Medtech Limited v Valentia Technologies (NZ) Limited
[2024] NZHC 2107
•31 July 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV2023-404-003051
[2024] NZHC 2107
BETWEEN MEDTECH LIMITED
Plaintiff
AND
VALENTIA TECHNOLOGIES (NZ) LIMITED
Defendant
Hearing: 29-30 May 2024 Appearances:
A J Lloyd, J J K Spring and O Sutton for Plaintiff K T Glover and D T D Horton for Defendant
Judgment:
31 July 2024
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 31 July 2024 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016.
.…………………………..
Registrar/Deputy Registrar
Solicitors: Minter Ellison Rudd Watts, Auckland Create IP, Auckland
MEDTECH LTD v VALENTIA TECHNOLOGIES (NZ) LTD [2024] NZHC 2107 [31 July 2024]
Table of Contents
Page No
Approach to interim relief[8]
Factual background[11]
Expert evidence[28]
Technical context[31]
Relational databases and the data warehouse[32]
Patient prescription and diagnosis — mCodes, MIMS, NZULM,
READ codes and SNOMED CT[36]
Data migration and mapping[41]
Medtech’s claims [46]
Valentia’s substantive response[54]
SEHR[55]
MCodes/Migration[62]
Other asserted intellectual property[68]
Serious question to be tried [73]
Copyright[75]
Misuse of confidential information[79]
Interference with contractual relations[88]
Breach of 2020 Settlement Agreement[94]
Fair Trading Act 1986[97]
Balance of convenience [103]
Nature of the relief[105]
Adequacy of damages[113]
Medtech’s ability to pay damages for the loss Valentia may suffer
if the injunction is granted[119]
Conduct/delay[123]
Status quo[125]
Is an order as regards SEHR Hook moot or unnecessary due to other
developments?[129]
Thrd party effects/public interest[132]
Order would require ongoing supervision[138]
Strength of case[139]
Overall justice[140]
Result[143][142]
[1] The parties are competitors in the provision of medical practice management systems (PMS) for patient record keeping and practice management. Medtech Limited’s (Medtech’s) products include a legacy product Medtech32, and an evolution of that product, Medtech Evolution. Medtech32 is installed locally on the server of the healthcare practice. Medtech Evolution can be server- or cloud-based.1 Valentia Technologies (NZ) Limited’s (Valentia’s) product, indici, is cloud-based. Medtech currently has 70 per cent of the market. Valentia has 17 per cent.
[2] Valentia is also the technology provider behind provision of Shared Electronic Health Records (SEHR). This is a central repository for storing patients’ summary care records. SEHR is updated regularly and accessible by health providers, including in emergency and urgent settings. Medical practices contract with primary health organisations (PHOs) to participate in this. The PHOs contract with Valentia for the technology.
[3] In Auckland the SEHR service is known as “Your Health Summary” or “YHS”, offered by ProCare Network Ltd (ProCare). Valentia also operates SEHR within the Waikato Region (Pinnacle PHO) and the Wellington and Hutt Region (Tū Ora Compass and related PHOs). An organisation called HealthOne provides a similar service in the South Island for PHOs there, but uses different technology.
[4] Valentia uses an SEHR extraction tool (SEHR Hook) to extract data from the databases of PMS for the purposes of compiling and updating SEHR. Where a PMS is server-based, participating medical practices install the SEHR Hook, which then operates on whatever PMS the medical practice is using, including Medtech’s.
[5] Valentia also uses an extraction tool when a medical practice changes PMS provider from Medtech to Valentia (Migration Hook). This requires the data on the legacy PMS to be migrated to the indici software. In broad terms, Valentia says that the Migration Hook is used to pick up any changes to data between when a medical practice initially provides a copy of its database to Valentia in its native form at the start of the data migration process and when indici goes live.
1 Valentia contends that Medtech Evolution is not a “true” cloud-based system.
[6] Medtech says that the Migration Hook is the same piece of software as the SEHR Hook.2 Whether that is so or not, they both have the principal function of extracting data for synchronisation and processing by executing “queries” on the database. They do this in different contexts and for different purposes.
[7] Medtech seeks an interim injunction3 prohibiting Valentia from extracting data from any of Medtech’s software installations, other than with the assistance or approval of Medtech. It has issued proceedings against Valentia alleging breaches of copyright, interference with contractual relations, breach of confidence, breach of a 2020 settlement of earlier litigation, and misleading conduct under the Fair Trading Act 1986 (FTA).
Approach to interim relief
[8] The Court tends to follow a three-step approach to an interim injunction application assessing:4
(a)whether there is a serious question to be tried;
(b)the balance of convenience; and
(c)where the overall justice lies.
[9] Here, the proceeding has already generated around 1,400 pages of affidavit material including several expert briefs in what is a complex and technical area both factually and legally. The application was argued over two days. Necessarily, this judgment will not be exhaustive in addressing the issues covered.
2 Medtech notes that the SEHR Hook connects to a webservice and has a name that includes the word “data migration”.
3 I heard this together with the defendant’s (Valentia’s) application to rescind preservation orders I made without notice in this proceeding on 21 December 2023. I have issued a judgment on the application to rescind: Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 1618.
4 These three stages were summarised by the Court of Appeal in Intellihub Ltd v Genesis Energy Ltd [2020] NZCA 344, [2020] NZCCLR 29 at [23] citing Kilssers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA) at 142.
[10] Fundamentally, the application turns on balance of convenience issues. However, regrettably, I will need to cover a great deal of ground before I get there.
Factual background
[11] Valentia was established in New Zealand in 2014. Its Ireland-incorporated holding company has been operating since 2004. Dr Ahmad Javad was its founder and is now its sole owner.
[12] Valentia began offering SEHR in New Zealand in about 2017. Around the same time, it launched its indici product. By this time, Medtech had been in the PMS market for a number of years and medical practices predominately used its software. A high proportion of all new indici PMS customers are existing medical practices that are transferring from Medtech PMS.
[13] In 2018, Medtech filed proceedings against Valentia and Pinnacle PHO after learning that Pinnacle PHO had shared a licence key with Valentia for Medtech’s Advanced Forms software. This Medtech product enables creation and customisation of system forms for health services. The proceedings were ultimately settled in June 2020 on terms that Valentia and Pinnacle PHO made certain confirmations of fact and gave undertakings to Medtech (Settlement Agreement).
[14] Later in 2020, Medtech and Valentia entered into a non-disclosure agreement (NDA) for the purpose of discussing the possible integration of the SEHR Hook with the Medtech PMS to enable extraction of defined patient information into the SEHR. This did not ultimately progress, for reasons the parties disagree on.
[15] However, as part of a preliminary step to testing security for that process, in October 2021 Medtech was provided with a spreadsheet of the content that the SEHR Hook was extracting from Medtech32 and Medtech Evolution for YHS. Referring to my earlier explanation, these are the “queries” it was running on the database. At this point, Medtech says it identified what it saw as serious issues with “over-extraction” of more data than was necessary for compiling the SEHR, engaging privacy, security and intellectual property issues. Medtech raised this with ProCare and identified, by
reference to a spreadsheet on the Medtech Evolution queries, those it considered should not continue to be run.
[16] I do not have the full detail on what happened after this. However, among other things:
(a)ProCare engaged with Valentia on the matters raised including on its processes. Valentia obtained an independent assessment of its software platform and associated practices.
(b)Subsequently, ProCare confirmed to Medtech that it had confidence that data transferred resided in a safe and assured environment, and that only the specific information that was compiled into the SEHR record was retained, with the rest being purged after being extracted.
(c)ProCare advised Medtech that Valentia had confirmed (albeit said this had not been independently checked) that Valentia had made changes to the queries, with 11 unnecessary queries disabled and 14 operational queries refined to minimise extraction.
(d)Valentia’s evidence is that it made these changes (at least to the Medtech Evolution queries). It says that after this it heard nothing further from Medtech.
[17] This incident led to ProCare making a privacy breach notification to the Privacy Commissioner on 19 November 2021. Medtech and Valentia were named as joint notifiers. The notification identified the type of breach as “unauthorised sharing” and “information not required.” It explained that:
The data extracted from PMS and transported to the Staging Area and then purged by the SEHR service exceeds the stated aims of the Your Health Summary product. It includes broad set of information classed as commercial- in-confidence and medical-in-confidence.
[18] The notification gave a non-exhaustive list of the examples Medtech had raised including health information over and above the requirements of SEHR; non-health
account information; commercially sensitive practice data such as user names and passwords used by the PMS; commercially sensitive provider data such as bank account details, contract details with third party agencies, home addresses and contact information; and set up and configuration data.
[19] The notification recorded that the collection of data was considered to be a breach of the Health Information Privacy Code 2020. It outlined that the information had gone to a staging area managed by Valentia and explained the SEHR process consistent with how it was described to me:
The SEHR service executes a set of SQL queries at intervals to extract PMS data … The queries identify and extract data which has been created or updated since the previous time the query was run. This data is transported from the PMS to a Staging Area hosted by [Valentia]. No data controls or limits are applied at the point of extraction. In the staging area the data is processed and transformed into a format consistent across PMS’s that meets the functional requirements of [SEHR]. The relevant data is then transferred to the SEHR production database. On completion of processing the staging data is purged. It is at this point that controls (such as op-out signals requested by practices or patients via the YHS public website [opt-out] request service) are exercised. All data is encrypted in transit and at rest.
[20] The notification advised that it was unlikely that someone would be harmed because of the breach and that reported security measures were in place including annual audits. I interpolate that Medtech contends that the only security audits that occur relate to the SEHR itself and not to the transfer and staging area, but this is unclear to me from the evidence. Medtech says that, pointedly, Valentia has not confirmed in its evidence or in response to correspondence from Medtech’s lawyers whether the “staging area” is housed in New Zealand or off-shore. The compiled SEHR records are housed in data warehouses in New Zealand.
[21] Medtech emphasises that a Privacy Impact Assessment in relation to YHS had previously been prepared by ProCare in June 2021 which recorded that sensitive information was not extracted from the PMS and that no data would be transferred or stored outside of New Zealand. ProCare had provided this to Medtech.
[22] Since February 2022, ProCare has included the following statement on its YHS website relating to the 2021 over-extraction issue:
Data Extract 8th February 2022
Before Christmas we identified that the Valentia data extract inside the Your Health Summary (YHS) system had been extracting more data than was required. No individual patient or practices records were unduly accessed due to the additional data extraction. We immediately isolated and updated the extraction code to stop this happening and initiated a full security review.
[23] Separately, in December 2021, Medtech was contacted by a GP who wished to migrate back from indici to Medtech. This enabled Medtech to identify aspects of indici that Medtech says are its intellectual property appropriated from Medtech PMS.
[24] In late 2023, Medtech was contacted by a medical practice which reported performance issues with Medtech Evolution. Medtech was able to access and review the SEHR Hook executable queries, leading Medtech to conclude that none of the concerns it had raised leading to the privacy notification had been remedied or rectified. It also considered that operation of the SEHR Hook was causing the performance issues.
[25] Based on the information provided, Medtech formed the conclusion (including following an independent review by PricewaterhouseCoopers Consulting New Zealand (LP) (PwC)), that Valentia had copied aspects of its intellectual property in indici; and additionally, that on the migration of data to indici there was an issue of incorrect mapping of medications to generic versions of a brand-name medication. Medtech saw this as a patient safety risk.
[26] Medtech issued proceedings for without notice orders in December 2023. The procedural backdrop is set out in an earlier judgment of mine and is not relevant for present purposes.5
[27] In February 2024, Medtech learned of additional issues from information provided by a practice using Medtech32. This identified additional information being extracted to the staging area for SEHR from practices using Medtech32 compared to Medtech Evolution. Medtech also raises an issue that the SEHR Hook is failing to identify and record inactive medical records in Medtech Evolution. In substance it is
5 Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 191.
said that whereas Medtech32 picks up that a record has become inactive and removes it from SEHR, the SEHR Hook operating on Medtech Evolution does not identify inactive records. Medtech contends this results in a widespread and serious clinical risk and adds to its concerns.
Expert evidence
[28] Medtech has filed three briefs from Manhor Singh, an executive director in the digital advisory team at PwC.6 Valentia has filed two “joint briefs” by Campbell McKenzie and Wayne Bryant.7 Mr McKenzie is a forensic technology consultant.8 Mr Bryant is a software development and data analytics consultant.9 In their joint evidence the experts record that:
We have different but complementary expertise in relation to the material that we have been asked to give evidence about. For that reason, our evidence has been prepared jointly. We have worked collaboratively throughout to prepare this evidence.
[29] Mr Lloyd for Medtech said I should give the brief little weight because the brief does not identify which expert says what and whether it is within their expertise. Mr Glover for Valentia submits that joint briefs are provided for by the High Court Rules 201610 and rejects that there is an issue with the way the brief has been cast. My supposition is that matters not specifically attributed to either expert in the joint briefs are matters within the expertise of both of them, whereas where they have each individually commented on a particular matter, that matter is solely within that expert’s expertise. If that is how the brief has been prepared this should have been stated explicitly. Mr Lloyd’s criticism is well founded. However, I have been assisted by the brief in this interim application.
6 Brief of evidence of Manhor Singh, dated 16 December 2023, 1 March 2024 and 16 May 2024.
7 Joint briefs of evidence of Campbell McKenzie and Wayne Bryant dated 9 April 2024 and 23 May 2024.
8 He has his own firm, Incident Response Solutions Ltd. He was previously a director at PwC, heading the national forensic technology practice and the Auckland cybersecurity practice.
9 He also has his own firm, 3rdegree Ltd (previously having been National Lead for Cloud Technologies and Fraud and Financial Crime software solutions at SAS (NZ) Ltd).
10 High Court Rules 2016, rr 9.44 and 9.45. See also Commerce Commission v Cards NZ Ltd (No 2)
(2009) 19 PRNZ 748 (HC) at [24]–[25].
[30] In what Mr Lloyd suggests is simply a quid pro quo, Valentia is critical of Medtech’s expert’s briefs on the grounds that they are based on work of third parties, constituting hearsay. Similarly, for the purposes of this application, I do not reject tracts of Mr Singh’s brief on the basis of hearsay limitations.
Technical context
[31] I need to explain some further technical matters to give the necessary backdrop. I do so tentatively, given the interim context.
Relational databases and the data warehouse
[32] PMS stores data in relational databases. Broadly speaking this as a series of data-filled tables (columns and rows) with identifier keys that enable cross-referencing between the various tables. The structure allows identification and access to one or more data fields in relation to others. For example, Medtech Evolution has 710 relational tables, all cross-referencing each other. Physical and logical design constraints are established in the design of the database. This “database schema” can include unique naming conventions and relational constructs between table variables. It can also include access to third party content used under licence.
[33] The database design is implemented by turning it into a data model through “Structured Query Language” (SQL) statements. SQL is a programming language for storing and processing information in a relational database. “SQL joins” make the relationships between database tables. The database schema is referenced in source code. When I referred to the SEHR Hook and Migration Hook running “queries”, these are “SQL queries” on the relational database.
[34] Transactions on the software occur out of the relational database. This needs to be distinguished from the reporting database, known as the “data warehouse”. Valentia says that on a daily basis, it runs an “extract, transform and load” (ETL) process to extract data from the relational database from multiple tables and consolidate it into “de-normalised” data records within the data warehouse. De-normalised data is simplified or “flattened” data from multiple tables with minimal SQL joins (that is, without the relationships).
[35] Valentia has a functionality called an “Advance Report Builder” in which a PMS user can generate a customised report with user-defined parameters out of the data warehouse. In Advanced Report Builder, the user literally builds what it wishes to see reported. In the background, through SQL queries, the software is dynamically creating SQL joins between different tables in the data warehouse based on what parameters the user is interrogating. Empty data fields are populated in the resulting report based on the user specified SQL join and not on any specific logic used by indici.
Patient prescription and diagnosis — mCodes, MIMS, NZULM, READ codes and SNOMED CT
[36] ETL processes are used by both parties in their software. Medtech uses an ETL process to generate what it describes as “unique concatenated keys”. These are strings of multiple data values to form unique identifiers for records in a table, with each data value in the key referencing a particular piece of information. MCodes are one example of this.
[37] Medtech’s “mCodes” are generated by an ETL to represent the specific medication prescribed to a patient. In a string of digits, each number references information stored in different database fields such as the brand, product code, generic equivalent, dose and the like. Medtech PMS functionality can also “disaggregate” or “break down” the mCode (my wording) to display the detailed prescription and associated reference information represented by the mCode. Medtech says that Valentia is using this functionality and its mCodes and that it has been able to do this because of extracting data through the SEHR Hook, or when undertaking data migration.
[38] The ETL process for generating mCodes collects data from MIMS. MIMS is a drug formulary which operates a database that hosts information about medication. Medtech integrates with MIMS under licence. GPs access MIMS under a separate licence. Because Medtech uses MIMS and historically had virtually all of the PMS market, most medical practices have had mCodes in use.
[39] MIMS is one of two drug formularies used in New Zealand. Valentia uses the other one, NZULM, in transactions in its software. Valentia’s data field for medications is NZULM SCTID. NZULM and MIMS reference lists are updated regularly by these respective organisations, with licensed users able to access or integrate with them, depending on the terms of their licence.
[40] In Medtech PMS, diagnostic and clinical information is identified as a “READ” code. The equivalent data field in indici PMS for diagnostic information is “SNOMED CT”.
Data migration and mapping
[41] Where a medical practice decides to change PMS software provider, it needs to migrate its existing practice records across to the new provider. This data “migration” includes transferring historical patient records, clinical notes, prescriptions, and administrative details from one PMS to the other.
[42] Valentia says its migration process to indici from a legacy PMS involves the data being extracted and transferred to a migration “staging area”. (Valentia emphasises that this should not be conflated with the “staging area” for processing data for the SEHR process). Data is cleansed in the staging area for importing into PMS. The data is then mapped. This is the process of matching data fields from the legacy PMS to a data field in the target PMS database. For example, customer prescriptions held as mCodes in the Medtech database need to be mapped to an equivalent NZULM code in the indici PMS. READ codes need to be mapped to SNOMED CT codes in indici PMS.
[43] Most of this mapping can be implemented automatically in the staging area using mapping logic. Valentia says that it is not possible to map all data during migration, for example because of a bespoke code in the legacy PMS for which there is no correlation in the Valentia database. It also says there are instances where mCodes and READ codes do not map readily to NZULM or SNOMED CT equivalents. Dr Javad explains that in the mapping process, medications are mapped to brand or generic medicines or are marked for manual verification. Records marked for manual verification are highlighted in the presentation view of the software to the
practice. Before any further steps such as a repeat prescription, manual mapping must be undertaken by the clinician, commonly when the patient attends for a prescription.
[44] Valentia says that in the case of migration from Medtech, the way it undertakes the migration process starts with the practice providing a database file to Valentia (Interbase for Medtech32 and MSSQL for Medtech Evolution). As I understand, this is provision of the database in its original or native form, which will include the schema and structure of the database and relationships between data. Data transfer can also be affected by provision of a “CSV” file but this is the dataset only, without the structure/relationships. Both parties confirm that they can affect migration to their PMS using a CSV file only, but Medtech emphasises that it is preferable for the medical practice if the native form is used.
[45] After this bulk data is provided, the Migration Hook is used to periodically “look up” changes that have occurred since the database was first copied to capture any changes in data since the start of the process, usually a matter of a few weeks.
Medtech’s claims
[46] Medtech alleges that despite the earlier “over-extraction” incident, privacy breach notification, and the statement on the ProCare website, Valentia is continuing to use the SEHR Hook to extract more information than required from Medtech’s PMS including unnecessary and sensitive patient/practice information, funding and enrolment information, set up configuration data, and Medtech’s system referential data including mCodes that Medtech says is confidential/proprietary. In Medtech32 the data also includes staff user login details, passwords and access rights.
[47] Medtech’s expert has not identified any genuine reason why Valentia is not able to extract only the data fields that are required for the SEHR. Medtech says that HealthOne in Canterbury does not do so for operation of the equivalent service there. Medtech also says that it has an application called “ALEX”11 that could and should be used instead. Medtech’s explanation for why Valentia is extracting more information than needed is so that Valentia can copy Medtech PMS including refreshing mCodes.
11 “Application Layer EXchange” Platform.
[48] Medtech says that there is evidence of indici using Medtech naming conventions and database structures (and indeed it has identified a copied spelling mistake) in indici. This includes copying of the structure for the data fields used in Medtech’s “Advanced Forms” product that was the subject of the earlier litigation.
[49] Medtech contends that the “over-extraction” creates exposure to public health privacy and security concerns and associated potential reputational fallout for Medtech should that risk be realised, that would not be able to be compensated in damages. By extracting more than the data fields needed, Medtech says there is a breach of the Privacy Act 2020 and the Health Information Privacy Code 2020, even if the additional information is purged in the staging area so not stored in SEHR. Medtech refers to the YHS webpage which reports that: “Only the data required for YHS is transferred.”
[50] Medtech also asserts that Valentia has extracted and is using its system of mCodes and the functionality behind them and continues to refresh the mCodes using the SEHR integration or on migration. It has recently learned that an indici medical practice that has never used Medtech’s PMS has mCodes in its database. Yet Valentia uses the NZULM formulary, not MIMS. Moreover, as a “greenfields” installation, the retention of mCodes cannot be explained by historical data being retained on migration. Medtech says that this shows Valentia has used or copied its mCode intellectual property.
[51] When Valentia undertakes migration of PMS to indici without Medtech’s involvement, Medtech says this results in patient safety issues because of incorrect mapping of data. This primarily relates to concerns about incorrect mapping of medication, issues of concern regarding allergies and the inactive records issue I referred to earlier.
[52]The above concerns populate Medtech’s five causes of action:
(a)First, Medtech asserts that Valentia has infringed, and on an ongoing basis is infringing, copyright by copying non-literal components of its
software12 through operation of the SEHR Hook and the Migration Hook. Medtech characterises its mCodes as “referential data”. It says there is copying by updating patient data in indici PMS.
(b)Second, Medtech alleges interference with contractual relations. This focuses only on use of the SEHR Hook. Medtech says Valentia is interfering with its contract with MIMS, through the retention, use and attempted conversion of mCodes. Separately, Medtech alleges that Valentia has caused or induced medical practices using Medtech PMS to breach Medtech’s terms of use of its software.
(c)Third, Medtech says that in breach of confidence Valentia is using Medtech PMS confidential information by the SEHR Hook extracting more than the data fields that populate the summary care record in SEHR when it operates on Medtech PMS. Valentia is said to owe obligations of confidence when it operates the SEHR Hook to extract only those data fields that appear in SEHR.
(d)Fourth, Medtech says Valentia is in breach of confirmations and undertakings given in the Settlement Agreement.
(e)Fifth, Medtech alleges that Valentia is in breach of the FTA by a breach of representations that it had complied with the confirmations and undertakings given in the Settlement Agreement. It also asserts that Valentia is in breach of ss 9 and 11 of the FTA by representing that the operation of the SEHR and migration is secure and privacy law compliant.
[53] In each cause of action, Medtech seeks permanent injunctions. Respectively, these are restraining use of copyright infringing elements, restraining contract interference, restraining use of confidential information, requiring compliance with
12 Medtech pleads that there is literal copying of source code or object code but it accepts it currently has no evidence to support this.
the Settlement Agreement by prohibiting access to Medtech PMS without its consent, and restraining conduct in contravention of the FTA.
Valentia’s substantive response
[54] I set out key aspects of Valentia’s substantive response to the concerns raised by reference to the topics of SEHR, allegations regarding mCodes, and other asserted intellectual property.
SEHR
[55] Valentia says that the SEHR Hook extracts only patient and practice data/records, which it has permission to extract. Valentia rejects that the data extracted is data proprietary or confidential to Medtech.
[56] Valentia is emphatic that it does not transfer any data to indici PMS in its operation of SEHR or the SEHR Hook. Mr Glover points to evidence that indici pre- dated SEHR and Dr Javad’s unequivocal evidence that SEHR and indici are entirely separate.
[57] Valentia acknowledges that the SEHR Hook extracts more data than will form part of the content of the SEHR. It says that this additional data is required for the purposes of building the SEHR content but not for other purposes. Valentia explains that the SEHR Hook extracts more data (for example, a whole row/column or table of a database containing a required data field rather than just the data field itself) so that the computing load is transferred to the staging area, rather than running complex queries on specific data fields. Valentia says that in developing SEHR its investigations led it to conclude that this was the only safe way to build the summary care record without comprising operation of the source PMS.
[58] It says there is no security risk in doing this because of the strength of the security it has over its processes and the encryption of the data. Data not required for SEHR is purged from the staging area at least every 48 hours.
[59] In response to the events in late 2021, Valentia says that it did modify its queries in response to the spreadsheet Medtech responded to, as it said it would. Valentia says the queries run remained unchanged from then until December 2023, when Valentia introduced a further three queries to extract location details. In February 2024, eight queries were modified to enable a PHO client with a Medtech Evolution PMS to join SEHR and to include a new search parameter “External Display Status” at the request of the client. Both instances responded to client requests for this information to be captured.
[60] Valentia notes that there are 44 additional queries that have always been run by the SEHR Hook and that were not in the spreadsheets provided to ProCare and through it to Medtech. These are not the queries that run constantly, but a set of queries run when the source PMS restarts. These are validation queries that extract a single record to sync with the database. They are a form of initial validation to ensure the connection between the source PMS database and SEHR Hook is active and functional.
[61] Valentia strongly contests Medtech’s suggestion that “ALEX” is a workable alternative and that it should be placed in a situation where it is required to licence this product. Valentia says Medtech charges a 30 per cent margin to extract the same data that is currently being extracted without charge.
MCodes/Migration
[62] Valentia says that when it migrates data to indici from Medtech it retains the mCodes for mapping, reporting and audit purposes. Valentia says that these are not used for prescribing but appear in the transactional software in a “read only” format.
[63] For migration, Valentia says mCodes are retained to facilitate manual medication mapping as part of a long tail to the mapping process. In answer to concerns that there is patient risk due to unmapped data, it says that where prescription and allergy information cannot automatically be mapped, the mCode and other patient record information is visible to the clinician in the indici user interface. Until this is mapped to a NZULM reference, it is highlighted as a record that is not to be prescribed. Upon prescribing, the GP undertakes the manual mapping process to an NZULM medication. Allergy information is flagged and mapped manually. Valentia says that
there is nothing unconventional about a “long tail” for mapping to a new software product, and there is no public safety issue because of clinician involvement.
[64] As to reporting and audit, Valentia says that clients and PHOs seem to require the mCode data field to be retained in indici as part of the historical medication record and to be able to report on mCodes in sector wide reporting for PHOs. This is because mCodes have been so prevalent due to Medtech originally being virtually the only PMS provider and its continuing substantial market share.
[65] Valentia explains that it has an mCode field even for greenfields installations for this reason. The mCodes in these installations are derived from a 2017 reference table in the data warehouse (not from using any ETL functionality). A medical practice asked for this de-normalised reference table to be retained in its data warehouse when it migrated to indici back in 2017 for the purposes of reporting requirements.
[66] Valentia has continued to include the 2017 reference table in the indici data warehouse for new installations to undertake validation of mapping and for reporting purposes. Because the table has not been updated since then there is no mCode information for medications added after 2017. Valentia emphasises that the evidence Medtech has provided on mCodes used in a greenfields installation, has plainly come from a user-generated custom report in Advance Report Builder, not from reports on its transactional database, where the mCode table does not serve a current purpose.
[67] Valentia says that is significant, because it demonstrates that it is only using the mCodes (which are simply a piece of patient data) as a reporting tool, not functionally. It also explains why Medtech has identified mCodes recorded against only a subset of the prescriptions (550/761) in use in the greenfields installation, because the balance relates to medications that post-date the 2017 reference table. If Medtech was refreshing mCodes from the SEHR Hook as Medtech asserts, there would not be a gap post-2017.
Other asserted intellectual property
[68] READ codes used by Medtech, like mCodes, are a reference dataset for diagnoses rather than medications. READ codes appear in indici. Valentia says that
this field and the data in it is only retained for mapping purposes to the Valentia equivalent, SNOMED CT. Valentia says they are only used manually by the physician at the point of care when manual mapping takes place. Valentia also says that certain Medtech fields are retained on migration where there is not an indici field to map to and/or where mapping has not occurred in an automated way. These are manually mapped to the indici field in due course or become redundant.
[69] In other cases where there are references to “Medtech” Valentia rejects that this means there has been copying of schema or database design. For example, Medtech says it uses “Medtech ID” simply as an identification number for the patient record migrated from the legacy PMS whether this is Medtech or another PMS. The reference was created originally because all were Medtech migrations when indici was first established. Other references enable identification of data elements that have been migrated from Medtech PMS for presentation of migrated data and to facilitate mapping rather than for use of those fields going forward.
[70] Columns in data fields that are migrated but not used by indici may be given the column name that was used in Medtech PMS. This will include long-disestablished columns that hold the historical data that was migrated to the indici PMS database.
[71] Valentia acknowledges that the Advanced Forms schema format is maintained during migration to indici but asserts that it is not proprietary to Medtech, notwithstanding the terms of the Settlement Agreement which (Medtech says) would include this within its definition of confidential confirmation.
[72] On the issue of how Valentia deals with inactive records, Valentia says it has made a deliberate choice to display in SEHR the full chronological history of both active and inactive records for Medtech Evolution due to more complicated logic used in that product relative to Medtech32. Valentia rejects any clinical risk arising from this decision, and points to the fact that since SEHR was operational, there has never been an incident reported where it has been alleged that display of wrong data has led to treatment issues or risks.
Serious question to be tried
[73] A “serious question to be tried” means a claim that is not vexatious or frivolous,13 on which the plaintiff has at least “a tenable basis upon which it might be able to succeed at trial”.14
[74]I need to frame my discussion of this issue with the following preliminaries:
(a)Valentia is concerned at resulting reputational damage if the Court were to conclude that there is a seriously arguable case and apprehends that Medtech will exploit this for competitive advantage. However, I emphasise that the threshold is not a high one.15
(b)It is trite that at the interlocutory stage the Court should not resolve conflicts of evidence or resolve difficult questions of law requiring detailed argument and mature considerations.16 This is particularly apt here. Despite the volumes of evidence filed, I apprehend that this is the tip of the iceberg relative to what will be the factual and expert evidence if the matter goes to trial.
(c)Although the “serious question” is the threshold for relief, I see the balance of convenience factors as determinative here. For that reason, I intend to address the issue of whether there is a tenable claim briefly relative to the detailed submissions and extensive affidavit material.
(d)Medtech was emphatic that Dr Javad, Valentia’s principal, is lying on key aspects of his evidence relative to the merits of the claim. Serious allegations are made. I am not prepared, nor do I need, to make credibility findings against Dr Javad in this context.
13 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12].
14 Intellihub Ltd v Genesis Energy Ltd, above n 4, at [24] and [27].
15 Nirvana Farms Ltd v Makakaho Land Co Ltd [2020] NZHC 3268 at [18] citing E R Squibb & Sons (NZ) Ltd v ICI New Zealand Ltd (1988) 3 TCLR 296 (HC).
16 Devgnz Ltd v The Depths LP [2021] NZHC 3398 at [33] citing: American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 407; Villa Maria Wines Ltd v Montana Wines Ltd [1984] NZLR 422 (CA) at 425; and Health Club Brands Ltd v Colven [2013] NZHC 428 at [9].
(e)Finally, Valentia submitted that I should conclude there is no serious question to be tried on the basis of Medtech’s poorly particularised claim. Particularisation is of critical importance in intellectual property cases.17 However, in an interim injunction context, I accept Mr Lloyd’s submission that I should not take an overly forensic approach to the need for particulars. The pleading will require considerable refinement, but I address the claims pleaded by reference to the evidence filed.
Copyright
[75] Medtech’s copyright claim asserts that Valentia has breached its copyright by copying mCodes, the ETL processes behind them, its data field names and its database schema (organisation and structure). Valentia says that the SEHR Hook extracts only patient and practice data/records. Whereas Medtech characterises features like is “mCodes” as its referential data, Valentia rejects that any data extracted is proprietary (or confidential) to Medtech.
[76] A line between what is client data and what is capable of being protected by copyright is not straightforward. Moreover, the extent of copyright protection in New Zealand for non-literal (non-source code) elements of software such as database schema is unclear.18 The Court of Appeal has said that the scope of protections of such elements is constrained.19 Valentia invited me to conclude that there is no seriously arguable case in law for such protection on the present facts. That was a bold submission given the relatively little New Zealand law there is on this subject and the early stage of the proceedings.
[77] Valentia says that mCodes are retained as read-only data and the underlying functionality by which an application converts the mCode to its expanded drug name is not transferred. Medtech considers that the latter still occurs. Who is correct on that is an issue for trial. Valentia has also provided explanations for the appearance of field names including “Medtech” within the software that would not engage a
17 Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 (Ch).
18 Karum Group LLC v Fisher & Paykel Financial Services Ltd [2014] NZCA 389, [2014] 3 NZLR 421 at [116].
19 At [116].
copyright claim. A claim for copyright based on mere use of some of the field names (such as READ codes), without copying particular functionality or relationships seems difficult. However, at this stage I cannot exclude that Medtech will establish substantial replication of data structure and/or ETL functionality and that this is protectable. In my view, there is sufficient basis on the facts and law for me to conclude that there is a tenable case for breach of copyright of Medtech’s data schema and mCode and ETL processes.
[78] The permanent injunction sought restrains Valentia from using the infringing copyright elements in indici. This is very different from the interim relief sought which relates to use of the hook tools. This is relevant to whether I should grant that relief, an issue to which I will return.
Misuse of confidential information
[79] The elements of a claim of misuse of confidential information are well known.20 The first requires an objective assessment as to whether information has the necessary quality of confidence.21 Confidential information can take any form (such as commercially sensitive information), but there needs to be a level of skill and effort involved in its creation.22
[80] Medtech asserts that its data structure and schema, ETL processes and referential data including mCodes have the necessary quality of confidence. Valentia correctly submits that Medtech only has standing to sue to protect its confidential information. It says that Medtech’s claims relate to extraction of data belonging to medical practices or their patients. That is too simplistic for at least two reasons. If Valentia is extracting data relationships created by Medtech, that goes beyond the data itself. Further, arguably data may be “intelligent” and/or have processes lying behind
20 Coco v AN Clark (Engineers) Ltd [1969] RPC 41 (Ch) as applied in Hunt v A [2007] NZCA 332, [2008] 1 NZLR 368. See also E-Blended Learning Solutions Ltd v Devaney [2012] NZHC 2382 at [11].
21 Medtech relies on the 2020 Settlement Agreement and its earlier NDA in 2020 as establishing the necessary quality of confidence. Because there is an objective test, the parties’ agreements are not dispositive even if their terms extend to the information in question: Karum Group LLC v Fisher & Paykel Financial Services Ltd (CA), above n 18, at [188].
22 E-Blended Learning Solutions Ltd v Devaney, above n 20, at [13].
it that are confidential to the software provider. I accept that it is arguable that at least some of the information relied upon may be confidential to Medtech.
[81] Second, the information must be imparted in circumstances importing an obligation of confidence.23 The pleading asserts that Valentia’s operation of SEHR and access to the confidential information is premised on a high level of consumer and clinician trust in the integrity of health sector information handling practices. Medtech then asserts that Valentia is under an obligation of confidence when it operated the SEHRs to extract only summary health record data. This obfuscates to whom it is said the duty is owed, however there is a tenable basis for establishing the second element.
[82] Third, there must be an unauthorised use of the information.24 Medtech’s primary claim is that Valentia is using the data extracted by the SEHR Hook in its indici PMS. On the evidence before me at this interlocutory stage, I am not satisfied there is a seriously arguable case for this contention due to a combination of factors:
(a)There is no positive evidence that this occurs. The various matters Medtech asserts as intellectual property transgressions are explicable as occurring in the context of migration when the medical practice provides the native database, so do not support use of data from SEHR.
(b)Medtech says that Valentia’s explanation for why it “over-extracts” data (to avoid performance issues) is counter-intuitive. It points to HealthOne, which Medtech says extracts only the relevant fields to compile the summary health record. I cannot form any conclusion on Valentia’s explanation without further technical evidence. However, even if the technical explanation proves flawed, this is a skinny basis to speculate that Valentia is deliberately “over-extracting” for the purposes of misusing the data extracted to copy a competitor PMS.
(c)That proposition would go to the heart of Valentia’s integrity as provider of the SEHR technology. I would need to form a tentative
23 At [11(b)].
24 At [11(c)].
view that Valentia is deliberately using the extraction of material to the staging area for improper purposes in serious breach of its contractual obligations to PHOs.
(d)This would also mean that Dr Javad’s emphatic statements to the contrary are complete fabrication of matters that would likely be exposed in the course of the proceeding. That is a serious assertion, and not one I am prepared to accept.
(e)While the evidence is untested, aspects of Valentia’s response appear compelling. Taking two examples, Valentia says that the SEHR extracted data is in a read only format, with no functional use other than for viewing. Second, I have referred to Valentia’s evidence that in the greenfields installation, mCode data is reported on for only a subset of the medications because the related data table has not been updated from 2017. If Valentia was refreshing mCodes via SEHR one would not expect this lacuna.
[83] There remains Medtech’s more limited proposition that data that is confidential to Medtech is being misused simply by virtue of use of the SEHR Hook, that is, by alleged unauthorised extraction of data fields beyond those that explicitly populate the summary care records in SEHR.
[84] Valentia asserts that with the exception of queries added since December 2023, it is extracting data based on constraining the queries in a way advised to Medtech (through ProCare) in 2021 when the over-extraction incident arose. It is difficult to reconcile Valentia’s assertions on this with the number of queries Medtech has identified are now run on the software and the nature of the information extracted. At the least, it seems that Medtech was not advised in 2021 that there were 44 queries run at initiation of the SEHR Hook on restart, with the information used for that relating to Medtech set-up configuration. Moreover, as I understand its evidence, in 2021 Valentia made changes only to the queries for Medtech Evolution. Medtech did not return the equivalent spreadsheet for Medtech32 so Valentia assumed Medtech had no
issues with the queries being run on the latter software. If that is correct, Valentia could be described, generously, as sticking its head in the sand.
[85] Valentia also says it has been of the understanding that Medtech has always been readily able to see and monitor what queries are being run on its PMS software. Medtech says this is incorrect, and that to do so a medical practice must facilitate this, which occurred only recently. A determination on this issue will be material to whether Medtech can maintain there is unauthorised use.
[86] It appears implicit in Medtech’s claim that to the extent data extraction is indeed necessary to compile the SEHR, then it is authorised. Valentia said that most of the extracted data is necessary to build parts of SEHR or to establish the relationship between certain data elements, with only two items not used in SEHR for processing. However reference to “necessary to build” may be referring to “necessary” simply to avoid performance issues with the source PMS, which Medtech rejects as valid.
[87] In all, I am satisfied that there is a tenable claim that Valentia misuses Medtech’s confidential information by use of the SEHR Hook.
Interference with contractual relations
[88]There are two formulations of this cause of action.
[89] The first presents as misconceived. Medtech’s claim is that Valentia has caused it to breach its contract with MIMS. The tort of interference with contractual relations is engaged where the defendant causes a third party to breach their contract, not the plaintiff.25
[90] The second is that Valentia has caused medical practices using Medtech’s PMS to breach their terms of use. The following matters are relied upon:
25 Plus Construction Co Ltd v JL Trustee Nominee Ltd [2023] NZHC 1986 at [46(d)] citing Fletcher Development Construction Ltd v New Zealand Labourers IUOW (1989) 2 NZELC 96,677 (HC).
(a)Medtech contends that operation of the SEHR Hook is causing performance and degradation issues to the Medtech PMS (slowing it down).
(b)Because the SEHR Hook is extracting proprietary tables that contain Medtech intellectual property, the medical practices are not using all reasonable endeavours to prevent unauthorised access to, or use of, the Medtech PMS as required by Medtech’s terms.
(c)While not particularised, in oral argument, Medtech referred to a term of its contract with medical practices that records that “compliance with the Privacy Act 2020 and the Health Information Privacy Code 2020 is a priority” and states:
The parties shall comply with the terms of this clause 10 and ensure that all Representatives and Permitted Users are aware of and comply with the confidentiality and security obligations set out in this Agreement.
Medtech alleges that the use of the SEHR Hook is causing a breach of the Act and the Code.
(d)Again, presently unparticularised, Medtech relies on a term requiring each party to keep confidential any information concerning the business and affairs of the other.
[91] Mr Glover contends that Medtech is taking a highly unorthodox approach to the tort, given that there has been no act of “inducement” to breach. I accept Mr Lloyd’s submission that arguably “inducing” includes simply causing a party to breach their contract.26
[92] The Medtech evidence that the SEHR Hook is affecting performance is limited. Valentia contends that it is difficult to attribute any slowdown specifically to operation of the SEHR Hook because the computer may be running multiple applications.
26 At [46].
Performance related issues due to the SEHR Hook have not been reported for practices using indici software. This is a disputed issue for trial.
[93] On the other aspects, there is a level of artificiality in this claim given that Medtech has been well aware that Medtech user practices have installed and have been using the SEHR Hook for many years. It would be difficult for Medtech to maintain against its clients that access to the Medtech PMS per se is unauthorised. If the SEHR Hook is extracting more information than Medtech was aware, it is unlikely the practice itself will have been aware of this. In those unusual circumstances, there may be arguments of estoppel or waiver affecting whether there is any breach of the terms. Nonetheless for present purposes I accept that there is a tenable claim.
Breach of 2020 Settlement Agreement
[94] I turn to Medtech’s claim for breach of confirmations and undertakings in the 2020 Settlement Agreement.
(a)Valentia is alleged to have breached confirmations of fact that it had developed indici software without reverse engineering Medtech’s software; that migration of GPs to indici had been achieved by extracting patient data from the underlying database without reverse engineering Medtech’s proprietary software; and that it had not copied Medtech’s software.
(b)Valentia is said to be in breach of undertakings that it would not intentionally seek confidential information belonging to Medtech from Pinnacle PHO and would rely on the assurances of Pinnacle PHO that no confidential information belonging to Medtech would be made available to Valentia; and it would not knowingly or deliberately use confidential information or copyright material, which Pinnacle PHO confirmed to Valentia was owned by Medtech, to further develop indici.
[95] To the extent that this cause of action asserts use of confidential information as defined in the agreement, the claim adds little to the breach of confidence claim.
[96] The other primary aspect of this claim relates to an allegation that Valentia has unlawfully reverse engineered a Medtech PMS tool that compresses/decompresses PDF documents contrary to Valentia’s confirmation that it did not reverse engineer Medtech PMS. This issue is irrelevant to the relief Medtech seeks restraining use of the SEHR Hook and Migration Hook.27
Fair Trading Act 1986
[97] Finally, Medtech seeks injunctive relief pursuant to s 41(1) of the FTA restraining Valentia from contravening the FTA and from continuing to engage in misleading and deceptive conduct.28
[98] Medtech alleges under this head that Valentia is engaging in misleading conduct by asserting it was compliant with confirmations and undertakings given in the Settlement Agreement. I do not see this as adding anything to other claims.
[99] Additionally, Medtech asserts misleading conduct by Valentia making express or implied false representations to medical practices that its operation of SEHR is safe and compliant with privacy legislation;29 that Valentia would only extract data that is compiled in the summary care record; that Valentia is able to extract data safely and securely; and that data can be safely and securely extracted if a medical practice decides to change from indici PMS.
[100] As discussed earlier, Valentia accepts that it extracts more data than is necessary to compile the SEHR, albeit that unnecessary data is purged and that this “over-extraction” is done securely and avoids performance issues in PMS. Valentia’s acknowledgement sits uneasily with the statement on ProCare’s YHS website that: “[o]nly the data required for YHS is transferred” and implications that might fairly be taken from ProCare’s report on the 2021 over-extraction incident that “the extraction code had been updated to prevent extracting more data than required”. Valentia’s
27 Medtech asserts that Dr Javad’s explanations of how it came to obtain a decompression utility undermine his credibility. I do not need to explore this for present purposes.
28 The section refers to where an injunction is “desirable” but it was not suggested a test different to other causes of action apply. See E R Squibb & Sons (NZ) Ltd v ICI New Zealand Ltd, above n 15.
29 Privacy Act 2020 and the Health Information Privacy Code 2020.
response may be that the level of data extraction it undertakes is “required” for SEHR so as not to place too much strain on the PMS of participating medical practices.
[101] Valentia says that it has not been aware of the terms of contracts between PHOs and their clients and does not control what PHOs state on their websites. It is questionable whether it can be said that Valentia is itself engaging in misleading conduct under the FTA by statements made by other parties or by extracting data other than the data fields required for the summary care record. I do not have visibility on what consultation occurs between PHOs and Valentia on the queries being run, PHO being the party with whom Valentia contracts. There is plainly more to know about what occurred at and after the 2021 incident. I consider that a tenable basis to succeed at trial under the FTA is made out, noting those qualifications.
[102] The permanent injunction sought by Medtech seeks an injunction restraining conduct in contravention of the FTA and restraining Valentia continuing to engage in misleading and deceptive conduct, both without stipulation as to what restraints are contemplated. While it is arguable the threshold test is met for a permanent injunction under the FTA, there is an issue with how that engages with the relief sought in this application. I will discuss this below.
Balance of convenience
[103] The parties raise the following matters in assessing where the balance of convenience lies:
(a)the nature of the interim relief;
(b)adequacy of damages for the respective parties, including issues going to the ability to pay/strength of undertaking;
(c)conduct of the parties;
(d)preservation of the status quo;
(e)whether the application is moot or unnecessary.
(f)effect on third parties including any public health or privacy risks;30
(g)need for supervision; and
(h)strength of the case.
[104] The process to be undertaken in assessing the balance of convenience is aptly described as the “balance of the risk of doing an injustice”.31
Nature of the relief
[105]The interim relief sought is misconceived as it relates to:
(a)the breach of copyright and confidence causes of action; and
(b)the FTA cause of action.
[106]I deal with these in turn.
[107] The interim injunction is an ancillary remedy, intended to support and preserve the plaintiff’s claim for substantive relief by way of permanent injunction or for other forms of equitable relief.32 There is a disconnect here between the allegations of breach of copyright and confidence, and whether the conduct sought to be restrained in the interim has any utility to prevent violation of Medtech’s rights.
[108] As explained, the Migration Hook is used to address the data delta between when the database is provided for in bulk migration to indici and when the new PMS goes live. Medtech had initially asserted that Valentia uses the Migration Hook or equivalent tool to extract a full copy of the database at the beginning of the migration process. However, its expert evidence and submissions appear now to acknowledge
30 Dunedin Taxis 1965 Ltd v Dunedin Airport Ltd (1990) 3 PRNZ 391; CBA Finance Holdings Ltd v Hawkins (1984) 1 BCR 609 (HC); NZ Forest Products Ltd v NZ Stock Exchange (1984) 2 NZCLC 99,051; Finnigan v New Zealand Rugby Football Union Inc (No 2) [1985] 2 NZLR 181 (HC); and Chatham Islands Fishermans Co-operative Co Ltd v Chatham Islands Packaging Co Ltd (1988) 2 TCLR 605.
31 Cayne v Global Natural Resources plc [1984] 1 All ER 225 (CA) at 237.
32 Peter Blanchard (ed) Civil Remedies in New Zealand (2nd ed, Thomson Reuters, Wellington, 2011) at [6.1.3].
that the medical practice provides Valentia with a full native copy of its database when it migrates to indici, rather than Valentia extracting it. I make no comment either way on the legitimacy of this.
[109] Medtech now asserts that the most likely plausible explanation of the similarity between the Medtech database structure/schema and that of indici arose as a result of GPs providing Valentia with the database in native form. Similarly, Mr Singh says that it is probable that Valentia copied Medtech’s Advanced Form table set up in an early migration. If that copying or use is actionable, it has already occurred, and its consequences could be restrained only by restraining use of the indici software.
[110] By its interim application, Medtech does not seek to restrain use of the indici software. Nor does it seek to restrain medical practices from providing its database in native form for migration as they have been doing. The orders sought are to prohibit Valentia from extracting data (using the Migration Hook and SEHR Hook) without assistance/approval. There is little utility in this when the database is being provided to Valentia in its native form on migration in any event.
[111] This disconnect between claim and interim relief is not a complete answer. Medtech seeks to restrain use of the SEHR Hook to restrain Valentia from “refreshing” mCodes and other data it says is proprietary. The premise underlying this is that Valentia is copying/using the data extracted for SEHR in indici on an ongoing basis. The injunction sought would restrain such conduct. However, as I outlined earlier, on the evidence before me I am not satisfied there is an arguable case that Valentia does this.
[112] I turn to the FTA claim. An injunction under s 41 of the FTA restrains conduct in contravention of the FTA, not its effects. The interim relief sought by Medtech is not directed at restraining the alleged misleading conduct (restraining or correcting representations that extractions are being undertaken in compliance with privacy legislation, safely and securely) but with restraining the conduct said to be contrary to those representations (restraining the extractions). There is merit in Mr Glover’s
submission that the relief sought does not correlate to the contravening conduct under the FTA.33
Adequacy of damages
[113] Where damages are an adequate remedy, it will generally follow that the balance of convenience does not require any interim intervention by the Court. 34 The alleged breaches must not only be compensable in damages — the defendant must also be in a position to meet them.35
[114] Medtech relies on two aspects for asserting that damages are an inadequate remedy. The first is the proposition that it will suffer irremediable reputational damage if the way Valentia operates SEHR or migrates data causes patient safety issues or leads to a security breach (hacking of sensitive patient or practice over-extracted data). The second is that Valentia has not demonstrated that it can meet a damages award.
[115] I do not see Medtech is at reputational risk for any issues relating to migration of data. By definition its software is not in use after migration. As to reputational loss due to Valentia’s use of the SEHR Hook and “over-extraction” of data, again it seems to me that it is not Medtech that is at risk. The reputational risk lies with Valentia (and the PHOs). Moreover, even if there is prospective reputational risk in the event of a data security incident, the damage must be assessed against the chances of its occurrence. Valentia emphasises the strength of its security measures and that it has had no security breach in the staging area. That informs the level of risk and needs to be balanced against the consequences of granting the relief. I accept that if reputational loss did occur, there may be some difficulty in quantifying it.
[116] As to Valentia’s ability to pay damages, Medtech made repeated reference to Valentia having minimal staff and no “front of house” presence in New Zealand. It painted Valentia as “fly by night” with a very limited footprint here. Medtech was
33 Sale 33 Ltd v M D Designer International Ltd [2015] NZHC 3029, (2015) 17 NZCPR 95 at [25]-[26]. The Court of Appeal dismissed the appeal in Sale 33 Ltd v M D Designer International Ltd [2016] NZCA 286, [2016] RTHNZ 33 although did not directly address the point as to availability of injunctions for the ancillary effect of misleading conduct under the FTA.
34 Cabco Group Ltd v Bartlett (2009) 6 NZELR 500 (HC) at [30].
35 American Cyanamid Co v Ethicon Ltd, above n 16, at 408.
highly dismissive and sceptical of a one-page affidavit from Mr Brian Scollard on Valentia’s financial standing because it was unaccompanied by supporting information.
[117] Dr Javad refers to 27 fulltime local staff, and to its data storage facilities in Auckland and Hamilton. Mr Scollard is the director of finance of Valentia’s parent company in Dublin. He deposes that Valentia owns net assets in New Zealand valued at [redacted]36 as at 31 December 2023. He reports that turnover for the New Zealand company in the most recent financial year to 31 December for which accounts are available was [redacted], with EBITDA being NZD [redacted]. He says that Valentia’s financial position has been enhanced since then due to additional medical practices joining. He says that he is confident on the basis of this that Valentia will be in a position to pay such damages as the Court might award.
[118] I agree that the information in Mr Scollard’s affidavit should have been supported by the base accounts or other corroboration so that it could be tested and confirmed. However, the affidavit does support that Valentia is a company of considerable substance in New Zealand with significant net revenues and a sufficient level of net assets here to meet a damages award.
Medtech’s ability to pay damages for the loss Valentia may suffer if the injunction is granted
[119] There is the converse analysis.37 If Medtech fails in its claim to an injunction at trial, will Valentia be adequately compensated under Medtech’s undertaking as to damages for the loss it will sustain by the injunction being granted?
[120] Valentia says the injunction, if ultimately held to be unfounded, would seriously impact its reputation in the healthcare industry in New Zealand and overseas. For any period when SEHR are not being updated due to an injunction, it seems inevitable Valentia would be in breach of its obligations to PHOs (albeit that those contracts are not before the Court). I consider such losses would be adequately compensated in damages, albeit, like Medtech’s they may be difficult to quantify.
36 This is commercially sensitive and has been redacted for that reason.
37 American Cyanamid Co v Ethicon Ltd, above n 16, at 408.
[121] Valentia also contends that it will suffer lost revenue from practices who decide not to migrate to indici due to the barrier created by the injunction if it could not use the Migration Hook. However, on Valentia’s own evidence, use of the Migration Hook merely gives the practice flexibility about timing and limits downtime. Without it, there would be a longer period the practice would be unable to access or update client records.
[122] Medtech has provided the usual undertaking as to damages. A plaintiff seeking an injunction generally has an obligation to provide the court with sufficient information to enable the court to assess the worth of its undertaking as to damages.38 The worth of the undertaking will be taken into account in assessing the overall justice of the case. Ironically, having complained that Valentia provides only flimsy evidence of its financial standing, Medtech has provided no financial information supporting its ability to meet its undertaking. This appears to be due to its solid presence in New Zealand, its prevalence in the market, and perhaps a perception that its history speaks for itself. I am prepared to accept that it can meet a damages claim on its undertaking.
Conduct/delay
[123] Each party says the other has behaved unreasonably. Medtech refers to Valentia being uncooperative and having created its own inconvenience. Valentia asserts that Medtech has an improper anti-competitive motive in bringing proceedings it says are baseless and moot. I observe that misconduct in an interlocutory context is often in the eye of the beholder. Valentia also asserted that Medtech had unreasonably delayed bringing the proceeding. This was based on its understanding of Medtech’s visibility of queries being run on the software. Neither alleged misconduct nor delay are features that sway the outcome.
[124] As part of a narrative of ulterior motives behind and lack of substantive merit in the application, Valentia highlights an open communication in which Medtech offered to abandon its injunction application. Mr Glover contends that this also demonstrates the lack of any imperative for relief. I accept Mr Lloyd’s submission
38 Jireh Holdings Ltd v Porchester Ltd HC Auckland M1466/02, 18 December 2002 at [32]; Eide v Huxford Holdings Ltd HC Dunedin 03/1678, 1 October 2003 at [13]; and Sanson v Energy Products Ltd HC Auckland CIV-2009-404-5464, 4 December 2009 at [40].
that this proposal was made in context of the Court’s then advice that it could not accommodate a two-day fixture for the interim injunction and preservation orders until next year. It was directed at Medtech prioritising having the preservation orders heard which appeared to be a barrier to progressing discovery.
Status quo
[125] An outcome that preserves the status quo is favoured. That is usually the position before any recent change which has caused the dispute between the parties. In some cases, it has been helpful to ascertain “the last peaceable state between the parties.”39
[126] Medtech suggests that to return the parties to the status quo entirely would involve the Court ordering that the SEHR Hook be removed, all extracted data be rewound and all changes to indici and the SEHR be unwound. Acknowledging that this is not possible or is impracticable, Medtech says the Court should relieve the effect of any continuing wrongdoing by pausing the practice of unchecked data extraction.40
[127] In my view that analysis is inapt in that it carries within it the assumption that Valentia is a wrong doer when that issue is at large. I doubt that the status quo concept has much utility on the current facts.41 To the extent that it does, pragmatically, the status quo is Valentia continuing to operate in the way it has been.
Is an order as regards SEHR Hook moot or unnecessary due to other developments?
[128] Valentia says an order restraining use of the SEHR Hook is redundant from mid-2024 because of the “HIRA” programme and Medtech’s own plans.
[129] HIRA is a Health NZ programme to digitise and modernise the provision of health information for all health participants. It will create a central repository into which medical practices will “push” their data from their PMS. Patients will access
39 Air New Zealand Ltd v Wellington International Airport Ltd [2008] 3 NZLR 87 (HC) at [10] quoting R & M Wright Ltd v Ellerslie Gateway Motels Ltd HC Auckland CP188/90, 11 July 1990.
40 Safe Kids in Daily Supervision Ltd v McNeill [2012] 1 NZLR 714 (HC) at [25].
41 See the discussion in Adrian Zuckerman (ed) Zuckerman on Australian Civil Procedure
(LexisNexis, Australia, 2018) at [10.12].
their individual health information through this means. It is intended that all practices contribute their data. The aim is that in due course SEHR and the SEHR Hook will not be needed. However, only a first stage of the HIRA programme is due to commence mid-2024 and at the time of the hearing it was not clear whether Medtech would even be participating in the short or medium term.
[130] Valentia also submits that Medtech could simply stop Valentia accessing Medtech PMS, rather than needing a Court order. It refers to a report in December 2023 (that Medtech accepts represents the position) that: “The Medtech team has been communicating with PHOs, practices and vendors about the 2024 deadline [in June] when uncertified applications will no longer work.”. Medtech says that Valentia is mistaken that this initiative will preclude Valentia using the SEHR Hook or the Migration Hook. That is because the initiative will only prevent software that pushes data from the Medtech PMS as opposed to Valentia extracting data from Medtech PMS as Valentia’s tools do.42 Only the medical practice which installed the SEHR Hook can “uninstall” it.
Third party effects/public interest
[131] Medtech acknowledges that if the SEHR Hook ceases to operate without an alternative solution, SEHR records will not be updated.
[132] Medtech’s responses to this concern are far from persuasive. Medtech says that because not all regions use the SEHR, the order would not have a nationwide effect. Mr Lloyd contends that there is no sufficient evidence of how frequently and extensively SEHR are used. All current records would be available, albeit Medtech accepts they may be incorrect, as would records uploaded from practices not using Medtech PMS. He says in an urgent setting, unless the patient is unconscious, patients could and should consult with a GP as to their medical history in any event.
[133] Medtech said that Valentia has not provided evidence of how widely SEHRs are used and hence the potential impact of the order. That simply means I would be
42 The software are application protocols called APIs. APIs are installed on the system and pushes data out.
flying blind as to what effects there would be. On the evidence, I am confident in saying that uptake of SEHR is sufficiently widespread that a breakdown in operation could have serious impact. At least in Auckland, all clinics are encouraged to participate in YHS. I observe that the 2021 Privacy Impact Statement recorded that ProCare was engaged to install the extraction tool on up to 366 Auckland metro PMS servers and that as at May 2021 the installation had taken place on 101 of these with work on the remaining practices continuing. This just relates to Auckland metro GP practices, when Valentia also delivers the technology to Wairarapa, MidCentral, Hutt Valley, Whanganui and Capital Coast. Medtech has some 70 per cent of the market.
[134] More generally, Medtech emphasises that the order only prohibits the use of SEHR without Medtech’s assistance or approval. Medtech encourages me to have confidence in a co-operative approach being taken and everything will be well. Mr Lloyd said Medtech could provide assurances to this effect. Given the acrimony and suspicion exhibited by the parties towards each other, that provides me with very little confidence indeed. In my experience, the parties cannot agree a timetable date let alone on what terms data should be extracted. I am troubled that orders of the Court will lead to a lacuna in updates to the SEHR. I am also uncomfortable placing Valentia in a situation where it is effectively required to agree to Medtech’s approach to updating the SEHR or risk being responsible for a public health incident.
[135] Medtech’s response to this is to contend that the present situation engages privacy and security risks. Valentia has not explicitly addressed whether the staging area for the data extracted by the SEHR Hook is in New Zealand or not, despite Medtech raising this. Medtech is sceptical that the annual audit of Valentia’s security systems apply to its SEHR staging area as opposed to the SEHR data repository. Medtech says there are serious privacy concerns with what is being extracted to the staging area.
[136] I do not dismiss these potential concerns. However, I balance these against, in my view, a high risk, if not inevitability, that SEHR records will not be updated for a material period, with a significant risk of serious public health and administrative impacts if the orders sought are made. Valentia has repeatedly said that it is confident
in its measures to secure the privacy and security of information. Valentia will need to answer to SEHR’s other stakeholders if Medtech’s concerns are well-founded.
[137] Use of the Migration Hook raises different issues to the SEHR Hook. I have already discussed that the utility of restraining use of this tool is dubious because it has no impact on bulk migration of data. For completeness I record that I have not been persuaded of patient safety risks more generally due to Valentia’s migration process to indici. In addition to Valentia’s evidence of the flagged manual clinician input and explanations of certain reporting issues, there is comfort in Valentia’s evidence that to date 149 practices have migrated to indici from Medtech PMS, representing 2.3 million active patients, 7.1 million patient records and 101 million successfully mapped medications.
Order would require ongoing supervision
[138] Valentia says the order would require ongoing supervision of the Court. I agree that seems likely.
Strength of case
[139] I do not rely on the strength or weakness of the case for a permanent injunction as persuading me one way or the other. That is partly because of the difficulties in assessing the merits in this complex scenario and partly because of my clear view that an injunction should not be granted on other balance of convenience grounds.
Overall justice
[140] I now stand back and consider whether an interim injunction should be granted restraining extraction of data without Medtech’s assistance or approval.
[141] The answer is no. In respect to the SEHR Hook, the primary reason is that I remain concerned at the effect on medical practices and on the public if the injunction is granted. Those effects seem to me to be significantly more tangible and likely to occur than the postulated risks to the public of the status quo. In respect to the Migration Hook, I am not satisfied that the relief sought will have utility in avoiding
any loss to Medtech (or to third parties) given the limited purpose of that tool. In both cases, I consider damages are an adequate remedy.
Result
[142]The application is dismissed.
[143] I will receive any submissions on costs on this and on Valentia’s application to rescind preservation orders, which was heard contemporaneously. Valentia is to file submissions within 14 days. Medtech is to file submissions within another 14 days.
Anderson J
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