Unlike rule-established judicial notice, incorporation-by-reference is a 24 judicially created doctrine that treats certain documents as though they are part of the 25 complaint itself.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 26 2018). “[A] defendant may seek to incorporate a document into the complaint if the 27 plaintiff refers extensively to the document or the document forms the basis of the 28 plaintiff’s claim.” Id. (internal quotation marks omitted). “However, if the [would-be 1 incorporated] document merely creates a defense to the well-pled allegations in the 2 complaint, then that document did not necessarily form the basis of the complaint. 3 Otherwise, defendants could use the doctrine to insert their own version of events into the 4 complaint to defeat otherwise cognizable claims. Submitting documents not mentioned in 5 the complaint to create a defense is nothing more than another way of disputing the factual 6 allegations in the complaint . . . .” Id. at 1002-03 (citations omitted). Accordingly, “what 7 inferences a court may draw from an incorporated document should . . . be approached 8 with caution.” Id. at 1003. For example, it is “improper to assume the truth of an 9 incorporated document if such assumptions only serve to dispute facts stated in a well- 10 pleaded complaint. This admonition is . . . consistent with the prohibition against resolving 11 factual disputes at the pleading stage.” Id. 12 Applying these standards, the February 2019 letter was not incorporated by 13 reference into HumanN’s pleading (and, thus, may not be considered for purposes of 14 resolving ThermoLife’s motion to dismiss). First, the incorporation-by-reference doctrine 15 applies only to documents whose authenticity is not questioned by the parties. See, e.g., 16 Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (“We have extended the 17 ‘incorporation by reference’ doctrine to situations in which the plaintiff’s claim depends 18 on the contents of a document, the defendant attaches the document to its motion to dismiss, 19 and the parties do not dispute the authenticity of the document, even though the plaintiff 20 does not explicitly allege the contents of that document in the complaint.”). See also 1 21 Gensler, Federal Rules of Civil Procedure, Rules and Commentary, Rule 12, at 335 (2021) 22 (“[T]he court may consider documents not attached to the complaint if the complaint 23 specifically refers to them, they are central to the claim, and their authenticity is not in 24 dispute.”) (emphasis added). Here, HumanN expressly disputes the authenticity of the 25 February 2019 letter, arguing that it was “not attached to a witness declaration,” “there is 26 no affidavit from a records custodian,” and “though sought in HumanN’s discovery 27 requests half-a-year ago, ThermoLife only produced [the letter] in discovery . . . after 28 bringing its instant motion.” (Doc. 125 at 5, emphasis omitted.) These are reasonable 1 grounds for objecting to the authenticity of the letter and ThermoLife makes no attempt to 2 address them in its reply. Second, it is not apparent that Exhibit B is, in fact, the disputed 3 communication on which HumanN’s tortious interference claim is based. HumanN alleges 4 that the offending communication took place “on or about March 8, 2019” and was set 5 forth in a “March 2019 letter” (Doc. 117 ¶¶ 79, 83), yet Exhibit B is dated February 26, 6 2019 (Doc. 122-2 at 1). Those dates are obviously not the same, and HumanN suggests 7 that ThermoLife actually sent a different letter to Amazon that included allegations related 8 to the ’531 patent. (Doc. 125 at 4 [“ThermoLife also fails to show that, even if Exhibit B 9 was sent to Amazon, it was the only communication with Amazon alleging 10 infringement.”].) It would be improper to consider Exhibit B under these circumstances, 11 as doing so would “insert [ThermoLife’s] version of events into the complaint to defeat 12 otherwise [potentially] cognizable claims.” Khoja, 899 F.3d at 1002. 13 III. Attempted Monopolization 14 A. Background 15 In its original pleading, HumanN included a counterclaim for attempted 16 monopolization in violation of § 2 of the Sherman Act. (Doc. 83 ¶¶ 79-87.) This 17 counterclaim was premised in part on a lawsuit that ThermoLife filed against HumanN in 18 June 2016 and then voluntarily dismissed in January 2018. (Id.) HumanN alleged this was 19 a “sham” lawsuit intended to “wrongfully block anyone else, including specifically 20 HumanN, from selling N-O supplement products in the United States.” (Id. ¶¶ 81-82.) 21 HumanN also alleged that ThermoLife and Kramer had engaged in other baseless patent 22 litigation, and made threats of other baseless patent litigation, that in tandem with the 2016 23 lawsuit “achieved a dangerous probability of success of monopolizing the relevant 24 market.” (Id. ¶¶ 83-86.) 25 In April 2020, ThermoLife moved to dismiss this claim on three grounds: (1) Noerr- 26 Pennington immunity; (2) failure to define the relevant market; and (3) failure to allege a 27 dangerous probability of acquiring monopoly power. (Doc. 97 at 7-12.) 28 The Court addressed these arguments in a November 2020 order. (Doc. 113 at 8- 1 19.) As for the first argument, the Court concluded that “HumanN has adequately pleaded 2 that ThermoLife engaged in sham litigation and sham out-of-court communications” and 3 that such showings “negate ThermoLife’s claimed entitlement to Noerr-Pennington 4 immunity.” (Id. at 8-16.) The Court also rejected the third argument because HumanN’s 5 “allegations are sufficient to allege a dangerous probability of achieving monopoly power.” 6 (Id. at 18-19.) Finally, the Court agreed with the second argument because, although 7 HumanN had alleged in conclusory fashion that the relevant market was “N-O supplement 8 products in the United States,” it hadn’t further alleged, “among other things, what the N- 9 O supplementation market is, what general products it includes, whether the N-O 10 supplementation market is a general market or a sub-market of the broader dietary 11 supplement market, and whether different supplement products are reasonably 12 interchangeable for the same use as N-O supplement products.” (Id. at 17-18.) Because 13 these deficiencies could potentially be cured by amendment, HumanN was granted leave 14 to amend. (Id. at 18.) 15 In December 2020, HumanN filed an amended pleading. (Doc. 117 ¶¶ 38-52.) As 16 discussed in more detail below, HumanN again alleges that the relevant market is “the N- 17 O supplementation market in the United States” but now clarifies that this market “is 18 distinct from the broader dietary supplement market” because, unlike regular dietary 19 supplements, “N-O supplementation products tend to be marketed to, and purchased by, 20 persons who wish to benefit from the specific advantages of N-O supplementation.” (Id. 21 at 44 & ¶¶ 38-39.) HumanN further alleges that vegetables are not a “reasonable substitute” 22 for N-O supplements, even though they “can be a rich source of dietary nitrates,” because 23 “consuming the volume of vegetables needed to attain sufficient levels of nitrates is 24 inconvenient and/or difficult for many, and may also be time-consuming.” (Id. ¶ 40.) 25 HumanN also alleges that the relevant market can be divided into three submarkets. 26 (Id. ¶ 42.) The first, the “bulk” submarket, is focused on “persons engaged in weight- 27 training or body building.” (Id.) The second, the “fitness” submarket, is focused on 28 “persons seeking to improve fitness and to obtain the general wellness benefits of an 1 increased oxygenated blood supply.” (Id.) The third, the “endurance” submarket, is 2 focused on “those seeking to enhance endurance, including, for example, elite athletes in 3 the fields of cycling and swimming.” (Id.) HumanN does not allege how large each 4 submarket is in relation to the others or otherwise quantify how much of the overall market 5 each submarket comprises. 6 As for ThermoLife’s market power in each submarket, HumanN alleges that 7 ThermoLife “currently enjoys market power” in the bulk submarket and identifies, by 8 name, 26 different companies—all of which are licensees of ThermoLife—that sell N-O 9 supplements in the bulk submarket. (Id. ¶¶ 46-47.) The products sold by these licensees 10 include “the world’s top-selling pre-workout product” and “the number one top earning 11 pre-workout in 2019.” (Id. ¶ 47.) As for the fitness and endurance submarkets, HumanN 12 alleges that ThermoLife “has considerable influence” in them. (Id. ¶ 48.) HumanN further 13 alleges that its products compete in those submarkets—Neo40 and SuperBeets are fitness 14 products while BeetElite is an endurance product—but ThermoLife and Kramer have 15 attempted to “stifle competition” through various means, including by “seek[ing] to force 16 HumanN out of the N-O supplementation market if HumanN does not agree to pay 17 royalties to ThermoLife for patents that HumanN does not practice.” (Id. ¶¶ 42, 50-51.) 18 All told, HumanN alleges that ThermoLife is “openly seek[ing] a monopoly in the 19 overall N-O supplementation market, including in the fitness and endurance submarket” 20 (id. ¶ 48), that this attempt “has a real danger of succeeding” (id. ¶ 52), and that such 21 success would result in “injury to consumers as companies selling N-O supplementation 22 products must increase their prices to pay Kramer and ThermoLife their demanded 23 royalties” (id. ¶ 52). 24 B. Analysis 25 ThermoLife contends that HumanN’s new allegations “fall well short of answering 26 the questions the Court posed to HumanN in dismissing the original attempted 27 monopolization claim.” (Doc. 122 at 4-9; Doc. 134 at 2-9.) First, ThermoLife argues that 28 HumanN’s market definition is flawed because “HumanN fails to identify a single product 1 in this market other than its own” and offers a “circular” definition (i.e., “HumanN’s 2 answer is the market where people purchase N-O supplementation”). (Doc. 122 at 5-6; 3 Doc. 134 at 2-3.) Next, ThermoLife argues that HumanN’s market definition is artificially 4 narrow because HumanN “fails to provide any factual reason as to why a market should be 5 drawn around N-O supplements” and doesn’t explain why any number of other products— 6 including the “nitric oxide supplements listed on [HumanN’s] own website,” Gatorade, and 7 Super Grapes, HumanN’s “own alternative non-nitric oxide boosting product”—might be 8 considered “logically, and reasonably, interchangeable” products. (Doc. 122 at 6-8; Doc. 9 134 at 5-6.) ThermoLife further argues that, to the extent HumanN is arguing there is a 10 “sub-submarket” within the N-O supplementation market that excludes “bulk” 11 supplements, this constitutes an improper attempt to “identify an extremely narrow 12 selection of consumers who have, at least once, purchased N-O supplements from HumanN 13 and superficially calling that a ‘market.’” (Doc. 122 at 8-9.) In a related vein, ThermoLife 14 states that it is “ambiguous[]” whether HumanN is defining the relevant market as “the N- 15 O supplementation market” or the “fitness and endurance submarkets of the N-O market.” 16 (Id. at 6).1 Finally, ThermoLife argues that HumanN can’t satisfy the “market power” 17 element because (1) to the extent the relevant market is the entire N-O supplementation 18 market, HumanN made a “dispositive” concession in its response brief that precludes 19 liability (Doc. 134 at 3); and (2) to the extent the relevant market is the fitness and 20 endurance submarket, HumanN can’t prevail because it acknowledges that ThermoLife 21 lacks market power in those submarkets (Doc. 122 at 6 n.4; Doc. 134 at 3-4). 22 HumanN disagrees that its market definition is artificial or too narrow and argues 23 that the question of market definition is, in any event, largely a factual one for the jury and 24 not proper to assess at the motion-to-dismiss stage. (Doc. 125 at 4-15.) 25 … 26 1 In reply, ThermoLife again accuses HumanN of providing inconsistent definitions 27 of the relevant market. (Doc. 134 at 2 [“At times, HumanN appears to contend that the ‘relevant market’ is the N-O Supplementation Market (a submarket of the dietary 28 supplements market). At other times, HumanN asserts that the relevant market is a submarket or sub-submarket related to endurance or fitness.”].) 1 1. Relevant Market 2 “[T]o state a valid claim under the Sherman Act [for attempted monopolization], a 3 plaintiff must allege that the defendant has market power within a ‘relevant market.’ That 4 is, the plaintiff must allege both that a ‘relevant market’ exists and that the defendant has 5 power within that market.” Newcal Indus., Inc. v. Ikon Off. Sol., 513 F.3d 1038, 1044 & 6 n.3 (9th Cir. 2008). However, because “[t]here is no requirement that these elements of 7 the antitrust claim be pled with specificity,” an “antitrust complaint therefore survives a 8 Rule 12(b)(6) motion unless it is apparent from the face of the complaint that the alleged 9 market suffers a fatal legal defect.” Id. at 1045. “And since the validity of the ‘relevant 10 market’ is typically a factual element rather than a legal element, alleged markets may 11 survive scrutiny under Rule 12(b)(6) subject to factual testing by summary judgment or 12 trial.” Id. (emphasis added). Thus, dismissal is not warranted at the Rule 12(b)(6) stage 13 unless the market definition is “facially unsustainable.” Id. 14 Applying these standards, HumanN’s new allegations pertaining to the definition of 15 the relevant market are sufficient to survive dismissal. As noted, HumanN now specifically 16 alleges that the N-O supplementation market “includ[es] N-O supplements like Neo40, and 17 N-O supplementation functional foods, like SuperBeets and BeetElite,” that are “marketed 18 to, and purchased by, persons who wish to benefit from the specific advantages of N-O 19 supplementation” (Doc. 177 ¶¶ 38-39), which advantages are defined elsewhere to include 20 “improved circulation and all its associated benefits, including the support of a healthy 21 blood pressure, increased energy, and more” (id. ¶ 12) and/or increased bulk, fitness 22 (including “an increased oxygenated blood supply”), or endurance (id. ¶ 42). HumanN 23 further identifies some goods that are excluded from the N-O supplementation market, 24 including “certain vegetables [which are] a rich source of dietary nitrates.” (Id. ¶ 40.) 25 Finally, and contrary to ThermoLife’s claim that HumanN has only defined the market by 26 circular reference to the consumers who purchase N-O supplementation products, HumanN 27 specifically identifies more than two dozen companies that sell products and compete in 28 the market. (Id. ¶ 46.) Accordingly, although the previous iteration of HumanN’s antitrust 1 claim was deficient because HumanN had not alleged “what the N-O supplementation 2 market is” or “what general products it includes” (Doc. 113 at 17), those omissions have 3 now been addressed. 4 ThermoLife’s next contention—that HumanN’s market definition is artificially 5 narrow and fails to account for substitutes—fares no better as a Rule 12(b)(6) dismissal 6 argument. As an initial matter, there is no merit to ThermoLife’s contention that HumanN 7 has offered “ambiguous” or inconsistent definitions of the relevant market. (Doc. 122 at 8 6; Doc. 134 at 2.) The amended pleading makes clear that the relevant market is the “N-O 9 supplementation market.” (Doc. 177 at 44 & ¶ 38.) Although the amended pleading also 10 alludes to the existence of three submarkets within this market (the bulk, fitness, and 11 endurance submarkets), it clarifies that the antitrust claim is based on ThermoLife’s attempt 12 to monopolize the overall N-O supplementation market, not any of the submarkets. (Id. ¶ 13 48 [“ThermoLife openly seeks a monopoly in the overall N-O supplementation market, 14 including in the fitness and endurance submarket.”]; id. ¶ 52 [discussing “Kramer and 15 ThermoLife’s intent to achieve monopoly power in the N-O supplementation market, 16 including in the fitness and endurance sub-market”].) This point is further clarified in 17 HumanN’s response brief. (Doc. 125 at 9 [“ThermoLife’s arguments devolve to . . . 18 misstatements . . . and odd misconstructions, including that HumanN ‘sever[ed] body 19 builders from the ‘market’ at issue . . . .’ But the bulk submarket is part of the N-O 20 Supplementation Market . . . . While there is market differentiation within this broader N- 21 O Supplementation Market, ThermoLife is working to exploit its dominance in the bulk 22 submarket to obtain general market power within the entire N-O Supplementation 23 Market.”].) Thus, to the extent ThermoLife’s artificial-narrowness argument presupposes 24 that the product market at issue is the fitness and endurance submarket, that argument is 25 unavailing. 26 Turning back to the merits, HumanN has plausibly alleged why the N-O 27 supplementation market is distinct from the broader dietary supplement market. As noted, 28 HumanN alleges that consumers ingest N-O supplements in the hope of obtaining specific 1 benefits, including increased bulk, fitness (arising from “an increased oxygenated blood 2 supply”), or endurance. (Id. ¶ 42.) This differentiates N-O supplements from other dietary 3 supplements intended for other purposes. To take one example, some dietary supplements 4 are intended to reduce bulk, not increase it. Accordingly, although the previous iteration 5 of HumanN’s antitrust claim was deficient because HumanN had not alleged “whether the 6 N-O supplementation market is a general market or a sub-market of the broader dietary 7 supplement market” (Doc. 113 at 17), that omission has now been addressed. 8 As for HumanN’s alleged failure to account for substitutes and interchangeable 9 products, ThermoLife’s arguments on this issue are premised in significant part on Exhibits 10 A and C. (Doc. 122 at 7-8 & n.5.) But as discussed in Part II.A above, those documents 11 are not properly before the Court at this juncture. More fundamentally, a motion to dismiss 12 is not the appropriate vehicle for conclusively resolving whether the products discussed in 13 Exhibit A and C, or Gatorade, or perhaps some other product might be an adequate 14 substitute for products in the N-O supplementation market. Because there is no 15 requirement that the market definition “be pled with specificity,” HumanN is entitled to 16 “survive scrutiny under Rule 12(b)(6) subject to factual testing by summary judgment or 17 trial.” Newcal, 513 F.3d at 1044. An antitrust claim will survive a motion to dismiss 18 “unless it is apparent from the face of the complaint that the alleged market suffers a fatal 19 legal defect,” but ThermoLife’s argument is, in essence, that HumanN’s alleged market 20 suffers from fatal factual defects. HumanN’s allegations concerning the contours of the 21 relevant market—which explicitly address why one category of potential substitutes 22 (vegetables) shouldn’t be considered substitutes—are not facially unsustainable. Cf. Datel 23 Holdings Ltd. v. Microsoft Corp., 712 F. Supp. 2d 974, 997 (N.D. Cal. 2010) (“Viewing 24 the allegations in the light most favorable to Plaintiff, the Court concludes that Plaintiff has 25 not improperly ignored products that may be reasonably interchangeable ones, but instead 26 has included two products in the alleged market and alleged differences regarding others 27 that plausibly exclude them from the relevant market.”). 28 ThermoLife’s cited cases do not compel a different result. In America Online, Inc. 1 v. GreatDeals.Net, 49 F. Supp. 2d 851 (E.D. Va. 1999), the alleged “relevant market [was] 2 e-mail advertising and that AOL control[led] a distinct sub-market based on the Internet 3 subscribers who are accessed through AOL facilities.” Id. at 857. In other words, the 4 claimant alleged that AOL had market power in the “sub-market based on the Internet 5 subscribers who [were] accessed through” its own facilities. Id. The language upon which 6 ThermoLife relies—that “it is improper to define a market simply by identifying a group 7 of consumers who have purchased a given product”—was limited to a market definition of 8 consumers that purchased a product from the antitrust defendant. Id. HumanN has not 9 limited its market definition solely to ThermoLife’s products or its own products. 10 Similarly, in Coffee.org, Inc. v. Green Mountain Coffee Roasters, Inc., 2012 WL 511485 11 (W.D. Ark. 2012), the court rejected a market definition that only included the “single, 12 licensed K-cup product.” Id. at *5. In contrast, HumanN hasn’t offered a market definition 13 that only includes ThermoLife’s products.2 14 2. Market Power 15 The final set of arguments made by ThermoLife concern the issue of market power. 16 Some of those arguments (Doc. 122 at 6 n.4; Doc. 134 at 3-4) can be disregarded because 17 they rest on the premise that HumanN excluded “bulk” products from its market definition. 18 As discussed, that premise is mistaken—the relevant product market, as alleged by 19 HumanN, is the N-O supplementation market in its entirety, inclusive of the bulk, fitness, 20 and endurance submarkets. 21 ThermoLife’s remaining argument turns on a statement in HumanN’s response 22 brief—specifically, the statement that “while ThermoLife does not yet have market power 23 2 In other cases cited by ThermoLife, the plaintiff provided far less detail than 24 HumanN provided in its amended pleading. See, e.g., LAI v. USB-Implementers Forum, Inc., 2014 WL 12600969, *5 (C.D. Cal. 2014) (relevant market was “reversible USB 25 connectors” and complaint “contain[ed] only one sentence that could be construed as justifying the exclusion of all other types of USB connectors from this market”); B.V. 26 Optische Industrie De Oude Delft v. Hologic, Inc., 909 F. Supp. 162, 17 (S.D.N.Y. 1995) (relevant market was “chest equalization radiography,” the complaint only stated that “at 27 all relevant times, no persons other than the parties hereto have had the capacity to provide chest equalization radiography equipment in the United States,” and the complaint 28 “offer[ed] [no] explanation for why they are defining the relevant product market in such narrow terms”). 1 over the entire N-O Supplement Market, it does have influence over the bulk submarket— 2 and has designs to further its ability to restrain competition over the entire market.” (Doc. 3 125 at 8, first emphasis added.) According to ThermoLife, the italicized language is 4 “dispositive on whether the N-O Supplementation market can serve as the relevant market 5 here; it can’t.” (Doc. 134 at 3.) 6 ThermoLife is correct. “[T]o state a valid claim under the Sherman Act, a plaintiff 7 must allege that the defendant has market power within a relevant market.” Newcal, 513 8 F.3d 1044 (internal quotation marks omitted). After all, “[w]ithout market power to 9 increase prices above competitive levels, and sustain them for an extended period, a 10 predator’s actions do not threaten consumer welfare.” Rebel Oil Co. v. Atl. Richfield Co., 11 51 F.3d 1421, 1434 (9th Cir. 1995). Thus, a failure to allege power in the relevant market 12 is fatal to an attempted monopolization claim. See, e.g., Rick-Mik Enterprises, Inc. v. 13 Equilon Enterprises LLC, 532 F.3d 963, 972-73 (9th Cir. 2008) (affirming dismissal of 14 antitrust claim because “the market power allegations of Rick-Mik’s complaint are 15 inadequate”); SC Innovations, Inc. v. Uber Techs., Inc., 434 F. Supp. 3d 782, 794-95 (N.D. 16 Cal. 2020) (dismissing attempted monopolization claim due to “failure to allege cognizable 17 market power”); Unigestion Holdings, S.A. v. UPM Tech., Inc., 412 F. Supp. 3d 1273, 1286 18 (D. Or. 2019) (dismissing antitrust claim where complaint lacked allegations that the 19 antitrust defendant had “monopoly power in the relevant product market”); ChriMar Sys., 20 Inc. v. Cisco Sys., Inc., 72 F. Supp. 3d 1012, 1019-20 (N.D. Cal. 2014) (“HP’s failure to 21 sufficiently allege market power is fatal to its attempted monopolization claim . . . .”).3 22 A plaintiff asserting a claim for attempted monopolization does not, to be clear, face 23 a particularly high bar in pleading the existence of market power. The Ninth Circuit has 24 emphasized that, because “the existence or non-existence of that market power is a factual 25 question,” it is often inappropriate to resolve “the market power question on a Rule 12(b)(6) 26 motion.” Newcal, 513 F.3d at 1052. But although the pleading standards in this area are 27 3 Rick-Mik concerned a claim for illegal tying under § 1 of the Sherman Act, but the 28 Ninth Circuit has made clear that “[t]he ‘relevant market’ and ‘market power’ requirements apply identically under [both § 1 and § 2] of the Act.” Newcal, 513 F.3d at 1044 n.3. 1 not onerous, they still exist. Dismissal of an antitrust complaint is required when the 2 market power allegations are deficient, regardless of the adequacy of the market definition. 3 See, e.g., Top Rank, Inc. v. Haymon, 2015 WL 9948936, *7-8 (N.D. Cal. 2015) (“Although 4 the Court concludes that Top Rank’s definitions of the relevant markets survive the 5 pleading stage, the Court concludes that Top Rank has failed to adequately allege market 6 power or economic power within those markets.”). See generally Endsley v. City of 7 Chicago, 230 F.3d 276, 282 (7th Cir. 2000) (“[P]laintiffs argue that the district judge erred 8 in taking up the question of market power on a motion to dismiss. He did not. We 9 acknowledge that frequently, questions of whether the defendant possessed the requisite 10 market power to establish a monopoly are addressed in a motion for summary judgment or 11 trial. However, where plaintiffs fail to identify any facts from which the court can infer 12 that defendants had sufficient market power to have been able to create a monopoly, their 13 § 2 claim may be properly dismissed.”) (citations and internal quotation marks omitted). 14 In general, “[m]arket power may be demonstrated through either of two types of 15 proof.” Rebel Oil, 51 F.3d at 1434. The first is “direct evidence of the injurious exercise 16 of market power,” which can be shown through “evidence of restricted output and 17 supracompetitive prices.” Id. The second and “more common” approach is to present 18 “circumstantial evidence pertaining to the structure of the market,” including evidence 19 “that the defendant owns a dominant share of that market.” Id. Here, it appears that 20 HumanN is pursuing the second approach. Its amended pleading contains no allegations— 21 or, at least, no non-conclusory allegations—concerning restricted output or 22 supracompetitive prices (which is the first way to prove market power)4 and is replete with 23 allegations concerning ThermoLife’s control over certain aspects of the N-O 24
25 4 The only mention of prices in the relevant portion of HumanN’s pleading comes in paragraph 52, which alleges that “Kramer and ThermoLife’s attempt to monopolize the N- 26 O supplementation market has a real danger of succeeding, with resulting injury to consumers as companies selling N-O supplementation products must increase their prices 27 to pay Kramer and ThermoLife their demanded royalties.” Not only is the allegation of increased prices conclusory and fact-free, but it is unclear whether HumanN is claiming 28 that the increased prices have already come into effect or is simply predicting that prices will increase in the future if ThermoLife succeeds on its alleged monopolization plan. 1 supplementation market (which is the second way). Among other things, HumanN alleges 2 that ThermoLife touts itself as the “world leader” in nitrate technology for dietary 3 supplements (Doc. 117 ¶ 43), has an interest in “many of the top-selling dietary 4 supplements in the world” (id. ¶ 44), claims that, “[w]ith few exceptions,” its technology 5 is present any time an amino acid is combined with nitrates and sold to consumers (id. 6 ¶ 45), and has “captured dozens of companies in [the bulk] submarket” (id. ¶ 46). 7 In its previous motion to dismiss, ThermoLife only challenged the sufficiency of 8 HumanN’s allegations related to market power on one specific ground—that HumanN 9 hadn’t alleged, in percentage terms, the share of the market controlled by ThermoLife. 10 (Doc. 97 at 11-12.) The Court rejected this argument because, as many courts have 11 recognized, it is unnecessary for an antitrust plaintiff to allege the exact market share 12 controlled by the defendant. (Doc. 113 at 19, citing Scooter Store, Inc. v. SpinLife.com, 13 LLC, 777 F. Supp. 2d 1102 (S.D. Ohio 2011).)5 But now, ThermoLife raises a different 14 challenge—it argues that HumanN’s claim is deficient because HumanN has affirmatively 15 conceded a lack of market power. The Court has no choice but to agree. However 16 forgiving the pleading standards in this area might be, a plaintiff asserting an attempted 17 monopolization claim cannot concede that the defendant currently lacks market power in 18 the relevant market and expect to survive dismissal. 19 During oral argument, HumanN urged the Court to disregard the concession 20 appearing on page 8 of its response brief (i.e., “ThermoLife does not yet have market power 21 over the entire N-O Supplement Market”) because it had intended to say that ThermoLife 22 currently lacks “monopoly power” over the entire market (which would not be fatal to its 23 antitrust claim) and used the term “market power” by mistake. This explanation is 24
25 5 See also Top Rank, 2015 WL 9948936 at *8 (agreeing that an antitrust plaintiff “does not have to allege an exact, percentage-based market share” but dismissing because 26 remaining claims related to market power did not “include enough facts to raise its right to relief above the speculative level”). With that said, nothing prevents an antitrust plaintiff 27 from alleging that the defendant controls a specific share of the relevant market, and the Ninth Circuit has suggested that an allegation of a market share exceeding 30% may be 28 sufficient to establish presumptive market power in an attempted monopolization case. Rebel Oil, 51 F.3d at 1438. 1 unpersuasive. As an initial matter, the disputed passage on page 8 is not the only instance 2 where HumanN stated that ThermoLife currently lacks market power in the overall market. 3 A similar statement appears on page 9. (Doc. 125 at 9 [“ThermoLife is working to exploit 4 its dominance in the bulk submarket to obtain general market power within the entire N-O 5 Supplementation Market.”].) It seems unlikely there were two typos concerning the same 6 issue on different pages of the brief. 7 More important, the response brief’s descriptions of ThermoLife’s market power 8 (or lack thereof) closely track the allegations in HumanN’s amended pleading on that topic. 9 As noted above, although paragraphs 46 and 47 assert that ThermoLife “currently 10 possesses market power” in one of the three submarkets (bulk) and provides specific factual 11 allegations in support of that assertion, paragraph 48 then acknowledges ThermoLife only 12 has “considerable influence” in the other two submarkets (endurance and fitness)—which, 13 read in context with paragraphs 46 and 47, is an acknowledgement that ThermoLife 14 currently lacks market power in those two submarkets—and then accuses ThermoLife of 15 “openly seek[ing]” monopoly power in the overall market. This is just another way of 16 saying that ThermoLife doesn’t yet have market power in the overall market but is 17 attempting to leverage its dominance in the bulk submarket to obtain such power—a theory 18 that fails to state a claim under Ninth Circuit law.6 19 Thus, even if the Court were to disregard the statements in HumanN’s response brief 20 and evaluate the sufficiency of its attempted monopolization claim based solely on the 21 factual allegations in its pleading, dismissal would be required. Even if, as HumanN 22 alleges, ThermoLife “openly seeks” a monopoly in the overall N-O supplementation 23 market (Doc. 117 ¶ 49), has the “intent” to obtain such a monopoly (id. ¶ 52), and “has 24 designs” to “restrain competition over the entire market” (Doc. 125 at 9), such conduct 25 does not, standing alone, violate the antitrust laws. Antitrust liability arises only when a
26 6 The Court further notes that, because HumanN has not alleged how large the bulk, fitness, and endurance submarkets are in relation to each other, it is impossible to infer 27 from ThermoLife’s possession of market power in the bulk submarket that ThermoLife also possesses market power in the overall market. If, for example, the bulk submarket 28 comprised only 5% of the overall market, ThermoLife’s dominance in this particular submarket would not reflect overall market power. 1 company with market power engages in such conduct, and that element is lacking here. Cf. 2 ChriMar Sys., 72 F. Supp. 3d at 1019-20 (“[A]lthough a lower percentage is required for 3 an attempted monopoly claim, as opposed to an actual monopoly claim, HP must still allege 4 sufficient market power. Therefore, HP’s failure to sufficiently allege market power is 5 fatal to its attempted monopolization claim . . . .”). 6 Accordingly, ThermoLife’s motion to dismiss is granted as to HumanN’s attempted 7 monopolization claim. As for whether the dismissal should be with or without leave to 8 amend, HumanN did not request such leave in its response brief but belatedly requested it 9 during oral argument, after reviewing the Court’s tentative order. In response, ThermoLife 10 argued that leave to amend should be denied on futility grounds, because HumanN was 11 already given an earlier opportunity to amend, and because amendment would be 12 prejudicial in light of the fact that this case is already over two years old and discovery is 13 almost closed. 14 HumanN’s request for leave to amend is denied. This is not a case where a Rule 15 12(b)(6) dismissal was granted because the underlying pleading was vague or insufficiently 16 detailed or conclusory. Rather, HumanN’s attempted monopolization claim was dismissed 17 because HumanN’s extremely detailed allegations, which have been refined through one 18 round of amendment, establish an affirmative lack of market power. Granting leave to 19 amend in this circumstance would be futile—a party may not use the amendment process 20 to walk back or contradict its earlier factual allegations. Reddy v. Litton Indus., 912 F.2d 21 291, 296-97 (9th Cir. 1990) (“It would not be possible for Reddy to amend his complaint 22 to allege a completely new injury that would confer standing to sue without contradicting 23 any of the allegations of his original complaint. Although leave to amend should be 24 liberally granted, the amended complaint may only allege other facts consistent with the 25 challenged pleading.”) (internal quotation marks omitted). 26 … 27 … 28 … 1 IV. Tortious Interference 2 A. Background 3 As discussed in Part II.B above, HumanN’s claim for tortious inference is premised 4 on the allegation that ThermoLife and Kramer sent a letter to Amazon.com in March 2019 5 in which they falsely accused HumanN of infringing the ’531 patent. In the November 6 2020 order, the Court dismissed this claim because HumanN hadn’t alleged any facts 7 showing that the false report was made in bad faith—which is a prerequisite to liability 8 when it comes to false claims of patent infringement—but granted leave to amend so 9 HumanN could attempt to cure the deficiency. (Doc. 113 at 24-27.) 10 In its amended pleading, HumanN adds an array of new factual allegations 11 concerning the existence of bad faith. (Doc. 117 ¶¶ 81-86.) HumanN then summarizes 12 those new allegations as follows: 13 Kramer and ThermoLife knew or should have known that SuperBeets and BeetElite do not infringe the ’531 Patent. At the time they sent their March 14 2019 letter to Amazon, Kramer and ThermoLife had no good faith belief, or 15 any objective basis for a good faith belief, that HumanN’s SuperBeets or BeetElite infringe the ’531 Patent. At the time they sent the March 2019 16 communication to Amazon, Kramer and ThermoLife already were in 17 litigation against HumanN, and knew or should have known that the ingredients of SuperBeets and BeetElite did not include one of the amino 18 acids identified in Claim 1 of the ’531 Patent. Absent such an ingredient, 19 SuperBeets and BeetElite could not practice the ’531 Patent. Kramer and ThermoLife thus sent the March 2019 letter to Amazon knowing that their 20 accusations of infringement were false, and they did so maliciously and with 21 an intent to injure HumanN. 22 (Id. ¶ 127.) 23 B. Analysis 24 ThermoLife moves to dismiss the tortious interference claim on the ground that it 25 remains deficient even after amendment. (Doc. 122 at 2-3, 9-11.) ThermoLife’s primary 26 argument is that Exhibit B proves that it (and Kramer) never made any allegations of 27 infringement concerning the ’531 patent (and, thus, couldn’t have made any allegations in 28 bad faith). But as discussed in Part II.B above, Exhibit B is not properly before the Court. 1 Thus, the Court must accept HumanN’s allegation that ThermoLife and Kramer sent a letter 2 to Amazon in March 2019 that falsely accused HumanN of infringing the ’531 patent. 3 Alternatively, ThermoLife contends that HumanN’s new allegations remain 4 deficient because HumanN still has not set forth “facts that support [the] conclusory 5 allegation that ThermoLife and Kramer ‘knew or should have known’ that HumanN’s 6 products do not infringe the ’531 Patent.” (Doc. 122 at 11.) This argument lacks merit. 7 HumanN has now provided detailed allegations that ThermoLife’s communication 8 concerning the ’531 Patent was made in bad faith. HumanN alleges that its products 9 “demonstrably do not infringe the ’531 Patent” because their ingredients “do not have— 10 and have never had—as an ingredient an amino acid from the group” protected by the ’531 11 patent. (Doc. 117 ¶¶ 81-82.) HumanN also alleges that, “[a]t the time [ThermoLife] sent 12 the March 2019 communication to Amazon, Kramer and ThermoLife already were in 13 litigation against HumanN, and knew or should have known that the ingredients of 14 SuperBeets and BeetElite did not include one of the amino acids identified in . . . the ’531 15 Patent. Indeed, in this litigation, ThermoLife claims to have chemically analyzed 16 SuperBeets and BeetElite, and thus must have known that HumanN’s labeling was accurate 17 and complete.” (Id. ¶ 83.) HumanN further alleges that, “as Kramer and ThermoLife knew 18 or should have known, the ’531 Patent was infirm in March 2019,” noting that “shortly 19 after Kramer and ThermoLife sent their letter to Amazon, the ’531 Patent went into 20 voluntary reexamination.” (Id. ¶ 85.) These allegations are sufficient to allege bad faith.7
21 7 HumanN also suggests its tortious interference claim should survive dismissal because ThermoLife and Kramer made false, bad-faith allegations of infringement 22 concerning the ’140 patent. (Doc. 125 at 16.) This is something of a red herring. The relevant paragraphs of HumanN’s pleading pertaining to the tortious inference claim only 23 discuss the ’531 patent. (Doc. 117 ¶¶ 77-89, 121-23.) The Court raises this point because HumanN did not, for whatever reason, affirmatively state in its motion papers that it has 24 proof that ThermoLife and Kramer sent a letter to Amazon in March 2019 raising infringement allegations concerning the ’531 patent (which, again, is the only theory of 25 liability set forth in its pleading). Instead, HumanN simply raised the possibility that such a letter might exist and then faulted ThermoLife for failing to disprove its existence. 26 (Doc.125 at 4 [“ThermoLife also fails to show that, even if Exhibit B was sent to Amazon, it was the only communication with Amazon alleging infringement. These are issues for 27 discovery and proof, not assumptions on a Rule 12 motion that would be used to contradict the well-pled allegations in the Amended Counterclaims.”].) Although this approach may 28 be permissible at the motion-to-dismiss stage, where a non-movant has no obligation to produce evidence in support of its claims, it will not be permissible at future stages. 1 Because ThermoLife does not seek dismissal of the tortious interference claim on || any other grounds, ThermoLife’s motion to dismiss that claim is denied. 3 Accordingly, 4 IT IS ORDERED that ThermoLife’s motion to dismiss (Doc. 122) is granted in part and denied in part. 6 Dated this 14th day of April, 2021. 7 8 Lm ee” 9 f t _o——— Dominic W. Lanza 10 United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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