A contract and copyright dispute over the development of a COVID-19 testing app has left Nomi Health with an order to pay more than $7 million in damages, which could potentially balloon into a higher payout once the case plays out in federal court.
The legal battle, recently detailed by The Salt Lake Tribune, began with a suit brought against the direct healthcare provider back in 2022 by OSGHD, a Texas-based software developer.
Nomi licensed from OSGHD a software platform for data collection, reporting, result aggregation and scheduling. Nomi used the software to support logistics at COVID-19 testing centers it began running in 2020, per legal filings.
OSGHD alleged that Nomi “grew greedy and resented paying” OSGHD the agreed-upon per-test fee and so “hatched a top-secret scheme to purloin OSGHD’s intellectual property by developing a copycat software application that Nomi called ‘Project Tiger.’”
Nomi, OSGHD alleged, hired another developer and “unlawfully provided Domo [the developer] with access to the application, which Domo then used in creating the replacement Tiger software application.” Nomi allegedly strung OSGHD along long enough for Domo to replicate a sufficient portion of its application before terminating the contract in April 2022, per the plaintiff’s complaint.
The contract between Nomi and OSGHD permitted the former to create its own application as long as no part of it was based on OSGHD’s software, according to the lawsuit. OSGHD said it caught wind of the alleged ploy because its team stumbled on “Project Tiger” documents and even a recorded three-day demonstration for Domo developers while OSGHD still had access to Nomi’s system.
Nomi’s COVID-19 testing business has pulled in “many hundreds of millions” over two years thanks to a small handful of state contracts, per the lawsuit, which OSGHD said would not have been possible without the support of its software.
In subsequent filings, Nomi counterclaimed that OSGHD was significantly overcharging for the use of the software, which the company said also did not meet all of its needs.
"Because of continuous problems with the Application (which included lost and missing test results), the 70% increase in monthly license fees, and the likelihood that COVID-19 testing would be necessary for the immediate future, Nomi Health decided to develop its own application," Nomi wrote in an early June motion to dismiss the complaint.
However, in June, Nomi admitted liability of the contract breach. Shortly after, the company was ordered to pay over $7 million to OSGHD in damages and legal fees, a decision Debbie Giambruno, in-house general counsel at Nomi Health, told Fierce Healthcare in a statement that the company disagrees with and plans to appeal.
Additionally, Nomi isn’t backing down from the federal copyright infringement allegations, which could bring even greater damages that are based on Nomi’s profits.
Counter filings from Nomi that were joined by Domo argue that the “vague generalities” highlighted by OSGHD relating to user interface layout aren’t protectable under the Copyright Act and were designed with functionality first and foremost. Among other arguments, Nomi took issue with the claims that OSGHD was “fraudulently induced” into entering an agreement or was subject to “string-along fraud” and asserted that it and Domo did not have access to, or were alleged to have access to, the source code of OSGHD’s app.
Giambruno said the company "cannot comment on ongoing litigation" but "remains focused on our mission to rebuild the U.S. healthcare system by removing complexities, cutting costs and increasing access to care.”
Utah-based Nomi Health was founded in 2019 as a direct healthcare purchasing and delivery ecosystem that it says cuts down buyers’ costs. It raised $110 million from investors back in late 2021 and, according to its website, has more than 800 customers across 15 states.
A summer 2022 blog post from the company detailing its COVID-19 pivot outlined more than 900,000 total administered COVID-19 vaccinations as well as surge periods during which it delivered over 150,000 COVID-19 tests per day. Nomi has faced scrutiny over those COVID-19 efforts related to the government contracts it secured and the accuracy of its testing.