Scanner service settlement is win/win deal

March 27, 1991

Both GE Medical and R Squared Scan Systems won victories of sortsin the settlement of their scanner servicing litigation this month(SCAN 3/13/91). Antitrust claims against GE were dropped and the company maintainsproprietary rights to service software

Both GE Medical and R Squared Scan Systems won victories of sortsin the settlement of their scanner servicing litigation this month(SCAN 3/13/91).

Antitrust claims against GE were dropped and the company maintainsproprietary rights to service software that can give it a competitiveedge. R Squared, on the other hand, has been assured access tobasic scanner software and a new, friendlier relationship withthe world's largest medical imaging vendor.

Although GE claims that independent service organizations havealways had access to operating and basic scanner software viathe equipment owners, the vendor has apparently made a tacticalretreat on the basic software issue in order to protect more advancedservice programs.

GE created a flurry among hospitals and ISOs three years agowhen it introduced new language into its standard condition ofsale, a document used for all products and services the medicalvendor sells. The wording appeared to severely restrict accessto basic scanner software (SCAN 2/3/88).

"Buyer agrees not to copy operating software and to limitaccess to operating software to those of its employees havinga need to use the operating software in connection with the equipmentfor a health-care purpose," the document read.

Without access to basic scanner software, ISOs cannot writeservice software of their own, said Paul Thomas, senior vice presidentof R Squared.

R Squared objected to the restrictive language in the GE documentationand in late 1988 filed for court injunction to prevent its use.GE agreed out of court to change the wording so that customerswould have a right to allow others to use the operating softwarein the scanner, Thomas said.

No matter how GE's contractual language might have been interpreted,the vendor did not intend to restrict the access of ISOs to itsequipment, said Douglas Stoner, patent counsel for GE.

"We have never objected to a third-party service providerusing operating and basic service software," he said.

Litigation between the vendor and the third party began in1987, when GE sued R Squared for copyright violation of softwareused to service Technicare CT systems. Johnson & Johnson,Technicare's parent, signed over rights to the software to GEwhen it shut Technicare down. R Squared countersued, allegingantitrust violations. GE later introduced copyright issues concerningits own software into the litigation.

Part of R Squared's antitrust case was an "essential facilties"claim, stating that a facility (the software, in this case) isessential if a company cannot stay in business without it, saidJeff Schaper, GE general manager of service marketing.

By permitting access to basic software, GE allows the ISOsto perform their job and cannot be accused of forcing smallercompetitors out of the business in a monopolistic fashion. Thesettlement, however, allows GE to maintain copyright claims onmore advanced software that can do the job faster and reduce scannerdowntime.

"GE's position is that we supply sufficient software andtools to repair the equipment. We will keep efficiency enhancement(software) for our own," Schaper said.

GE decided not to fight over rights to the Technicare CT softwarebecause it was five years out of date and the installed base ofsystems is small and declining. The vendor reclassified all ofthe Technicare software as basic, making it fully accessible,Schaper said.

Although ISOs can gain access to operating and basic scannersoftware by receiving permission from the clinical user, the legalposition of ISOs regarding scanners they own themselves was unclear.R Squared requested rights to use the basic software on scannersthat it owned, and GE granted the license, he said.

R Squared has had to return to GE copies of advanced softwarefor use on 9800 scanners. The ISO is in the process of writingits own advanced diagnostics programs, Thomas said.

The agreement allowing R Squared access to basic software inGE equipment is also valid for magnetic resonance imaging andx-ray equipment. The ISO has obtained rights to use certain portionsof GE software in its own scanner maintenance software as well,said Jim Hunt, R Squared president.

While R Squared did not receive compensation for attorneys'fees and other expenses it incurred, the firm was satisfied withgaining the additional access to GE equipment, he said.