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Clinical Insight, Inc v. Louisville Cardiology Medical Group

April 22, 2011

CLINICAL INSIGHT, INC., PLAINTIFF,
v.
LOUISVILLE CARDIOLOGY MEDICAL GROUP, PSC., DEFENDANT.



The opinion of the court was delivered by: Michael A. Telesca United States District Judge

DECISION and ORDER

INTRODUCTION

Plaintiff Clinical Insight, Inc., ("Clinical Insight") the owner of a computer software program known as "Pronto", brings this action against defendant Louisville Cardiology Medical Group, PSC, ("Louisville Cardiology"), a medical practice based in Louisville, Kentucky, claiming that Louisville Cardiology has breached a licensing agreement whereby Clinical Insight licensed the use of the Pronto software to the defendant. Clinical Insight claims that Louisville Cardiology has failed to pay annual license fees for its continued use of the software, and has violated the software licensing agreement by allowing third-parties to gain access to the software program. Louisville Cardiology denies plaintiff's claims, and brings a counterclaim alleging that Clinical Insight breached the licensing agreement by failing to provide full software functionality as promised in the licensing agreement. Specifically, defendant claims that the plaintiff failed to provide a "billing module" that would have allowed the defendant to use the Pronto software to generate billing data. Louisville Cardiology contends that the promised billing module was a key component of the software, and that the failure of Clinical Insight to provide a functional billing module was a significant breach of the parties' agreement.

This case was originally filed in New York State Supreme Court, Monroe County, and was removed to this court by the defendant on the basis of diversity jurisdiction. Plaintiff now brings a motion for a Temporary Restraining Order and Preliminary Injunction against Louisville Cardiology claiming that because Louisville Cardiology was recently purchased by Baptist Healthcare Systems, an owner of several hospitals and other medical facilities in the Louisville, Kentucky metropolitan area, there is a significant likelihood that Baptist, which does not have a licensing agreement with Clinical Insight, will have access to the Pronto software. Plaintiff claims that access to Pronto by Baptist will result in irreparable harm because valuable trade secrets and proprietary information will be disclosed in violation of the licensing agreement and therefore, plaintiff's confidential intellectual property will be lost. Plaintiff asks that all software, manuals and other support material be immediately returned to Clinical Insight, and that Louisville Cardiology immediately stop using the Pronto software. Plaintiff also moves for summary judgment on its claim for specific performance, and asks the Court to order Louisville Cardiology to return the Pronto software on grounds that the licensing agreement has been terminated, and upon termination, Louisville Cardiology is required to return the Pronto software. Finally, plaintiff also seeks dismissal of defendant's counterclaims.

Louisville Cardiology opposes plaintiff's motion, and alleges that it has not disclosed Pronto to Baptist or any other party, nor has it allowed Pronto to be used by Baptist or any other party. Rather, Louiseville Cardiology alleges that it has taken specific steps to ensure that the Pronto software is not accessed by any persons other than Louisville Cardiology personnel. According to the defendant, it no longer uses Pronto for its current medical records, and is in the process of transferring its older medical records from the Pronto software system to another electronic records system. Upon completion of the transfer, defendant states that it will no longer be using the Pronto software.

In its Counterclaim, defendant alleges that the Pronto software failed to function properly, and that as a result, Louisville Cardiology was required to spend significant amounts of money and man-hours to perform the billing operations that the Pronto software was supposed to perform.

For the reasons set forth below, I deny plaintiff's motion for a temporary restraining order and for summary judgment. I grant in-part and deny in-part plaintiff's motion to dismiss defendant's counterclaims.

BACKGROUND

Plaintiff Clinical Insight is the owner of a proprietary computer software program known as Pronto. According to the Complaint, Pronto is "an electronic medical record software product designed for use by cardiologists." Complaint at ¶ 7. Plaintiff alleges that in 2006, it entered into a licensing agreement with defendant Louisville Cardiology, whereby Louisville Cardiology agreed to pay an annual licensing fee of $19,050 for use of the Pronto software.

According to the plaintiff, after paying the first year licensing fee, Louisville Cardiology stopped paying the annual licensing fee for the Pronto software, but continued to use the software without a valid license. Despite the clause in the licensing agreement obligating Louisville Cardiology to return the software upon the expiration of the license, defendant has allegedly failed to do so. Plaintiff also alleges that the defendant has exceeded the number of users authorized to use Pronto, but has failed to pay additional licensing fees for use of the software by those users.

Defendant contends that upon delivery of the Pronto software, it was discovered that the software was missing what it considered to be a key component of the software, a billing module that was intended to allow billing records to be generated from the medical records stored in Pronto. Louisville Cardiology alleges that it complained about the lack of functionality, and discontinued paying the annual license fee as a result of the missing billing module. Plaintiff contends that the billing module was a small component of the Pronto Software, and as a result of defendant's complaint, it reduced the amount of the licensing fee to reflect the missing billing module. Clinical Insight contends that despite lowering the amount of the license fee, Louisville Cardiology stopped paying the fee, but continued to use the software.

According to the Complaint, Louisville Cardiology continued to use Pronto without paying a licensing fee through 2010. Then, in late 2010, defendant's practice was purchased by Baptist Healthcare Systems. Because the licensing agreement between Clinical Insight and Louisville Cardiology prohibited assigning the use of Pronto to any successor, and prohibited Louisville Cardiology from allowing third parties to use Pronto, plaintiff filed the instant action in State Court seeking breach of contract and other damages. After the action was removed to this court, plaintiff sought the immediate relief of a Temporary Restraining Order prohibiting Louiseville Cardiology from disclosing Pronto to Baptist, or allowing Baptist to use Pronto, and seeking the immediate return of the Pronto software.

DISCUSSION

I. Motion for a Temporary Restraining Order Clinical Insight seeks a Temporary Restraining Order directing Louisville Cardiology to return the Pronto software, and all accompanying materials and manuals. For the reasons set forth below, I deny plaintiff's motion.

A. Standard for issuing a Temporary Restraining Order.

A court may issue a Temporary Restraining Order only when the plaintiff demonstrates: 1) a substantial likelihood of success on the merits of the case; 2) that irreparable harm will occur if the Order is not issued; 3) that no other parties will be harmed if temporary relief is granted; and 4) that the public interest favors entry of the Order. The Nation Magazine v. Department of State, 805 F.Supp. 68 (D.D.C. 1992). See also, Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2nd Cir. 1979) (preliminary injunction may issue on showing that the party seeking the injunction is subject to irreparable harm; and (2) that the party will either likely succeed on the merits of the case, or that there are sufficiently serious questions ...


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