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Language in a licensing agreement is sufficient to refute claims of copyright ownership in a medical records software program, a federal judge has ruled. J.B. Gilleland v. Richard D. Schanhals, No. 1:00-CV-230 (W.D. Mich. 2001). U.S. Judge Gordon J. Quist of the Western District of Michigan entered summary judgment on May 21 for Richard D. Schanhals, Douglas O. Carson, MedTrak Systems Inc. and Micom Systems Inc. on copyright claims asserted by J.B. Gilleland. The judge also declined to exercise supplementary jurisdiction over Gilleland’s state law claims, dismissing them without prejudice. Gilleland developed a system for recording and tracking treatment rendered to a patient during an office visit. In October 1991, he, Schanhals and Carson formed MedTrak to develop and market Gilleland’s idea as a computer program called MedTrak. The three received a one-third interest in MedTrak in exchange for initial capital contributions of $75,000 each and were elected as directors and officers of the corporation. Before forming MedTrak, Carson and Schanhals licensed accounting and billing software to law firms through Micom, a corporation in which they each owned a 50 percent interest. Gilleland, Carson and Schanhals initially decided to market MedTrak through Micom; later, however, they agreed that Micom would license the program to MedTrak. AGREEMENTS In January 1994, Gilleland and Micom entered into a written agreement regarding the sharing of net proceeds from the sale of MedTrak. That agreement referenced a license agreement signed the same day, under which Micom granted MedTrak an exclusive license to use the program for five years. The license agreement stated that MedTrak was developed by Micom and Gilleland and that the agreement did not transfer title “nor any proprietary rights to the software,” but that the title “to all intellectual property rights … is, and shall remain, in Micon.” In August 1997, Micom and MedTrak entered into a second license agreement, granting MedTrak an exclusive license to use the program for 15 years. That agreement also stated that the title to intellectual property rights belonged to Micom. SUIT FILED Gilleland sued, seeking a declaration of copyright ownership and asserting pendent state law claims for corporate oppression and breach of duty. Schanhals, Carson, MedTrak and Micom moved for summary judgment, arguing that Gilleland transferred any interest in the computer program by signing the 1994 license agreement. The judge granted the motion. “While it is true, as Gilleland points out, that the Sharing Agreement and the 1994 License Agreement state that Micom and Gilleland developed the Program and there is no language specifically referencing a transfer by Gilleland to Micom of any interest that he may have had in the Program, it is evident from both agreements that the parties understood that Micom was the sole owner of the Program,” the judge said. Further, the judge said, the 1994 agreement states that the license granted by Micom to MedTrak is exclusive in nature, “which shows that all parties believed that Micom alone owned the program because common sense and the law dictate that if two persons have an undivided right to use or license a work, both persons must act to convey an exclusive license.” SIGNATURE REQUIREMENT And, the judge said, Gilleland’s signature on the 1994 agreements fulfills the requirement of a signature by the owner of the copyright to effectuate a transfer. “Although Gilleland did not sign the 1994 License Agreement in his individual capacity, he nonetheless was aware that representations were being made in that agreement that Micom was the owner of the Program and had the right and authority to grant an exclusive license in the Program to MedTrak,” the judge said. “If, as an officer and fiduciary of MedTrak, Gilleland believed that he was a co-owner of the Program, he was obligated to disclose that fact to ensure that MedTrak was getting that for which it bargained — an exclusive license. His failure to do so tends to refute his claim of ownership.” Gilleland is represented by Richard A. Gaffin of Miller, Canfield, Paddock & Stone in Grand Rapids, Mich. Schanhals, Carlson and Micom are represented by David L. Bossenbroek of Britton & Bossenbroek in Muskegon, Mich. MedTrak is represented by Mary Anna Owens of Flickinger & Plachta in Grand Rapids. �; Copyright 2001 Mealey Publications, Inc.

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