On November 6, 2019 and after a nine-day jury trial in Miami, Florida, KipuHealth won a judgment for $19.5 Million against ZenCharts, for breach of contract and unfair competition. KipuHealth developed its proprietary cloud record keeping system “KipuEMR,” which is widely used by addiction treatment centers throughout the country to organize patient data and records without using paper.
Fake Clients and Bulgarian Hackers Oh My
KipuHealth proved at trial that Zencharts, through its affiliate Solutions Recovery, posed as a potential client in order to get inside access to KipuHealth’s software. The defendants were granted administrator access while they had the software and were recorded asking numerous technical questions. A group of Bulgarian web developers (the plot thickens!) associated with Zencharts also gained access to the code for KipuEMR and used it to clone their own, competing software for addiction treatment centers. The jury was shown screen shots of portions of the two companies’ competing EMR systems and it looked obvious that Zencharts had simply copied parts of the KipuEMR software and used it for its own. Zencharts, for its part, denies liability and maintains that it was working on similar software and in fact, they had developed certain aspects of the software before KipuHealth did.
Get It in Writing!
Luckily, KipuHealth had a written user agreement that Zencharts, like all of its customers, had to sign. These user agreements typically include provisions restricting the users access to and eventual use of the software, code and other confidential and proprietary information. Users are allowed a temporary “pass” so to speak, to try out the software, but cannot use it afterwards for any purpose. Zencharts breached the agreement by stealing KipuHealth’s software and passing it off as its own. In Florida, the Plaintiff would also be entitled to sue for deceptive and unfair trade practices, common law unfair competition, and misappropriation of trade secrets. Depending on the language of the user agreement at issue, it would likely be a violation of the parties’ non-disclosure agreement as well, which is a form of restrictive covenant. Theft of commercially valuable technology as in this case is high stakes litigation. As we have discussed before, it’s always the best course to get your contract in writing and signed by both parties. It pays off in the end.
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