Court: Court of Appeals for the Sixth Circuit; January 6, 2003; Federal Appellate Court
Douglas Carson, Richard Schanhals, and J.B. Gilleland are the sole shareholders of MedTrak Systems, Inc., which holds an exclusive license for the MedTrak Program, a software that tracks medical patient care. Micom Systems of Michigan, Inc., owned by Carson and Schanhals, is the licensor. In January 1994, Micom granted MedTrak Systems an exclusive license to use the MedTrak Program, stating that all intellectual property rights would remain with Micom. In 1997, a new agreement superseded the 1994 agreement, granting MedTrak an exclusive license to use and license the MedTrak Program, with Gilleland signing both as Vice President of MedTrak Systems and in his individual capacity.
On March 31, 2000, Gilleland filed a complaint against Carson and Schanhals, claiming co-ownership of the copyright to the MedTrak Program. Carson and Schanhals sought summary judgment on this claim, which the district court granted. Gilleland appealed, arguing that the court improperly applied the Copyright Act, misinterpreted the agreements, granted summary judgment based on ambiguous terms, and erroneously considered Schanhals’s affidavit. The appellate court affirmed the district court's judgment.
The factual background indicates that the parties initially collaborated to form MedTrak Systems, contributing equally to its funding and forming a business relationship that later deteriorated, leading to Gilleland's lawsuit for copyright ownership.
Defendants filed a motion for summary judgment asserting that Gilleland lacks ownership interest in the MedTrak Program, supported by the 1994 and 1997 agreements and an affidavit from Schanhals. The affidavit states that the 1997 agreement was signed to confirm Gilleland's lack of individual ownership interest, as required by U.S. Health Works, Inc., which partnered with MedTrak Systems. Gilleland opposed the motion but did not provide supporting evidence. On May 25, 2001, the district court granted the defendants’ motion for summary judgment on Gilleland’s federal claim and declined to exercise jurisdiction over his state-law claims, leading to an appeal.
The standard of review for the summary judgment grant is de novo, meaning the appellate court reassesses the case without deference to the lower court’s decision, confirming that summary judgment is appropriate when no genuine material fact issues exist, and the moving party is entitled to judgment as a matter of law. Key considerations include whether evidence is sufficiently disputed to necessitate a jury trial or is overwhelmingly favoring one party.
Regarding the application of the Copyright Act to the 1997 agreement, Section 201(d) allows copyright ownership to be transferred in whole or part, necessitating a written and signed instrument for validity per Section 204(a). The intent of the parties is paramount, and no specific language is required for a transfer to be valid. The 1997 agreement, which supersedes the 1994 agreement, is deemed ambiguous as it states that no rights are transferred to the MedTrak Program, yet Gilleland's co-grantor status implies he had an ownership interest at the time of signing.
Schanhals's affidavit clarifies the 1997 licensing agreement between the parties, specifically addressing Gilleland's prior ownership interest in the MedTrak Program's copyright. The affidavit indicates that U.S. Health-Works, Inc. required a new agreement, with Gilleland signing it individually to indicate he had no ownership interest. This clarification supports the validity of the 1997 agreement under the Copyright Act.
Gilleland argues that the district court improperly considered the affidavit, claiming it reopened the record post-closure and violated the parol evidence rule, containing hearsay and conclusory statements. He contends the affidavit was filed improperly with the defendants’ reply memorandum rather than with their initial motion. However, legal precedent allows such filings if they directly address the opposing party's memorandum and if that party has an opportunity to respond. In this case, Schanhals's affidavit responded to Gilleland's opposition, and Gilleland had ample time to reply before the court's ruling.
Gilleland did not challenge the affidavit's filing or seek to strike it before the appeal, showing no procedural error. Furthermore, the affidavit meets the requirements for admissibility under Rule 56(e) of the Federal Rules of Civil Procedure, and Schanhals had the requisite personal knowledge as MedTrak's President regarding the contract conditions with U.S. Health-Works.
The parol evidence rule does not prevent the use of the affidavit under Michigan law, as it allows consideration of documents that clarify the parties' actual intent in the presence of ambiguity. In Wonderland Shopping Ctr. Venture, Ltd. P’ship v. CDC Mortgage Capital, Inc., the court noted that extrinsic evidence can clarify ambiguities. The affidavit in question does not contain conclusory statements, as highlighted in Schanhals' affidavit. It was a requirement of U.S. HealthWorks, Inc. that a new licensing agreement be signed by all principals in conjunction with a contract with Medtrak Systems, Inc., and that Gilleland sign the agreement individually, affirming he had no ownership interest in the software. Additionally, the affidavit does not include hearsay, as the motivations of U.S. HealthWorks were presented not for their truth but to explain the rationale behind the 1997 agreement. The judgment of the district court is affirmed.
