Medical Graphics Corp. v. SensorMedics Corp.
| Decision Date | 31 October 1994 |
| Docket Number | Civ. No. 3-94-525. |
| Citation | 872 F. Supp. 643 |
| Parties | MEDICAL GRAPHICS CORPORATION, Plaintiff, v. SENSORMEDICS CORPORATION, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Jon S. Swierzewski, Alan Marshall Anderson, Renee L. Jackson, Larkin Hoffman Daly & Lindgren, Bloomington, MN, Michael R. Sullivan, Sullivan Walsh & Wood, Los Angeles, CA, for Medical Graphics Corp.
Jeffrey M. Olson, Hope E. Melville, Lyon & Lyon, Los Angeles, CA, Samuel D. Heins, Daniel E. Gustafson, Heins Mills & Olson, P.L.C., Minneapolis, MN, for SensorMedics Corp.
Before the Court is Plaintiff Medical Graphics Corporation's ("Medical Graphics") Motion for a Preliminary Injunction, brought pursuant to Rule 65 of the Federal Rules of Civil Procedure. Plaintiff seeks to enjoin Defendant SensorMedics Corporation ("SensorMedics") from making false and misleading statements in the marketplace about Medical Graphics and its products which will further damage Medical Graphics' goodwill and reputation.
Medical Graphics is a Minnesota corporation headquartered in Vadnais Heights, Minnesota, which manufactures and sells medical devices. (Compl. ¶ 2.) SensorMedics, a California corporation, also manufactures and sells medical devices; SensorMedics has engaged in such business in the state of Minnesota. (Answer, ¶ 3.) The parties are competitors in the market of cardiopulmonary diagnostic equipment; SensorMedics currently holds the larger share of the market in this type of equipment. Answer, ¶ 4; Aff. of Terrance J. Kapsen, ¶¶ 2, 3. The potential customers for this equipment include hospitals, clinics, doctor's offices, research facilities and academic institutions. Decl. of William Ross, ¶ 2. This equipment is subject to regulation by the United States Food and Drug Administration ("FDA"). Kapsen Aff., ¶ 4.
Plaintiff has based its motion upon a number of incidents involving representations made by SensorMedics sales personnel to present or potential customers of Medical Graphics. SensorMedics' sales staff consists of twenty-three sales representatives, two district sales managers and two regional sales managers. Ross. Decl., ¶ 3. As part of its ongoing sales and marketing efforts, SensorMedics distributes "marketing flashes" to its sales force which contain background information on the products of SensorMedics and its competitors. Id., ¶ 4. Plaintiff contends that SensorMedics' conduct has created misconceptions and caused confusion in the marketplace and has delayed purchases; plaintiff asserts that it has found it necessary to spend substantial time and resources to correct the misconceptions and confusion. The Court will discuss each of the complained of representations below.
Plaintiff contends that SensorMedics has falsely represented to Medical Graphics' present and potential customers that Medical Graphics was having difficulties with the United States Food and Drug Administration ("FDA") and that Medical Graphics' pneumotach, a key component of its equipment, was being recalled by the FDA. Aff. of Patti Wenberg, ¶ 2. A Medical Graphics sales representative averred that he has been receiving a number of questions from new customers inquiring about whether Medical Graphics was having difficulties with the FDA and whether the FDA has recalled Medical Graphics' pneumotach. Decl. of Michael Fussell, ¶ 4. The Medical Graphics sales representative does not know firsthand, however, that SensorMedics salespeople had made these suggestions to Medical Graphics potential customers.
Plaintiff further contends that SensorMedics has falsely stated to a potential customer that Medical Graphics is actually a front for a German company and is in fact a German company "masquerading as an American company." Aff. of Marie Easterling, ¶ 4. The sales representative from SensorMedics who allegedly made these statements denied doing so. Decl. of Felix Perez, ¶ 3. The Court notes that quarterly financial announcements from Medical Graphics indicate that Medical Graphics has a subsidiary in Dusseldorf, Germany. Aff. of Mindy Morales, Exh. C.
Plaintiff has identified in its supporting materials numerous other statements made by SensorMedics relating to the cost and performance of Medical Graphics' products which plaintiff alleges are false or misleading. A memorandum from SensorMedics stated that a Dr. Revels Cayton of the East Bay Pulmonary Laboratory in Oakland, California, was currently evaluating a SensorMedics product to "replace" an eight-month old Medical Graphics product "due to chronic down time." See Decl. of Terry Robinson, Exh., at fifth unnumbered page. Dr. Cayton learned of this memorandum in August of 1994 and objected to the use of his name. Aff. of Dr. Revels Cayton, ¶ 2. Whereas it is true that Dr. Cayton had spoken with a SensorMedics sales representative and had agreed to try a SensorMedics system for a period of time at no cost, he avers that he did not say anything negative about Medical Graphics.1 Id. ¶ 4. Dr. Cayton demanded and received a letter of apology from the sales representative with whom he had dealt. Id. ¶ 5 and Exh.
Plaintiff has identified other statements by SensorMedics relating to performance issues such as the tendency of Medical Graphics' pneumotach to lose its calibration if reused and to be affected by temperature and humidity. Aff. of Dr. David Nielsen, ¶ 5. A SensorMedics sales representative also represented to a prospective customer that Medical Graphics' gas validator would not perform to the standards suggested by Medical Graphics and that Medical Graphics had ineffectively copied Dr. Wasserman's gas validator. Id., ¶ 6. Medical Graphics contends that these statements were false. Kapsen Aff., ¶ 9. Specifically, Medical Graphics contends that its gas validator is manufactured to Dr. Wasserman's patented specifications, and Dr. Wasserman in fact uses the Medical Graphics gas validator. Id., ¶ 10. The SensorMedics sales representative involved denies making these representations. Decl. of Don Sievers, ¶¶ 5, 6.
Plaintiff also complains of SensorMedics' statements relating to cost issues such as those found in the documents attached to a letter from Scott Minnich, a sales representative for SensorMedics, to David Best at Summersville Memorial Hospital. Medical Graphics contends that other allegedly false cost comparisons are found in the materials sent by Bob Messmer of SensorMedics to Dr. Michael Davis of the Doctors' Hospital in Manteca, California. Aff. of Dale Knox, Exh. A.
Plaintiff also complains that SensorMedics has distributed false or misleading documents to potential customers, including a memorandum or "alert" which appears to, but does not, originate from a non-profit health services research organization called the Emergency Care Research Institute ("ECRI"). ECRI distributes information on medical devices to thousands of hospitals. Aff. of Ronni P. Solomon, ¶ 1.
The "alert" came to the facsimile machines of both the bio-medical and pulmonary departments of a hospital in Long Island, New York at a time when the hospital was considering whether to buy equipment from either SensorMedics or Medical Graphics. Decl. of Ira Bauer, ¶ 4. The "alert" was also shown to a hospital administrator after she had told a SensorMedics sales representative that her hospital had decided to purchase Medical Graphics equipment. Aff. of Marie Easterling, ¶¶ 2, 3. A sales representative from SensorMedics left a copy of the "alert" with the receptionist of the Marshfield Clinic in Wisconsin following a sales call. Decl. of Larry Sternitzky, ¶ 3. A copy of the "alert" was shown to a potential customer while on a tour of SensorMedics' California facilities. Decl. of Scott Rifkin, ¶ 3. Another SensorMedics sales representative stated to a potential customer that ECRI had tested the pneumotach and had found problems with it.2 Aff. of David Nielsen, ¶ 4.
Plaintiff contends the document has been manufactured by SensorMedics and that the contents of the document are in fact an unverified report of an incident which allegedly occurred on or about August of 1993 involving a Medical Graphics product.3 Kapsen Aff., ¶ 7. A marketing manager for SensorMedics declares that he received the incident report from Michael Collins of Natividad Medical Center, who in turn had obtained it from Al deRichemond at ECRI. Decl. of Alex Stenzler, ¶ 2. Stenzler admits that, prior to sending the report to the sales representatives in a marketing flash, he cut and pasted the report onto the facsimile cover page that deRichemond had used to transmit the report to Collins. Id., ¶ 2 and Exh.
Plaintiff contends that the "ECRI alert" has caused confusion in the marketplace in that actual and potential customers have contacted Medical Graphics to determine whether the report is genuine. In early August of 1994, the vice president of legal affairs for ECRI became aware that SensorMedics had been distributing a memorandum ostensibly on ECRI facsimile letterhead. Solomon Aff. ¶ 2. When she learned of SensorMedics' use of the ECRI name on that document, Solomon wrote to SensorMedics demanding that they stop. Id. at ¶ 4 & Exh. B.
SensorMedics responds that the ECRI "alert" was not intended for distribution. Upon receiving the letter from Solomon, SensorMedics promptly told its sales force to stop any further distribution of the document. Aff. of Jon Swierzewski, Exh. F.
Plaintiff also complains of an adulterated chart, which bears the Medical Graphics registered trademark, that showed Medical Graphics' cost-per-test to be higher than SensorMedics' for certain cardiopulmonary tests. Compare Decl. of Michael Fussell, Exh. A with Id., Exh. B. SensorMedics has acknowledged that it superimposed...
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