Companies spar in federal court over bar code software

Jack Berlin says he's never had to sue a customer.

But, no customer ever stole his company's software, Berlin said, and sold hundreds of thousands of copies, all while admitting they did so without paying for it.

Such is the crux of what Berlin calls a David v. Goliath lawsuit about to play out in federal court in Tampa over software now being used in digital medical records across the country.

On one side: Pegasus Imaging Corp., Berlin's 55-employee company on Martin Luther King Boulevard that makes software to process images like X-Rays and digital camera photos. Sales last year, about $19 million.

On the other side: Chicago-based Allscripts-Misys Healthcare Solutions, a medical electronics giant whose sales grew 43 percent last year to $548 million.

"We're a small company," said Berlin. "In a down economy, we didn't hire more people or give raises last year, but we had to pay our attorneys a lot of money to fight this."

Allscripts officials say they can't comment on pending litigation.

The mix-up may have begun eight years ago. That's when, Pegasus signed a deal with a company called Advanced Imaging Concepts to use Pegasus software to read bar codes. For instance, the codes could tag a physical X-Ray to a patient's virtual record, so it's available to any doctor in a medical system.

But the deal never generated significant revenue and sat dormant for years.

Then, almost by accident, Berlin says his sales staff were at a New Orleans trade show in March 2007, and walked up to the kiosk of software giant Allscripts, hoping to sell bar-code scanning software, only to hear an Allscript official say they're already using it.

Unknown to Berlin, Allscripts had bought AIC, and Berlin claims Allscripts started using the Pegasus software, processing healthcare records in hospitals and doctor's offices across the country, yet never paid a license fee.

Allscripts is a high-profile player in the medical industry's transition from paper to electronic medical records. Last year, University of South Florida President Judy Genshaft and U.S. Rep. Kathy Castor praised Allscripts for a project to modernize records across Florida.

In court documents, Allscripts says it acquired a license for Pegasus software legitimately through AIC, though the Pegasus bar-code reader is merely a "little-used, and incomplete aspect" of some programs that "never worked well."

Simply deleting the software would be complex and potentially unstable for their systems, Allscripts said in one court document.

Berlin says he's tried to work out a settlement, but after 18 months of phone calls and delayed meetings, he feels Allscript officials are dragging their heels and trying to run up his legal fees. At $350 to $400 per copy of the software, Berlin thinks Allscripts could owe him $60 million or more in license fees - a lot for a company with 55 employees.

A trial could start in March.