Philips N. Am., LLC v. Glob. Med. Imaging

• Decision Date: 04 August 2022
• Docket Number: 21-cv-3615
• Parties: PHILIPS NORTH AMERICA LLC, KONINKLIJKE PHILIPS N.V., and PHILIPS INDIA LTD., Plaintiffs, v. GLOBAL MEDICAL IMAGING, LLC d/b/a AVANTE ULTRASOUND, AVANTE HEALTH SOLUTIONS f/k/a JORDAN HEALTH PRODUCTS, LLC, and JORDAN INDUSTRIES INTERNATIONAL, LLC, Defendants.
• Court: U.S. District Court — Northern District of Illinois

PHILIPS NORTH AMERICA LLC, KONINKLIJKE PHILIPS N.V., and PHILIPS INDIA LTD., Plaintiffs,
v.
GLOBAL MEDICAL IMAGING, LLC d/b/a AVANTE ULTRASOUND, AVANTE HEALTH SOLUTIONS f/k/a JORDAN HEALTH PRODUCTS, LLC, and JORDAN INDUSTRIES INTERNATIONAL, LLC, Defendants.

No. 21-cv-3615

United States District Court, N.D. Illinois, Eastern Division

August 4, 2022

MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr. United States District Judge

Plaintiffs bring suit against Defendants for allegedly using hacking tools to modify, tamper with, and alter Plaintiffs' ultrasound systems. Currently before the Court are Defendants' motion to dismiss for failure to state a claim [20] and Plaintiffs' motion for leave to file a surreply in opposition [33]. For the reasons that follow, both motions, [20], [33], are denied.

I. Background

The following facts are taken from the complaint. All well pled facts are assumed to be true for purposes of Defendants' motion to dismiss. Zimmerman v. Bornick, 25 F.4th 491 (7th Cir. 2022). Plaintiff Philips North America LLC is a medical imaging device company that supplies healthcare providers throughout the United States with medical imaging devices such as ultrasound systems and X-ray machines. Philips is a subsidiary of Plaintiff Koninklijke Philips N.V., which is organized and headquartered in the Netherlands. Plaintiff Philips India Ltd. is organized and headquartered in India and is the owner or co-owner of certain copyrights that are the subject of

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Plaintiffs' complaint. The complaint refers to the three Philips entities collectively as “Plaintiffs” and “Philips.”

The Philips name has become commonly known as the provider of specific branded lines of medical imaging devices, such as “CX,” “HD,” “ClearVue,” and many others (collectively, “Philips ultrasound systems”). Since 2004, Philips has also sold refurbished models of its branded products as part of its Diamond Select program. Philips authorizes certain third parties in certain territories to distribute Philips ultrasound systems, including Philips' refurbished machines under the Diamond Select brand name.

Philips develops, manufactures, sells, and subsequently supports, maintains, repairs and services these medical imaging systems through proprietary hardware, software, and trade secrets contained within the proprietary software and hardware. Philips' software was developed by and is owned by Philips entities and is protected by certain Registered Copyrights, which Plaintiffs set forth in Exhibit A to the complaint. See [1] at 9; [1-1] (63 pages of Certificates of Registration from the United States Copyright Office for computer programs and proprietary computer program code).

The specific versions and functionalities of the ultrasound systems enabled on a particular system can vary, and Philips licenses the use of features on each specific system. Because the proprietary software enabled on the ultrasound systems allows them to function and controls what licensable features are available for copying into memory to be available for use, the proprietary software includes strict access controls to limit access to software features. These access controls also control access to optional software which enables certain system features and which Philips licenses to end users for a fee.

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The ultrasound systems that Philips currently sells or that are active in the field are driven by one of three software platforms: (1) Philips Boris Platform; (2) Philips Voyager Platform; and (3) Philips Common Platform software. Each of these platforms was created and is owned by Philips and includes Philips' confidential and proprietary information, intellectual property, and trade secrets. Philips has also registered the copyright in its proprietary software for the following ultrasound systems: EPIQ5, EPIQ7, Affinity 30, Affinity 50, and Affinity 70. These models execute software subject to copyright registrations covering Voyager Platform Versions 1.5, 1.7, 1.8, 2.0, 3.0, 4.0.2, and 5.0.1; CX50 Versions 1.0 and 5.0; CX30 Versions 1.0 and 2.0; ClearVue 350 Versions 2.0 and 3.2; ClearVue 550 Versions 2.0 and 3.2; ClearVue 580 Version 2.0; ClearVue 650 Versions 1.0 and 3.2; ClearVue 850 Versions 3.1 and 3.2; HD15 Versions 1.0 and 3.0; SPARQ Versions 1.0 and 3.0; VISIQ Version 1.0; XPERIUS Versions 1.1 and 2.0; HD11 Versions 1.0 and 1.2; STS; CRC Tool 2014; and CRC Tool 2018.

Each ultrasound system, whether driven by Boris Platform software, Voyager Platform software or Common Platform software, includes both model specific features and machine specific set features that Philips enables on each ultrasound system pursuant to the license that the end user purchases. An ultrasound system may also support optional hardware add-ons and features, which Philips can enable if the end user purchases an additional license.

Philips uses multiple layers of technological controls to protect Philips' copyright-protected works from unauthorized access. These controls include user-specific access codes and hardware keys, which enable the software access and control features for a particular registered user. These user-specific access controls permit access to enabled Philips tools and features based on a user's registered access authorization level. These controls also include machine-specific access controls which permit users access only to the features and tools that have been enabled on

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a specific device. Philips further protects its trade secrets and proprietary software with both contractual restrictions and access controls, which only allow individuals access to informational material consistent with the authorization level of their user credentials.

Each ultrasound system includes certain software and hardware features that may only be used when a particular licensable feature is enabled. For each Philips ultrasound system sold, only the licensed features and tools are enabled, and only the specific authorized users of the machine can access the enabled features and software options. Philips' optional licensable features control access to Philips' proprietary software and limit the options available on each ultrasound system. Features and add-ons that have not been licensed are not accessible on the ultrasound system or by the authorized user. Any attempt to use an unlicensed feature on an ultrasound system will result in an error message that the feature is not compatible with the system and/or the machine specific access controls will prevent access to the unlicensed feature. If a specific hardware add-on requires a software feature be enabled to make use of such hardware, absent the required software, Philips ultrasound systems will report an incompatible device and the related software will be disabled.

Philips also controls access to proprietary manuals and documents with instructions for use of its proprietary software, which together with its proprietary software, Philips refers to as its customer service intellectual property (“Philips CSIP”). Philips retains ownership of its CSIP even though the physical machine upon which Philips CSIP resides may itself be owned by a hospital, medical center, or other Philips customer. Displays on computer screens that appear in connection with accessing Philips' software on ultrasound systems, and the contents of written service and maintenance manuals used by technicians to access Philips ultrasound systems, contain various written warnings, disclosures, and notices that place the user on notice that the software and information being accessed is Philips' proprietary and confidential software that is to be accessed

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only by authorized and licensed users, and that passwords provided by Philips in connection with such access are subject to terms and conditions restricting their usage.

Philips has spent considerable time and money creating this software and developing access controls to limit and control access to these features. Philips controls who holds a license for specific restricted tools and features and what features and options are available and accessible on a particular ultrasound system. Philips also requires end users to register for authorized access. These same controls prevent unlicensed access to and copying of the software.

Defendant Global Medical Imaging, LLC d/b/a Avante Ultrasound (“GMI”) advertises itself and its “family of companies” as “a single source provider of medical, surgical, diagnostic imaging, and radiation oncology equipment, including sales, service, repair, parts, refurbishing, and installation.” [1] at 2 & n.2. GMI is the ultrasound arm of Defendant Avante Health Solutions f/k/a Jordan Health Products, LLC (“Avante”). GMI is advertised on the Avante website as the “one source for complete ultrasound service, parts and equipment.” Id. at 2. Based on information and belief, Defendant Jordan Industries International, LLC (“Jordan”) acquired GMI in October 2015. See id. at 5.^[1] On information and belief, following the acquisition, Avante and Jordan took over control and leadership of GMI and have been funding, overseeing, supervising and directing the business. See id.

The complaint alleges that since that acquisition, GMI, at the direction of and for the financial benefit of Jordan and Avante, acts under the d/b/a Avante Ultrasound in furtherance of an unlawful scheme to trade off of and use Philips' proprietary and trade secret software, tools and information. More particularly, the complaint alleges that Defendants have engaged in an unlawful scheme consisting of three independent activities: (1) the modification of Philips ultrasound

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systems to enable software configurations and features without permission and the sale of modified ultrasound systems for a profit; (2) the sale of “24 hour access keys” to customers and third parties, intended for use by Defendants and their customers to circumvent and bypass...