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Merge Healthcare Inc. is suing a rival medical imaging software company, charging that the other company is stealing clients by making false claims about Merge.

Merge, based in Chicago, filed a lawsuit earlier this month against Medstrat Inc. of nearby Downers Grove, Illinois. The lawsuit, filed in U.S. District Court in Chicago, says that Medstrat’s false claims and unfair business practices have cost Merge up to tens of millions of dollars in revenue.

Both companies sell medical imaging software, although Medstrat focuses only on orthopedic software. The lawsuit says Medstrat has lured away almost 40 Merge clients since 2010.

Merge has had a tumultuous year, as detailed by Crain’s Chicago Business. First, it switched from a traditional business model based on sales and started pushing subscription services instead. Then, in September, Merge engaged an investment bank to explore a sale or merger of the company.

According to the lawsuit, Merge first learned in April that Medstrat was trying to grab Merge’s PACS customers by falsely saying in e-mails and advertisements that Merge planned to replace PACS with a new product that would require a costly transition.

After Merge announced its intention to consider a sale or merger, Medstrat sent out a marketing e-mail that questioned Merge’s stability and touted Medstrat’s ability to convert Merge clients to its own software. The e-mail, included in the lawsuit filing, said:

Why go through more pain? Converting is simple.

Michael Summerhill, one of Merge’s lawyers, told Crain’s that the lawsuit was intended to force Medstrat to portray Merge fairly. “It’s inaccurate for Medstrat to say that because Merge has engaged an investment bank, therefore Merge is unstable,” Summerhill said.

Um, OK. If he says so.

A Medstrat spokesman issued a statement calling the lawsuit “baseless” and saying, “We intend to aggressively defend ourselves without distracting from the important services we provide to our orthopedic partners.”

The lawsuit mentions another factor, aside from statements about new products or company stability, that might explain why Medstrat has been able to woo clients from Merge: Medstrat’s monthly service fee is 20 percent to 30 percent less than Merge’s.

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Related seminar: UCSF Musculoskeletal MR Imaging


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