Allscripts Healthcare, LLC v. Andor Health, LLC

District Court, D. Delaware·Decided November 22, 2021·No. 1:21-cv-00704·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

ALLSCRIPTS HEALTHCARE, LLC : CIVIL ACTION : v. : NO. 21-704 : ANDOR HEALTH, LLC, et al. :

MEMORANDUM KEARNEY, J. November 22, 2021 Two companies and their related affiliates dispute who stole or blocked access to trade secrets and otherwise breached legal obligations following their brief relationship. Allscripts Healthcare, LLC first sued Andor Health LLC, Mahathi Software Pvt., Ltd., and their principals Raj Toleti, Paul Tyriver, and Amar Bulsara. Andor, Mahathi, and Mr. Toleti then counterclaimed and filed a third-party complaint against various individuals affiliated with Allscripts. Mahathi counterclaims Allscripts breached a user interface license included in a May 2018 Statement of Work between Mahathi and Allscripts. Mahathi also admits assigning the May 2018 Statement of Work to its co-defendant Andor. Mahathi found emails showing Andor accepted the assignment as well as documents purportedly confirming an assignment. Allscripts moves to dismiss the breach counterclaim arguing Mahathi lacks standing to pursue its breach of contract claim and otherwise fails to state a claim. Mahathi argues its assignment of rights under the Statement of Work did not preclude suing for breach of the user interface license in the Statement of Work because it always retained ownership of its intellectual property. Mahathi has ownership rights in its intellectual property and may sue in tort but lacks standing to sue for breach of the user interface license because it assigned its rights in the license (included in the Statement of Work) to Andor. I. Allegations relating to the challenged breach.1 Allscripts and Mahathi entered into a Statement of Work on May 18, 2018 in which Mahathi would “provide certain software and related support services” to Allscripts.2 Mahathi also agreed to grant Allscripts a non-exclusive, perpetual license to use Mahathi’s user interface software.3 Allscripts and Mahathi agreed: “MAHATHI will provide its standard User Interface

(‘UI’) and ALLSCRIPT’S [sic] acknowledge[s] that this standard UI is currently utilized by many healthcare customers and further acknowledge[s] and agree[s] that this UI layout is the intellectual property of MAHATHI. Allscripts’s [sic] shall have a non-exclusive, perpetual, paid up and royalty free license to use this UI . . . .”4 Allscripts removed Mahathi from and/or blocked Mahathi’s access to “Mahathi’s Azure tenant” – the system on which the user interface is stored.5 Allscripts converted the non-exclusive license granted by the May 2018 Statement of Work into an exclusive license, exceeded its license, and breached the license.6 Mahathi notified Allscripts on June 18, 2021 of terminating the user interface license effective immediately, but Allscripts continued to use Mahathi’s user interface after June 18, 2021.7

Mahathi assigned its rights and interests in the May 2018 Statement of Work to Andor on September 6, 2019. Mahathi and Andor contemporaneously signed two documents: an Assignment and Assumption Agreement and the Intellectual Property Notice of Assignment and Assumption.8 Mahathi pleads these two documents “clearly” defined what it assigned, and what it did not assign, to Andor.9 Mahathi also alleges a separate “Notice of Assignment and Assumption” document is part of the September 2019 Assignment.10 In the Assignment and Assumption Agreement, Mahathi and Andor agreed: “[Mahathi] hereby assigns, transfers and sets over unto [Andor] effective as of the date hereof [September 6, 2019], all of the right, title and interest of [Mahathi] in and to the Contracts.”11 Mahathi and Andor agreed “Contracts” included the May 18, 2018 Statement of Work.12 They further agreed “[Andor] accepts the assignment made hereby and assumes and agrees to perform and observe all . . . obligations of [Mahathi] to the extent arising and to be performed and observed under and as described in the Contracts, including without limitations the obligation to provide the Services.”13

The Assignment and Assumption Agreement does not reference the Intellectual Property Notice of Assignment and Assumption.14 But the Intellectual Property Notice of Assignment and Assumption explicitly references both the May 2018 Statement of Work and the Assignment and Assumption Agreement.15 It provides: “This letter is to clarify the Assignment and Assumption of the contracts. Assignment excludes any transfer of intellectual property that belongs to Mahathi. The Assignee further acknowledges the Mahathi Standard user Interface (UI) and UI Layout are intellectual property of Mahathi as described in the contracts….”16 The third document, the Notice of Assignment and Assumption, also dated September 6,

2019 provides: “This letter shall serve as notice of assignment and assumption of the Contracts. [Mahathi] has assigned all of its right, title, and interest in and to the Contracts [defined to include the May 2018 Statement of Work] to [Andor] . . . [Andor] has agreed in writing to assume all of [Mahathi’s] obligations under the Contracts. A copy of the assignment instrument is enclosed with this notice.”17 It is unclear from the exhibits and pleading what Mahathi provided as the “assignment instrument,” but Mahathi alleges the assignment documents include the Assignment and Assumption Agreement, Intellectual Property Notice of Assignment and Assumption, and the Notice of Assignment and Assumption.18 Mahathi alleges Allscripts did not acknowledge the assignment in September 2019.19 Andor and Mahathi agreed Mahathi would continue to bill Allscripts despite the assignment.20 In Spring 2020, Andor and Mahathi again agreed Mahathi would assign rights under its contracts to Andor, including the May 2018 Statement of Work.21 Andor and Mahathi signed another “Intellectual Property Notice of Assignment and Assumption” on July 1, 2020.22 Andor then began

billing Allscripts, Mahathi engineers continued to provide services to Allscripts, and “Allscripts continued to manage the projects Mahathi was performing for Allscripts directly with Mahathi.”23 Mahathi alleges “[a]ll that changed after July 1, 2020 was that Andor was now sending monthly invoices for services Mahathi rendered to Allscripts, and Allscripts was paying Andor, rather than Mahathi, for the services Mahathi was providing.”24 II. Analysis Allscripts moves to dismiss Mahathi’s breach of the license agreement in the May 2018 Statement of Work.25 Allscripts moves to dismiss, arguing: (1) Mahathi has no right to sue because it assigned all of its rights to Andor under the September 2019 Assignment; (2) the “Clarifying

Letter” purportedly forming part of the Assignment and clarifying Mahathi did not assign any intellectual property rights to Andor makes no difference in our analysis; (3) Allscripts had no obligation to provide Mahathi access to its servers; and (4) the events constituting the purported breach occurred after the May 2018 Statement of Work terminated, so Mahathi cannot maintain its claim.26 Mahathi counters: (1) the Assignment and Assumption Agreement and Intellectual Property Notice of Assignment and Assumption must be read together as the Assignment documents and demonstrate Mahathi did not assign Andor any rights in its user interface software, including the license Mahathi granted to Allscripts in the May 2018 Statement of Work; (2) Allscripts’s argument regarding timing of the alleged breaches is unavailing because the breaches occurred during the May 2018 Statement of Work and even if they did not, Allscripts could breach the license after it expired because the license is perpetual; and (3) Allscripts did not cure its alleged breach by providing a copy of the purported user interface source code under a reservation of rights.27 Mahathi argues it did not assign its rights to its user interface intellectual property to

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