Philips North America LLC v. Global Medical Imaging, LLC, 1:21-cv-03615

Background

Philips (three corporate plaintiffs) develops proprietary software and access controls for branded ultrasound systems and licenses features to customers; it alleges strong technological and contractual protections for its software and CSIP.
Defendants are Global Medical Imaging LLC (d/b/a Avante Ultrasound), Avante Health Solutions, and Jordan Industries; Philips alleges Jordan acquired and controls GMI and that Avante/Jordan supervise and profit from GMI’s conduct.
Plaintiffs allege Defendants used hacking tools and a counterfeit key generator to circumvent Philips’ machine- and user-specific access controls to (a) permanently enable unlicensed or non‑FDA‑approved features, (b) upgrade software without authorization, and (c) sell short‑term "24‑hour access keys" to customers to access proprietary diagnostic/service tools.
Specific on‑site incidents alleged: unauthorized enabled features and software upgrades on an Epiq system at St. Peters Hospital (including a non‑approved Transducer Option) and altered DICOM presets after Avante’s visit at Beaumont Dearborn Hospital.
Philips asserts claims under the DMCA (§1201 & §1202), federal and Illinois trade secret law, the CFAA, copyright infringement, tortious interference, civil conspiracy, and state unfair competition; Defendants moved to dismiss and Philips moved for leave to file a surreply.
Court disposition on the motion to dismiss: the court denied Defendants’ motion to dismiss and denied Philips’ surreply motion as moot; most claims survive the pleadings stage.

Issues

Issue	Philips' Argument	Defendants' Argument	Held
DMCA §1201 / Copyright infringement — do §117 "essential step" or "repair/maintenance" exclusions bar claims?	Philips: Defendants exceeded any maintenance/repair scope, permanently enabled unlicensed features and modified software without ownership or license.	Defs: §117 permits copying/activation for owners/repair; Copyright Office exemption for repair of medical devices covers service circumvention.	Court: Dismissal denied; complaint plausibly alleges conduct beyond §117 protections and beyond the limited service exemption because Defendants allegedly modified software and lacked ownership/license.
DMCA §1202 (CMI) — sufficiency of pleading altered/false CMI	Philips: Complaint identifies CMI (copyright notices, licensed‑option identifiers, terms) and alleges how defendants altered or falsified it when enabling unlicensed options/upgrades.	Defs: Complaint fails to identify specific CMI altered, when/how, or that such CMI was accessible to end users.	Court: Allegations satisfy Rule 8; Plaintiffs plead identifiable CMI and plausible alteration/distribution.
Trade secret misappropriation (federal & Illinois) — particularity and misappropriation	Philips: Identifies categories of trade secrets (software, access controls, enablement tools, CSIP) and alleges acquisition via keys/hacking.	Defs: Pleading is too vague; no allegation of decompilation or that information isn’t industry‑known; insufficient safeguards shown.	Court: Denial; complaint adequately describes trade secrets in general terms (avoiding public disclosure) and pleads plausible means of misappropriation.
CFAA — unauthorized access / exceeding authorization	Philips: Defendants accessed system software without authorization or beyond granted access using counterfeit keys and hacking, obtaining proprietary tools/logs and causing >$5,000 loss.	Defs: Factual gaps re: who did what onsite (Beaumont), timing, and whether access was unauthorized; contradictions in allegations.	Court: Denial; pleadings plausibly allege unauthorized or excessive access and resulting loss; factual disputes inappropriate at dismissal stage.
Tortious interference / Civil conspiracy / Unfair competition / Vicarious liability	Philips: Customers agree to Philips’ Terms and License; defendants induced breaches via keys and services; Jordan supervised/benefitted from GMI/Avante.	Defs: No specific contract identified; hospitals may not have contracted with Philips; no facts tying Jordan to GMI.	Court: Denial; complaint plausibly alleges contractual relationships (including downstream buyers bound by terms), inducement, damages, conspiracy, unfair competition theories, and plausible vicarious liability for Jordan.

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (pleading plausibility standard)
Zimmerman v. Bornick, 25 F.4th 491 (treat well‑pled facts as true on motion to dismiss)
Vernor v. Autodesk, Inc., 621 F.3d 1102 (essential‑step §117 applies to owners not licensees)
MDY Indus., LLC v. Blizzard Ent., Inc., 629 F.3d 928 (licensees cannot invoke §117 owner defenses)
Storage Tech. Corp. v. Custom Hardware Eng’g & Consulting, Inc., 421 F.3d 1307 (limitations on §117 repair/maintenance defense)
Midway Mfg. Co. v. Artic Int’l, Inc., 704 F.2d 1009 (section 117 scope tied to rights of owners)
Allen‑Myland, Inc. v. Int’l Bus. Machines Corp., 746 F. Supp. 520 (copies beyond essential step/use not protected by §117)