McKesson/HBOC sues W3Health, former McKesson employees

September 20, 2000

McKesson/HBOC sues W3Health, former McKesson employeesFirm claims damages for loss of trade secretsMcKesson/HBOC has filed a lawsuit in Massachusetts Superior Court against W3Health and 12 former McKesson employees for allegedly

McKesson/HBOC sues W3Health, former McKesson employees

Firm claims damages for loss of trade secrets

McKesson/HBOC has filed a lawsuit in Massachusetts Superior Court against W3Health and 12 former McKesson employees for allegedly appropriating trade secrets in connection with a suite of software products, the Clinical Resource Management System (CRMS), developed by the Access Health subsidiary of McKesson. Access Health was rolled into the iMcKesson division in June (HNN 7/12/00).

The lawsuit alleges that W3Health used the proprietary information to develop its own Distributed Reporting System (DRS) software suite that competes directly with CRMS, and that W3Health enticed the 12 employees named in the suit away from McKesson with the specific goal of acquiring the knowledge to create a product similar to CRMS. The San Francisco-based firm seeks damages of triple the amount of monetary damages suffered as a result of W3Health's actions, and enforcement of the noncompete and nondisclosure clauses of the 12 codefendants' employment contracts.

W3Health has issued a release denying McKesson's charges. The firm claims that its ASP-based DRS software does not use any information garnered from McKesson employees in developing its product.

"McKesson/HBOC is using an increasingly common business tactic: suing a potential competitor that has developed a superior product," said Doug Percy, chairman and CEO of Wilmington, MA-based W3Health. "W3Health does not intend to change its business strategy in reaction to this suit."

W3Health launched financial reporting and risk management DRSsoftware commercially in the first quarter of 2000. The firm counts Yale-New Haven PHO as its most recent DRS customer. Other DRSinstallations include Blue Cross/Blue Shield of Vermont, Yale-New Haven Health, New England Medical Center, HealthConnecticut, and Hill Physicians Medical Group.

McKesson/HBOCstock rose following announcement of the lawsuit. After closing at $25.75 per share on Sept. 12, the stock closed at $28 per share on Sept. 13, an increase of 8.7%. Lehman Brothers raised the company's 12-month price target to $34 from $30 on Sept. 8.