As reported in Crain's Chicago Business on Monday, Merge Healthcare Inc. has filed suit against rival Medstrat for allegedly using unfair means to target a specific group of clients. Merge and Medstrat are competitors in the field of medical-imaging technology.
The central allegations it the Complaint revolve around a marketing plan Medstrat allegedly developed to poach customers away through a series of inaccurate or disparaging remarks, including claims that Merge was not "stable" and that Merge had retained an investment bank, ostensibly suggesting Merge was trying to combine itself with another industry player.
The meatier allegations of unfair competition concern a claim that Medstrat used improper tactics to poach away specific customers from Merge's prior acquisition of Stryker Imaging. Those so-called "legacy" customers had a different type of imaging system (that is, a hardware/software system that captured and stored medical images) that other Merge customers.
The crux of Merge's claim is that Medstrat was "scaring" customers into believing that Merge was going to convert these legacy Stryker customers into using (or migrating to) a different imaging platform. Ostensibly, the alleged purpose of these communications was to suggest the transition or conversion would be costly, painful, and difficult.
Merge's take is that no customer would be forced to convert to a single imaging product and that it would continue providing support for any legacy product that ex-Stryker customers use. Interestingly, Merge alleges that it is aware of nearly 40 accounts that have switched to Medstrat during the time period proximate to disparaging remarks. It claims that lost profits easily could reach into the eight figures.
The lawsuit seeks both injunctive relief and damages. Any time a court issues an injunction that ostensibly affects speech (which disparagement is), a First Amendment concern arises. And an injunction against speech could easily be deemed an improper prior restraint.
The law in Illinois is not particularly well-developed but it appears Merge recognizes the First Amendment difficulties that its injunction could pose. In my opinion, plaintiffs sometimes pursue a shotgun approach that seeks a broad injunction against false or misleading remarks - without specifically exactly what a court should enjoin. That clearly is wrong and would lead to significant legal problems crafting an injunction order.
Merge, though, was pretty careful. With its preliminary injunction motion, it has submitted a proposed order identifying what types of communications it wants enjoined. It outlined very specific comments that it believes should be enjoined and also wants the court to prevent Medstrat from distributing certain marketing communications that it believes incorporate disparaging material.
This is an example of a injunction request that affects speech, but which may be appropriately and narrowly crafted to avoid the latent First Amendment "prior restraint" problem that often crops up in disparagement cases between competitors.
Medstrat has not yet responded to the Complaint, but it will be interesting to see if the prior restraint issue is part of its defense at the preliminary injunction phase.
A copy of the Merge Complaint is embedded below. The case is No. 12-cv-9140 (N.D. Ill.). Judge Samuel Der-Yeghiayan.
Merge Healthcare v. Medstrat, Inc. - Complaint