Practice Management Information v. American Medical
| Decision Date | 08 December 1994 |
| Docket Number | No. CV 94-3107 DT (GHKx).,CV 94-3107 DT (GHKx). |
| Citation | 877 F. Supp. 1386 |
| Court | U.S. District Court — Central District of California |
| Parties | PRACTICE MANAGEMENT INFORMATION CORPORATION, a California corporation, Plaintiff-Counterdefendant, v. AMERICAN MEDICAL ASSOCIATION, an Illinois nonprofit corporation, Defendants-Counterplaintiff. |
Darrell L. Olson, Joseph R. Re, Paul A. Stewart, Knobbe, Martens, Olson and Bear, Newport Beach, CA, for plaintiff.
Peter I. Ostroff, Sharon Helene Pohoryles, Sidley & Austin, Los Angeles, CA, Henry L. Mason, III, Quincy White, Sidley & Austin, Chicago, IL, for American Medical Ass'n.
This action arises under the Declaratory Judgment Act, 28 U.S.C. § 2201. Plaintiff Practice Management Information Corporation ("PMIC") seeks a declaration that certain copyrights for the book entitled Physicians' Current Procedural Terminology ("CPT") of defendant American Medical Association ("AMA") are invalid and unenforceable because the federal government has required physicians to use the numerical codes contained in the CPT when describing medical procedures in requests for government reimbursement.
The following facts are undisputed. PMIC is a publisher of medical books. Defendant American Medical Association ("AMA") is a non-profit corporation and its business includes publishing, licensing for publication, and selling books used by medical professionals.
Since 1966, the AMA has published the CPT, a reference book which describes medical services performed by physicians and assigns a specific numerical code to each service. Declaration of Barry S. Eisenberg, ¶ 4 () ("Eisenberg Decl."); see also CPT, attached as Exhibit 1 to the Declaration of James Davis filed in support of PMIC's Motion for Preliminary Injunction ("CPT" or "Exh. 1"). The CPT contains a list of thousands of five-digit code numbers and two-digit modifiers, each followed by a description of particular medical procedures. See CPT; U.S. Dept. of Health and Human Services, Office of Inspector General, Coding of Physician Services A-1 to A-2 (May 1994) ("HHS Report") at p. 1 and attached to the Eisenberg Decl. as Exhibit "C" (which was attached to the AMA's Opposition to PMIC's Motion for Preliminary Injunction). The code numbers and their accompanying descriptions are listed in numerical order, except that the frequently used code numbers beginning with the digits "99" are listed first. See CPT.
The CPT is used by physicians to obtain reimbursement for their medical services from the federal government, state governments and from private insurers. Eisenberg Decl., ¶¶ 6, 14. The physician finds the most accurate description for the services he or she has performed, locates the corresponding CPT code number and writes the number on the appropriate reimbursement forms. In addition, the CPT also contains guidelines and definitions which instruct medical professionals how to use the CPT. The guidelines appear at the beginning of each section and are essential for selecting the correct CPT code number. See CPT, at p. xii.
The AMA updates the CPT every year, revising the code numbers, descriptions, definitions, and guidelines. The AMA publishes and distributes the revised edition of the CPT in the fall of each year. The 1995 CPT was scheduled for release in October 1994.
The Health Care Financing Administration ("HCFA") is an agency of the United States Department of Health and Human Services ("HHS"). The HCFA is responsible for administrating the financial reimbursement of hospitals, physicians, and other health-care professionals for medical services performed under the federally funded Medicare and Medicaid programs. 42 Fed.Reg. 13262 (March 9, 1977). HCFA is specifically charged with developing a uniform coding system for medical procedures to be used for reimbursement in all HCFA-administered programs. 42 U.S.C. § 1395w-4(c)(5). This system is commonly known as the HCFA Common Procedure Coding System or "HCPCS".
On February 1, 1983, HCFA entered into a licensing agreement with the AMA in which the AMA granted HCFA a royalty-free, nonexclusive license to use the CPT coding system. HHS Report at A-1 to A-2; Agreement, the Department of Health and Human Services, Health Care Financing Administration and American Medical Association, ¶ 3(a) dated February 1, 1983 ("Agreement") and attached as Exhibit "C" to AMA's Answer. HCFA may terminate the Agreement upon ninety days notice. Agreement, ¶ 10.
In exchange for this royalty-free license, HCFA promised to use its regulatory powers as a federal agency to "require the use of CPT-4 ... in programs administered by HCFA by its agents and other entities participating in those programs." Agreement, ¶ 2(b). HCFA also promised not to use any other system of procedure nomenclature for reporting physicians' services. Agreement, ¶ 1. The Agreement also requires HCFA to include a copyright notice whenever it reprints the CPT. Agreement, ¶ 3(c). The notice is specifically designed to inform the public that only the AMA may reproduce the federally mandated AMA CPT system. Agreement, ¶ 3(c).
HCFA, other federal agencies and the United States Congress have incorporated the CPT into federal law.1 These statutes and regulations mandate the use of the CPT coding system for obtaining reimbursement from the federal and state governments for medical services. For example, HCFA requires all states which receive federal funding or their Medicaid programs to adopt the CPT as the exclusive coding system to be used by all Medicaid health-care providers. 42 C.F.R. § 433.112(b)(2); State Medicaid Manual, Part 11, Section 11300 (App.K); Medicaid Management Information Systems Requirements for Physician and Supplier Services, 50 Fed.Reg. 40895, 40898 (October 7, 1985) (adopting this requirement) (App. C).
The Department of Labor requires all health-care providers treating patients under the Federal Employees' Compensation Act to identify their services using only the CPT coding system. 20 C.F.R. § 10.411; see also 51 Fed.Reg. 8280 (March 10, 1986) (adopting this requirement) (App. D). Similarly, Section 9343(g) of the Omnibus Budget Reconciliation Act of 1986 requires that all hospitals, "as a condition of payment for outpatient hospital services" under Medicare Part B, to use the CPT to report their services. Pub.L. No. 99-509, § 9343(g), 100 Stat. 2040 (reprinted as a note following 42 U.S.C.S. § 1395(u) (App. E).
HCFA annually publishes a complete list of the CPT code numbers in the Federal Register. Each code number is listed in numerical order and is accompanied by an abbreviated description of the medical services which the code number designates, and a table of numbers which are used to calculate the reimbursement that health-care professionals will receive for performing the listed medical services. HCFA also publishes a series of manuals, including the Medicare Intermediary Manual and the State Medicaid Manual, which provide instructions to the institutions that process claims under Medicare and Medicaid. 53 Fed.Reg. 21730 (June 9, 1988). These manuals require the processing institutions to accept reimbursement applications which identify medical services using CPT code numbers.
For the past several years, PMIC has been reselling the CPT as printed by the AMA and currently resells more CPT books than anyone else. However, according to PMIC, the quality of the CPT has been declining annually, and the 1995 CPT published by the AMA will contain many errors and omissions. The AMA announced that it will, for the first time, increase the size of its book from 6" × 9" to 8.5" × 11". PMIC claims that its customers overwhelmingly prefer the traditional 6" × 9" format. This preference has allegedly led PMIC to standardize its entire line of medical coding books in the 6" × 9" format. PMIC has indicated it intends to publish its own reference material using the CPT coding system or modified versions of the CPT coding system in the 6" × 9" format with its own corrections.
PMIC filed its original Complaint on May 12, 1994. PMIC filed a motion for preliminary injunction against the AMA to enjoin the AMA from enforcing any copyrights for the CPT. On July 25, 1994, this Court denied that motion for preliminary injunction on the grounds that the CPT was sufficiently original to entitle it to copyright protection ("July 25 Order"). This Court rejected three of the four arguments presented by PMIC. The only issue left for determination was whether the federal government could destroy a valid copyright for a privately created reference book where the federal government then requires all physicians to use that reference book when participating in a federal program and seeking reimbursements. July 25, 1994 Order, at pp. 12-16.
On August 23, 1994, the parties signed a Stipulated Protective Order in which they agreed that certain evidence pertinent to this case may contain confidential or trade secret information and that such evidence or information would be designated as confidential.
On September 22, 1994 by Stipulation with PMIC, the AMA filed its Answer and Second Amended Counterclaim.
On October 21, 1994, the AMA filed the present Motion for Partial Summary Judgment seeking a judgment that the federal government's requirement that physicians use the CPT coding system when seeking reimbursement for participating in a federal program does not destroy a valid copyright in a privately created reference work. This motion is now before this Court.
On November 7, 1994, PMIC filed its Cross-Motion for Summary Judgment of...
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