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HEALTHCARE AFFILIATED SERVS. v. LIPPANY

August 11, 1988

HEALTHCARE AFFILIATED SERVICES, INC., and BLUE CROSS OF WESTERN PENNSYLVANIA, Plaintiffs,
v.
LESLIE V. LIPPANY, individually and doing business as HOSPITAL MICROSYSTEMS, INC., Defendant


Alan N. Bloch, United States District Judge.


The opinion of the court was delivered by: BLOCH

ALAN N. BLOCH, UNITED STATES DISTRICT JUDGE

 A. The Parties

 1. Plaintiff, Healthcare Affiliated Services, Inc. (HAS), is a Pennsylvania corporation with its principal place of business at 301 Fifth Avenue, Pittsburgh, Pennsylvania 15222.

 2. Plaintiff, Blue Cross of Western Pennsylvania (Blue Cross), is a Pennsylvania corporation with its principal place of business at One Smithfield Street, Pittsburgh, Pennsylvania 15222. HAS is a wholly-owned subsidiary of Blue Cross.

 3. Defendant Leslie V. Lippany (Lippany) is an individual residing at 474-1/2 Woodland Road, Pittsburgh, Pennsylvania 15237.

 4. Lippany has done business or is doing business in whole or in part as "Hospital Microsystems, Inc." (HMI).

 B. Plaintiffs' Business and Systems

 5. At all times relevant to this action, plaintiffs have been in the hospital management consulting business, engaged in researching, designing, packaging, marketing, selling and installing manual and computerized systems in hospitals, nursing homes and other health care institutions to increase operational efficiency, perform cost accounting services, install cost accounting systems and provide management support.

 6. Plaintiffs have developed a product line of fully and partially computerized hospital productivity, cost management, and other decision support systems. Five of these systems, incorporating four software programs, are at issue in this action.

 7. A computer program is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.

 8. The structure, sequence and organization of a computer program consists of the manner in which the program operates, controls and regulates the computer in receiving, assembling, calculating, retaining, correlating and producing useful information.

 9. Plaintiffs' Objective Management Information System (OMIS) is a computerized departmental staffing control system. The first generation (OMIS I) is a mainframe version. The second generation (OMIS II) is a micro-computer version.

 10. On April 12, 1988, HAS was granted copyright registration No. 314981 for the OMIS II system software and, on April 27, 1988, was granted copyright registration No. 316851 for the OMIS II system manual.

 11. Plaintiffs' Staff Leveling System (SLS) is a partially computerized, acuity-based nurse staffing system. The input for SLS is manual; all other aspects of SLS are computerized. Input is accomplished via input forms.

 12. On April 27, 1988, HAS was granted copyright registration No. 316856 for the SLS software and copyright registration No. 316852 for the SLS manual.

 14. The computerized aspect of SBSS is plaintiffs' Computerized Operating Room Data Analysis (CORDA) System, which organizes the surgical case history analyses for the surgeons. After the data is collected and organized in accordance with CORDA, it is worked through plaintiffs' SBSS.

 15. On April 27, 1988, HAS was granted copyright registration No. 316857 for the CORDA system software and copyright registration No. 316853 for the CORDA system manual.

 16. No copyright registration has been granted for SBSS itself.

 17. Plaintiffs' Standard Cost Accounting System (SCAS) is a procedure-level engineered standard-based cost accounting system. The system is computerized; input to the system may or may not be manual depending upon whether the hospital has an HAS information system for the preliminary data processing.

 18. On April 27, 1988, HAS was granted copyright registration No. 316855 for the Standard Cost Accounting System software and copyright registration No. 316854 for the Standard Cost Accounting System manual.

 19. In order to research, develop, enhance, market and sell these five systems, plaintiffs have compiled and used in-house information which has been developed over the years as a result of the combined efforts and contributions of a variety of professionals employed by plaintiffs including, among others, industrial engineers, nurses, cost accountants, management engineers, and system analysts.

 20. The five systems were developed by plaintiffs' employees during their employment.

 21. Plaintiffs have attained, and can only maintain, their present competitive status in the industry by developing and confidentially maintaining information concerning their systems and the associated methodologies.

 22. Plaintiffs are considered a leader in the field of hospital management consulting in large part because they offer a complete line of manual and computerized hospital management systems.

 23. Plaintiffs have taken measures to maintain the confidentiality of their systems and the associated methodologies; these measures include employment agreements containing confidentiality and non-competition provisions, conflict of interest disclosure forms, which are to be completed by the employee on an annual basis, security access codes for computer information, physical security of the premises, verbal communications to employees regarding the confidentiality of information, withholding the publishing of the systems or the detailed methodology of the systems, and restricting internal disclosure of information on a need-to-know basis. Plaintiffs have not released the methodologies of their systems to the public.

 24. Plaintiffs have required their employees to enter into employment agreements which prohibit the employees from disclosing plaintiffs' confidential information to the public and/or to competitors of plaintiffs. Confidential information, within the meaning of the agreements includes, inter alia, customer lists, information regarding customer needs and requirements, knowledge relating to existing software and software under development, marketing plans, and information relative to the business and affairs of plaintiffs' customers, which information plaintiffs have not made available to the general public.

 C. Defendant's Employment with Plaintiffs

 25. Lippany was hired by Blue Cross on May 14, 1973, as a consultant in its Consulting Department. At the time he was hired, he had no experience in or knowledge of the hospital management consulting business and related manual and computerized systems, products and services. Lippany's knowledge of this area was developed during and because of his employment with plaintiffs.

 26. From May 14, 1973 until January 22, 1988, Lippany continued in plaintiffs' employment. During the 15 years of his employment with plaintiffs, Lippany was in a relationship of trust and confidence with plaintiffs and had possession of valuable and confidential information including, inter alia, plaintiffs' systems, methodologies, business plans and procedures, and client information.

 27. At all times during his employment with plaintiffs, Lippany had intimate knowledge of and responsibility for the research, development, design and enhancement of plaintiffs' methodologies and systems, including, specifically, the five systems at issue herein and their associated methodologies.

 28. Lippany had the responsibility for enhancing plaintiffs' OMIS and SCAS systems.

 29. In addition, Lippany had principal responsibility for writing the specifications to fully automate, i.e., computerize, on a personal computer, plaintiffs' semi-automated SLS system and plaintiffs' manual SBSS.

 30. Lippany was the primary author of plaintiffs' SBSS and was given the specific responsibility of automating the system.

 31. Lippany developed the SBSS during his employment with plaintiffs.

 32. On June 1, 1987, Lippany signed a written employment agreement with HAS in connection with his promotion to manager. Lippany received an increase in salary in connection with this promotion.

 33. Under the terms of paragraph 1 of this agreement, Lippany agreed to protect and preserve the confidentiality of HAS's confidential information, which was defined to include all information concerning the business or affairs of HAS not generally available to the public at large, including, but not limited to, customer lists, customer needs and requirements, knowledge relating to existing software and software under development, marketing plans, pricing information and employee lists, salaries and benefits.

 34. Confidential information, under the terms of the agreement, was also defined to include information relating to the business and affairs of persons and entities with whom HAS has business relations, which information is not generally available to the public at large and which information is made available to the employee in the course of his/her employment by HAS.

 35. Under the terms of the agreement, Lippany further agreed that HAS had the sole and exclusive proprietary right to any and all products, processes, methodologies and services, including, but not limited to, systems and software developments and improvements, developed by Lippany alone or in conjunction with other persons, during his employment with HAS.

 36. During his employment with plaintiffs, Lippany was in contact with plaintiffs' clients and potential clients, privy to their confidential information, and had intimate knowledge of and responsibility for the development and enhancement of plaintiffs' systems and services.

 D. Defendant's Products

 37. Lippany's products consisted of the following five software programs: (a) a procedure-level engineered standard-based cost system known as MICROCOST; (b) a hospital-wide all department staffing control system known as ACCUSTAFF; (c) an operating room data gathering system to track utilization, known as INFOSURG; (d) a system to optimize the application of surgical block times by surgeon, known as OPTISURG; and (e) an acuity-based nurse staffing system, known as ACCUNURSE.

 38. Defendant began work on the development of his ACCUSTAFF program in March of 1984. ACCUSTAFF was completed in July of 1985.

 39. Defendant began work on the development of his ACCUNURSE program in March of 1985. ACCUNURSE was completed in December of 1985.

 40. Defendant began work on the development of his OPTISURG program in September of 1985. OPTISURG was ...


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