Wismer Martin Accepts Payoff, Drops Lawsuit Deal Means Software Company Won’t Pursue Allegations Against Eds

Wismer Martin Inc. agreed to dismiss its lawsuit against Electronic Data Systems Corp. Thursday, and assigned rights for the use of its software to Blue Cross of Washington and Alaska in exchange for a cash payoff.

The two transactions clear the way for EDS and Blue Cross to go ahead with a deal in which the Texas-based data processing giant would acquire Blue Cross health care computer information networks in Washington and Alaska. The networks are driven by Wismer Martin software.

But Thursday’s agreement also apparently cuts Spokane-based Wismer Martin out of any further participation in the development of these or other networks by Blue Cross or EDS.

A curiously-worded press release issued Thursday implied otherwise, though.

The release says that Wismer Martin had agreed to “provide software and exclusive operating rights to Blue Cross of Washington and Alaska. The transaction was completed as part of Blue Cross’s plan to continue expansion of its Electronic Health Care Information Networks …”

The release quotes Ron Holden, Wismer Martin’s chief executive officer, as saying, “This new network agreement provides for the continuation and expansion of the Blue Cross Networks. That’s a positive for all concerned. The related earnings momentum, coupled with the recently completed public offering, completes the financial turnaround of Wismer Martin.”

But on Friday, Jack McRae, senior vice president for Blue Cross, said, “Our agreement with Wismer Martin is that we have the rights for the software package for the Washington Information Network and the Alaska Information Network. We do not see any continuing relationship with Wismer Martin.”

Holden, contacted Friday, said only, “These agreements have confidentiality provisions so I have no comment outside of what’s in the news release.”

EDS officials were unavailable for comment.

Sources close to the deal, however, say both Blue Cross and EDS are angry over Wismer Martin’s tactics in its suit against EDS, and want nothing further to do with the Spokane company. In the suit, Wismer Martin accused EDS of stealing trade secrets.

McRae would not comment on the amount of money Blue Cross paid Wismer Martin for the rights to continue using Wismer Martin software, but sources say the figure was $1.5 million.

Also in Thursday’s news release, Wismer Martin officials said the Blue Cross agreement would pave the way for the financially-struggling company to be profitable during the first half of the current fiscal year.

“In contrast to the recently reported first quarter loss of $112,000,” the release says, “Wismer Martin earnings for the second quarter and six months ended (Dec. 31) are expected to increase sharply to record levels with a projected net income of in excess of $1 million for the first six months.”

The release says those earnings are “being driven by the just-signed agreement …”

For the past two years, Wismer Martin has focused on cracking the computerized health care information network market. Along with several other competing companies, it has developed software that allows doctors, hospitals, insurers and other players in the health care delivery system to link up in a single computer network.

The company helped to develop three such networks. One was in Spokane in collaboration with Medical Services Corp. of Eastern Washington. The others were the two Blue Cross networks in Western Washington and Alaska.

In order to become a more significant player in the market, though, Wismer Martin decided it needed to ally itself with a major corporation. It is currently exploring such an alliance with GTE. Last year, it undertook the same discussions with EDS. Those talks resulted in an offer from EDS to acquire Wismer Martin. But that deal fell apart.

A few months ago, EDS and Blue Cross entered into negotiations whereby EDS would acquire the two networks and operate them for Blue Cross using the Wismer Martin software.

But Wismer Martin sued EDS charging that EDS stole trade secrets from Wismer Martin and used that information to convince Blue Cross to consummate the network sale to EDS.

In October, Wismer Martin attorneys argued in U.S. District Court that if that deal went ahead, and Wismer Martin was cut out of two networks, Wismer Martin would cease to be a viable entity.

U.S. District Judge Fred Van Sickle agreed and granted a temporary injunction barring Blue Cross and EDS from going ahead with the deal.

The dispute was scheduled for trial early next year.

But on Thursday, Wismer Martin and EDS agreed that the action would be dismissed and Van Sickle signed an order dissolving the preliminary injunction.

, DataTimes