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Licensing Law

Founders Beware: Retaining Ownership of IP

Departing the organization you helped found without an agreement as to ownership of intellectual property could mean leaving your property behind, according to a recent decision by the U.S. Court of Appeals for the Federal Circuit.

The Federal Circuit held in Lyons v. Am. College of Veterinary Sports Med. & Rehab. that an originator of a service mark may not own the mark upon her departure from the organization she helped found. Ultimately, ownership of a mark comes down to three factors:

  1. what was the parties’ objective intent or expectations regarding ownership of the mark;
  2. who does the public associate with the mark; and
  3. to whom does the public look to stand behind the quality of goods or services offered under the mark.

The dispute was over the ownership of service mark “The American College of Veterinary Sports Medicine & Rehabilitation” and took place between between Lyons, the originator of the mark, and The American College of Veterinary Sports Medicine & Rehabilitation (the College)—an organization that she helped create.

The decision follows an appeal by Lyons after the lower district court and the Trademark Trial and Appeal Board had decided in the College’s favor. Ultimately, her registration of the mark was cancelled and, despite being the founding member of the College and the originator of the mark, Lyons lost ownership of the mark.

No longer can we believe that the individual who discovers a name or thinks it up is its true owner. In fact the opposite is true. Founding members should be mindful of the factors the Federal Circuit considering in determining ownership of a mark—and especially of their actions at the time of founding the mark, forming a business entity, and departing from such entity.

Background

Lyons was an equine veterinarian with plans to form an accredited veterinary specialist organization (VSO) for treating athletic animals. Starting in 1999, Lyons approached five other veterinarians, forming a committee, with the idea of forming a VSO under the mark. In 2002, the committee began using the mark as the name of the intended VSO, and in 2004, it started drafting a letter of intent to gain accreditation from the American Veterinary Medical Association (AVMA) for their VSO.

While drafting the letter of intent, the Committee dismissed Lyons from the organization for reasons not relevant to the dispute. At the time, the parties did not discuss or conclusively determine the true owner of the mark.

After her dismissal, Lyons successfully registered the mark in the Supplemental Register based on her first use of the mark in a publication called The Equine Excellence Initiative back in 1995. Meanwhile, the committee completed their letter of intent and VSO petition for accreditation and submitted their first draft in November 2008. In Jun. 2011, the AVMA granted the College provisional recognition as a VSO and permitted it to administer certification tests, offer educational programs, and establish active residency programs at veterinary colleges. This is when the College sought to cancel Lyons’s registration of the mark on grounds of priority of use and likelihood of confusion.

Objective Intentions/Expectations Regarding Ownership

The Court found that the parties objectively believed and expected that the committee would inevitably form the VSO which would utilize the mark—not that Lyons would offer personal veterinary services under the mark.

Lyons never communicated to any other committee member her belief that she owned the mark, that she had made any prior use of the mark, or her objection to the committee naming the College after the mark.

Public Association with the Mark

Regarding the second element, the Court found that the public associated the mark with the College, rather than with Lyons, and looked to the College for services in connection with the mark.

By the time of Lyon’s appeal, the College already certified at least 115 vets, established 13 active residency programs, and conducted conferences and continuing education programs utilizing the mark. The College also published a well-subscribed and read journal for the industry, obtained corporate sponsorships from companies in the veterinary industry, and was recognized by the press for its status in the industry.

The Court found this track record to be sufficient evidence of the public’s association of the mark with the College.

Public Expectations About the Quality of the Mark

Lastly, the Court held that the public looked to the College to stand behind the quality of services associated with the mark. The College’s website offered the public veterinary services and information regarding all AVMA-recognized organizations and specialists. Additionally, the veterinarians certified by the College looked to it for their accreditation and re-education.

On the other hand, the Court noted that Lyons could not show that she obtained similar certifications, offered students educational services under the mark, or offered any certification programs.

In Conclusion

As noted above, originators of a mark must understand that when it comes to ownership, the relevant inquiry is who the public perceives as offering the product or service, not the actual identity of the creator.

Lastly, and ideally, to avoid these types of disputes, founders and their co-members are best advised to contract around the ownership of their marks and determine their true owners at the start of their business relationship.

Special thanks to our guest author.

Credit is given to Abraham Hamra for the writing of this story. Contact him at:

Abraham Hamra, Esq., Partner
2017 New York Metro Rising Star, Super Lawyers
Varacalli & Hamra, LLP
110 E. 59th St., #3200
New York, NY 10022
(646) 590-0571
ahamra@svhllp.com

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