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Wave Form Systems, Inc. v. AMS Sales Corp.

United States District Court, D. Minnesota

December 22, 2014

Wave Form Systems, Inc., Plaintiff,
v.
AMS Sales Corporation and American Medical Systems, Inc., Defendants

Page 1053

Karla M. Vehrs, Esq., Lindquist & Vennum PLLP, Minneapolis, MN, appeared on behalf of Plaintiff.

Kirk W. Reilly, Esq., Gray Plant Mooty Mooty & Bennett, PA, Minneapolis, MN, appeared on behalf of Defendants.

Page 1054

MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, UNITED STATES DISTRICT JUDGE.

I. INTRODUCTION

On December 5, 2014, the undersigned United States District Judge heard oral argument on Plaintiff Wave Form Systems, Inc.'s (" Wave Form" ) Motion for Preliminary Injunction [Docket No. 11] against Defendants AMS Sales Corporation and American Medical Systems, Inc. (collectively, " AMS" ). For the reasons set forth below, Wave Form's motion is denied.

II. BACKGROUND

A. AMS

AMS is a Delaware corporation with its principal place of business in Minnetonka, Minnesota. Am. Compl. [Docket No. 10] ¶ 2; Answer Am. Compl. Countercl. [Docket No. 19] ¶ 2. AMS markets health care solutions, including GreenLight lasers. Rooney Decl. [Docket No. 22] ¶ 2. The GreenLight laser is a self-contained unit designed to treat benign prostatic hyperplasia, an affliction of the prostate that impacts urine flow. Id. The GreenLight laser procedure utilizes special, liquid-cooled fibers inserted through a cystoscope to deliver laser energy to rapidly heat and vaporize prostate tissue. Id. The procedure is designed to eliminate excess tissue and results in the restoration of normal urine flow in most patients. Id.

Until 2012, AMS had two different methods of selling its GreenLight lasers; direct sales and through its network of Mobile Service Providers. In its direct sales method, AMS sold GreenLight lasers

Page 1055

to health care providers at specific hospitals, who stored the lasers on site for physicians to use for their scheduled appointments. Id. ¶ 3 AMS provided technicians to assist physicians with use of the laser. Id. AMS also sold GreenLight lasers to a network of Mobile Service Providers. Id. ¶ 4. These providers supplied GreenLight lasers to physicians at their offices and clinics. Id. Unlike the direct sale model, Mobile Service Providers transported their lasers for procedures as needed to clinics and offices of its customers. Id. Mobile Service Providers also provided technicians to assist physicians with use of the laser. Id.

B. Wave Form

Wave Form is an Oregon corporation that supplies health care providers with laser equipment and services for medical procedures in over 30 states. Watkins Decl. [Docket No. 15] ¶ 2. Wave Form offers its services to physicians and hospitals within driving distance of its 40 offices and satellite locations across the country. Id.

Wave Form first bought GreenLight lasers from AMS starting in 2002. Id. ¶ 4. To date, Wave Form has purchased over $1.4 million in GreenLight laser equipment, including over $530,000 in 2013 alone. Id. ¶ ¶ 5, 11. In 2013, Wave Form performed over 860 GreenLight procedures, a 28% increase over its 2012 numbers. Id. ¶ 4. At the hearing, Wave Form indicated GreenLight accounts for roughly 20% of the laser therapy procedures it provides.

Prior to 2012, Wave Form purchased the lasers and disposable fibers from AMS and occasionally called upon AMS for repairs and troubleshooting. Id. ¶ 6. Wave Form staff personally serviced the GreenLight lasers whenever possible, performing needed repairs and periodic maintenance. Id. ¶ 12. Wave Form would sometimes sign service contracts under AMS' " Certified Partners Plan," which covered repair parts and on-site service up to a certain cap per laser. Id.

C. The 2012 Mobile Provider Agreement

In 2011 and early 2012, AMS restructured its GreenLight laser business to align its direct sales and Mobile Service Provider models. Rooney Decl. ¶ 5. To that end, AMS eliminated its sales representatives and no longer directly sold GreenLight technology to end users. Id. ¶ 6. At this time, AMS also required Mobile Service Providers to purchase a Post-Warranty Service Plan (" Service Plan" ) from AMS for each GreenLight laser it owned. Id. ¶ 8. AMS reasoned the Service Plan was necessary because the wear and tear of more frequent travel increased the likelihood of damage to the sensitive GreenLight lasers. Id. ¶ 7.

After AMS announced its new plan, Wave Form expressed interest in being a part of the mobile program. Id. ¶ 13. In early 2012, AMS representatives traveled to Oregon to make an in person presentation to Wave Form about its new plan. Id. ¶ 14. Some time later, a first draft of the proposed Mobile Provider Agreement (" MPA" ) was emailed from AMS in Minnesota to Wave Form in Oregon. Watkins Decl. ¶ 9. Eventually, an execution copy of the MPA was sent from AMS in Minneapolis to Oregon, where it was signed by Wave Form and returned to Minnesota, where it was signed by AMS. Id.

The MPA includes a number of provisions that are central to this lawsuit, such as the required purchase of Service Plans, the establishment of non-competition obligations, and a termination clause. Article 6, Section 2, entitled " Service Plan Requirements," states:

As part of AMS' quality assurance requirements, Mobile Provider shall be required

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to purchase from AMS and maintain a Post-Warranty Service Plan for all GreenLight XPS and HPS Equipment. Mobile Provider is prohibited from providing service or service agreements, with respect to any Equipment, to third parties, including but not limited to Customers.

Am. Compl. Ex. A at 9. Exhibit D of the MPA details the three Service Plans AMS offers. Id. at 25. The Service Plans, designated " Bronze," " Gold," and " Platinum," are tiered according to cost and the amount of services provided. Bronze, for example, costs $6,000 per GreenLight XPS laser per year and includes two annual preventative maintenance visits by AMS with all repair parts included, telephone technical support from 6:00 AM to 5:00 PM, and a 10% discount on parts required for separate corrective repairs. Id. The Platinum plan costs $11,000 annually for each GreenLight XPS laser and covers two annual preventative maintenance visits by AMS, 24-hour telephone technical support, an uptime guarantee, unlimited on-site service, included parts replacement, and more. Id. at 26.

The MPA also establishes non-competition obligations on both AMS and Wave Form. Specifically, Wave Form is prohibited from offering or providing alternative lasers if the customer requests GreenLight lasers. Wave Form also cannot design or manufacture laser products or systems that compete with AMS products. Id. at 5. AMS ...


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