Property, intangible

a blog about ownership of intellectual property rights and its licensing

Think of the Trademark License, Too

Two opinions issuing on the same day, one in Connecticut and one in Indiana, are parallel situations. In both cases, there was a contractual relationship that fell apart. The relationships had a trademark aspect to them, but the contracts never addressed the use or ownership of the trademarks directly, leaving the courts to sort it out in hindsight. This post will be on the Connecticut case and the next on the Indiana decision.

In Laboratory Corporation of America v. Schumann, Dr. G. Berry Schumann and his wife developed a certain kind of urinalysis test, the “Schumann urinalysis test,” in 1979. On January 1, 1993 Schumann was hired by Laboratory Corp. subsidiary Dianon Systems, Inc. In August or September of that year, Dianon began marketing the test under the trademark “Microcyte.” Dianon stated on its medical literature “Microcyte is a trademark of Dianon Systems, Inc.”

Shortly thereafter, on October 12, 1993, Dianon signed a “technical services agreement” with Dr. Schumann’s company, Schumann Cytology Laboratories, Inc. (“SCL”). SCL gave Dianon an exclusive license to the Schumann urinalysis test through December 31, 1998, after which Dianon would have a non-exclusive perpetual license.

Dr. Schumann worked for Dianon from 1993 to 2005. Dianaon terminated Dr. Schumann’s employment in 2005, shortly after Dr. Schumann filed an application to register Microcyte in SCL’s name. Lab. Corp. and Dianon opposed the application and filed the lawsuit, seeking a declatory judgment that it was the owner of the Microcyte mark and that Dr. Schumann was infringing the mark. Dr. Schumann counterclaimed on trademark ownership, and also brought a claim for copyright infringement of training materials. The PTO suspended the prosecution of the SCL application.

The fairly well-reasoned decision awarded ownership of the trademark to Dianon. It found that Dianon was the first to use the mark Microcyte and therefore awarded priority to Dianon. I don’t believe that “priority” is the right way to characterize the point, since the dispute is about only one trademark and, a priori, there can only be one priority date. Nevertheless the point is well-taken; Dr. Schumann commercialized the test before his relationship with Dianon without using the name “Microcyte.” He claims that he was the first to think of the name “Microcyte,” but it was Dianon who commercialized the test under the name. Dr. Schumann also for years reviewed patient test results that stated “Microcyte is a trademark of Dianon Sytems, Inc.” and never objected.

Schumann argued that the agreement between the parties was a trademark license to Dianon. The court found, however, that the agreement, when considered as a whole, was not a trademark license but merely a license for the test itself. It was labeled “technical services agreement” and described the scope of the license as the testing services. Although the agreement referred to “Microcyte,” the agreement did not use the word “trademark” in it or assign trademark-related duties. It did not consistently refer to the test as “Microcyte,” but also referred to simply “testing service” or “testing service application.”

In light of the silence of the agreement and the absence of Schumann’s own earlier use of Microcyte, the court granted summary judgment in Dianon’s favor on the trademark ownership count. It grant Schumann summary judgment on the infringement count, though, since Schumann was not actually using the Microcyte mark but had only tried to register it. The copyright claims were decided in Dianon’s favor and the court declined to exercise supplemental jurisdiction over the state law claims, dismissing them without prejudice for refiling in state court.

For discussion: Dianon did not allege fraud by SCL in its Notice of Opposition, only likelihood of confusion. Should it have?

Laboratory Corporation of America v. Schumann, No. 3:06-cv-01566 (VLB), 2009 WL 275859 (D. Conn. Feb. 4, 2009).

P.S. Hat tip to my former colleagues at Cantor Colburn on the case.

© 2009 Pamela Chestek

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