0The Problem of Grey Market Goods: Practical Suggestions for Protecting Your Brand

Many trademark owners increasingly find themselves faced with the unenviable position of needing to take action against their own marks, and specifically trying to defeat the sale of grey market goods.  Historically, these actions focused on curbing the sale of goods meant for distribution and sale abroad, which were imported into the United States without the U.S. trademark owner’s consent.  However, the paradigm now includes products manufactured for sale in the United States that have been diverted from the brand owner’s authorized channels of distribution.  Fortunately, courts appear to recognize the challenges trademark owners face when confronting the sale of grey market goods.  To this end, a recent decision by the U.S. Court of Appeals for the Second Circuit is both encouraging and instructive for brand owners.

In Zino Davidoff S.A. v. CVS Corp., 571 F.3d 238 (2d. Cir. 2009), the Second Circuit considered whether the unauthorized removal of a unique production code from an otherwise authentic product could justify a finding of trademark infringement.  The court’s decision, which affirms the lower court’s preliminary injunction and enjoins CVS from selling such products, articulates many of the concerns expressed by trademark owners.  In recognizing how grey market goods frustrate the efforts of brand owners to protect the quality of their brands, the decision provides an insight into how brand owners may successfully combat grey market competition.

Zino Davidoff S.A. v. CVS Corp.

Zino Davidoff (“Davidoff”) markets and sells, among other items, a line of cologne and fragrances under the mark COOL WATER.  As part of a quality control program, Davidoff created and placed on each unit of its COOL WATER products a unique production code (“UPC”).  The UPC provides relevant information about that particular unit, such as the time and place of production, and the ingredients used. 

Davidoff limited sales of its COOL WATER products to luxury retailers, and had declined to sell its products to CVS.  Nonetheless, CVS obtained and sold Davidoff’s COOL WATER fragrances.  After first demanding that CVS cease any sale of the COOL WATER products, Davidoff sued CVS alleging trademark infringement, unfair competition and trademark dilution under the Lanham Act. 

Through court-ordered investigation, and armed with its UPC-placement practice, Davidoff was able to determine that CVS was selling both grey market and counterfeit goods.  In fact, the grey market goods had the UPCs removed, either by (i) cutting away the UPC from the packaging, (ii) using chemicals to wipe away the UPC or (iii) grinding away the UPC from the bottom of the fragrance bottle. 

CVS voluntarily agreed to cease selling the counterfeit products, but refused to stop selling the grey market products.  Davidoff then sought a preliminary injunction forbidding CVS from selling the grey market goods.  The lower court granted the motion and CVS appealed.

The Second Circuit’s Analysis

In its appeal, CVS argued that the grey market goods were genuine Davidoff goods sold in their original packaging with the Davidoff trademarks clearly visible and unaltered.  As such, CVS maintained, there could be no trademark infringement because the mere removal of the UPCs did not negate the authenticity of the goods or the marks associated with those goods.   

The Second Circuit disagreed.  Recognizing that the Lanham Act does not generally impose liability on the sale of genuine goods bearing a trademark because such a sale would not cause confusion, the court nonetheless explained that goods are not genuine if they do not conform to the trademark holder’s quality control standards.  Thus, in the court’s view, the issue was not whether the grey market goods were genuine Davidoff goods, per se.  Rather, the court explained, the focus was on whether the removal of the UPCs interfered unlawfully with Davidoff’s trademark rights and its ability to exert quality control.  In the Second Circuit’s view, therefore, a trademark owner’s ability to control quality is paramount.

Davidoff explained that the UPCs helped Davidoff to detect and prevent counterfeit and defective products, as well as to effectuate any necessary recalls.  Citing this policy, the court explained that “[a] trademark holder is entitled to an injunction against one who would subvert its quality control measures upon a showing that (i) the asserted quality control procedures are established, legitimate, substantial and nonpretextual; (ii) it abides by these procedures, and (iii) sales of products that fail to conform to these procedures will diminish the value of the mark.” The court concluded that Davidoff satisfied this burden and that the removal of the UPCs exposed Davidoff to the risk of damage to the reputation of its COOL WATER mark.

In addition to recognizing Davidoff’s right to control the quality of its product, the court also concluded that the removal of the UPCs materially altered the product sold under the mark.  Explaining that cutting or burning away the UPCs detracted from the value of Davidoff’s otherwise luxury product, the court articulated another basis to grant an injunction against CVS: CVS was selling COOL WATER products that were materially different from Davidoff’s genuine trademarked product. 

The court explained when determining what constitutes a “material” difference between grey market goods and genuine trademarked product, it requires “no more than a slight difference which consumers would likely deem relevant when considering a purchase of the product.”  Thus damage to the appearance of the product – and the resultant material differences between the altered product and the genuine trademarked product – further frustrated CVS’s attempts to overcome the injunction.

Next Steps for Trademark Owners

Grey market goods and the problems created by the unauthorized sale of these goods are not limited to luxury items.  On the contrary, products as diverse as children’s dolls and energy drinks have been the subject of grey market disputes. (See, e.g. Original Appalachian Artworks Inc. v. Granada Electronics, 816 F.2d 68 (2nd Cir. 1987) (dolls); Red Bull GmbH v. Lamont Distributors, Inc. 09-cv-02602 (E.D.N.Y. June 2009) (energy drinks); Societe des Produits Nestle, S.A. v. Casa Helvetica, Inc., 982 F.2d 633 (1st Cir. 1992) (chocolates); Davidoff & CIE, S.A. v. PLD Int’l Corp., 263 F.3d 1297 (11th Cir. 2001) (fragrance).  And while trademark owners cannot insulate themselves entirely from the risks posed by the grey market, there are certain steps every trademark owner should take to protect itself against the dangers of the grey market. 

For example, in Davidoff, the Second Circuit emphasized the role the UPCs played in the brand owner’s anti-counterfeiting program.  The court repeatedly explained that the only relevant question regarding the UPCs was whether they were a bona fide control device upon which the brand owner relied.  It is therefore important for brand owners to have decisive and articulated quality control measures in place.  This could include a formal written policy for inspection and handling of a product, or a unique production code affixed to each product.  A quality control program – even for those products meant for sale in the United States through authorized distributors – should be comprehensive and detailed.

It is important to not only have these measures in place, but to actually utilize the procedures to monitor the quality of the products.  Davidoff suggests that courts will not entertain a quality control program that is neither established nor enforced. 

Maintaining quality control standards is one way to combat grey market goods, whether those goods are products meant for sale abroad or products meant for sale in the United States through authorized distributors.  It would also be helpful for brand owners to differentiate those products meant for sale in the United States from products which are meant for distribution and sale outside of the Unites States.  This may be accomplished by providing instructions, ingredient lists or any warranty information in a particular language targeted to a particular jurisdiction.  And while the threshold for establishing “materiality” in the context of grey market goods may be relatively low, any differences in packaging should be as conspicuous as possible.

For example, relying on such differences in packaging to identify grey market goods, brand owners Red Bull GmbH and Red Bull North America have been aggressively attacking the sale of grey market RED BULL-brand products in the United States.  See, e.g., Consent Judgment, Red Bull GmbH et al. v. Kassir Import-Export Co. et al., 1:06-CV-2301-CC (N.D. Ga. 2009) (citing material differences between toll free contact numbers, missing deposit information and differences in spellings of words); Complaint for Damages and Injunctive Relief, Red Bull GmbH et al. v. Lamont Dist., Inc., et al., Inc. 09-cv-02602 (E.D.N.Y. June 19, 2009) (identifying omitted or different nutritional information, unfamiliar ingredients identified on the cans, a lack of required U.S. federal and state nutritional, deposit and volumetric information); and Complaint for Damages and Injunctive Relief, Red Bull GmbH et al. v. Central Supply, 09-cv-04034 (E.D.N.Y. September 18, 2009) (citing wording written in British English and a London address rather than a U.S. address in California). 

The Second Circuit’s decision is encouraging for brand owners and their efforts to maintain the integrity of their products and brands.  However, it remains incumbent upon brand owners to create and enforce programs which will protect this integrity.  Such programs should be written and communicated both to the public and to the brand owner’s authorized sellers.  Educating consumers and authorized distributors about the perils of the grey market is the brand owner’s best defense against the market’s detrimental effects.

0Options for Enforcement of ITC Exclusion Orders

If the U.S. International Trade Commission (“ITC”) finds a violation of Section 337, it typically issues an exclusion order against importation of the offending articles into the United States and, if there are domestic respondents with significant inventories, cease-and-desist orders precluding them from trafficking in the offending articles.  While this marks the end of the ITC investigation, it is not the end of the process of excluding the articles from commerce in the United States.  This article explains the steps that should be taken, and options available, after an ITC remedy has issued, whether your client is the complainant that has won the remedy or the respondent against whom the remedy has been imposed. 

Taking Action upon Issuance of an ITC Exclusion Order

Upon issuance of an exclusion order, the ITC serves the order on the U.S. Bureau of Customs and Border Protection (“Customs”), which is responsible for enforcement.  Customs now lies within the Department of Homeland Security, which has the primary duty of keeping terrorists and their weapons out of the United States.  Customs does not receive assistance from the ITC in determining how to enforce an exclusion order, and the order itself will typically state only that articles infringing certain claims of particular patents are to be excluded.  Given the lack of particularity provided by the exclusion order and limited resources available for enforcement, Customs receives input from the private parties regarding how to enforce the order.

Customs allows the parties in the ITC investigation affected by the exclusion order to present their views on how the order should be enforced in individual, ex parte meetings.  The parties usually meet for a few hours with Customs officials responsible for drafting an advisory to customs agents, who will enforce the order at the border.  These meetings are very important because they typically are the only opportunity for each party to explain its viewpoint to Customs as to how the exclusion order should be enforced.

The complainant should contact Customs shortly after issuance of the exclusion order to schedule a meeting promptly, since there will be no enforcement until the advisory issues.  The complainant should provide Customs with as much information as possible to facilitate enforcement, including descriptions of the articles subject to the order (and how to distinguish them from articles not subject to the order), their harmonized tariff codes, their ports of entry, methods of shipment, and the identities of the manufacturers, importers and U.S. customers.  Accordingly, it is important for the complainant to have obtained sufficient information during discovery in the ITC investigation to provide useful information to Customs.

Similarly, the respondent should contact Customs to schedule a meeting, and should be prepared to explain how enforcement should be limited.  The respondent should differentiate between its products potentially subject to the order and those falling outside the order to try to avoid overbroad enforcement.  To the extent the respondent has re-designed products to avoid the order, the respondent should be prepared to explain this to Customs and inform Customs how to identify the re-designed products.  The respondent should bear in mind that claims of non-infringing re-designs are common, and that the complainant also will be meeting with Customs to present its view of the order, so the respondent will need to make a highly persuasive argument that the re-design avoids the order.  In appropriate cases, the respondent may choose to provide a technical protocol that Customs can use to determine whether or not articles fall within the order, since Customs has technical facilities available.  Even if such information does not result in a favorable advisory, this may make Customs more receptive to accepting subsequent certifications that certain articles do not fall within the exclusion order, assuming the order includes a provision permitting certification.

After the meetings, Customs will issue its advisory (which is not provided to the private parties) and enforcement will begin.  A complainant can continue to assist Customs by monitoring the marketplace and providing information to Customs that will assist with enforcement.  A complainant can also monitor an import database to try to identify on its own shipments potentially subject to exclusion, and convey this information back to Customs. 

Options for Challenging Exclusion Orders and Pursuing Their Enforcement

To the extent that complainants or respondents are dissatisfied with Customs’ enforcement, they have a few options through which to raise their arguments.  However, only parties whose products may be excluded from entry by Customs have formal options for addressing enforcement directly at Customs.  Prior to importation of articles potentially subject to exclusion, a party may request an advisory ruling by submitting a letter to Customs explaining why certain articles should not be excluded.  See 19 C.F.R. § 177. If a party believes that its articles have been improperly excluded from entry, it can protest Customs’ decision.  A party dissatisfied with either Customs’ advisory ruling or decision in a protest can file suit against Customs in the Court of International Trade.  However, that court recently confirmed that complainants generally lack standing to challenge Customs’ decisions.  See Funai Elec. Co. v. United States, Slip Op. 09 – 109 (Ct. Int’l Trade Oct. 6, 2009).

A complainant dissatisfied with Customs’ enforcement can pursue enforcement proceedings in the ITC.  Enforcement proceedings can be either informal or formal.  See 19 C.F.R. § 210.75.  To start informal enforcement proceedings, a complainant can request that the ITC, through the Office of Unfair Import Investigations, investigate possible violations.  Alternatively, or if informal enforcement proceedings do not resolve the matter, a complainant can file a formal enforcement proceeding.  The formal enforcement proceeding will be assigned to an Administrative Law Judge and will follow the normal course of an ITC investigation, except that the schedule is typically somewhat condensed, particularly if emergency relief is sought.  The ITC can rule that products were improperly imported even if Customs decided that they fell outside the exclusion order, since the ITC is the final arbiter of the scope of its order.  In addition, the ITC can impose substantial civil penalties for violations of the order.  Enforcement proceedings can also be used to address possible violations of cease-and-desist orders and consent orders.  The ITC recently assessed over $20 million in civil penalties against violators of cease-and-desist orders and a consent order.  See In the Matter of Certain Ink Cartridges and Components Thereof, Inv. No. 337-TA-565 (U.S.I.T.C. Sept. 24, 2009).

In addition, either a complainant or a respondent may seek modification of the exclusion order due to changes in conditions subsequent to issuance of the order.  See 19 C.F.R. § 210.76.  A party may also seek rescission of the order, e.g., due to settlement. 

Other Considerations for Complainants and Respondents

In addition to pursuing enforcement of an ITC exclusion order, a complainant can maximize the benefit of the order by “marketing” it to known purchasers and potential purchasers of the articles subject to exclusion.  For example, a complainant should consider sending letters to such purchasers to inform them of the order and the possibility of being found a willful infringer in subsequent district court litigation.  In many cases, the recipients of the letter may decide that attempting to purchase the articles subject to exclusion is not worth the risk of interruption of their supply and potential liability.  Complainants may also want to provide their sales force with scripts addressing the exclusion order, so that they may educate the marketplace while trying to ensure that sales persons do not inaccurately characterize the order.  Advertisements in trade journals and at trade shows may also be appropriate in some circumstances.

Conversely, a respondent should anticipate the complainant’s marketing campaign and have a strategy in place for preserving its business before the ITC renders a final determination.  To the extent the exclusion order only affects some of a respondent’s products, the respondent will want to make sure that customers and potential customers know which products are unaffected by the order.  If warranted, a respondent should also consider seeking a stay of enforcement pending appeal and/or an expedited briefing schedule on appeal.


The ability to obtain an exclusion order against infringing products at the ITC remains an important remedy for intellectual property owners.  However, obtaining an exclusion order is not the end of the enforcement process.  For a complainant, it is essential to work with Customs to help locate and identify the articles subject to exclusion, and to educate the marketplace about the order.  For respondents subject to exclusion orders, it is likewise important to explain how enforcement of an exclusion order should be limited, and to distinguish re-designed products that respondents believe should not be subject to exclusion.

*    *    *    *    *

For further information on this topic, please attend ACI’s 2nd Annual Expert Forum on ITC Litigation & Enforcement at The Omni Berkshire Place, New York on February 24-26, 2010. Information can be found here.

0The Importance of Proper Employee Assignment of Inventions Agreements

On September 30, 2009, the U.S. Court of Appeals for the Federal Circuit decided in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., 583 F.3d 832 (Fed. Cir. 2009), that the plaintiff (“Stanford”) lacked standing to assert an infringement cause of action against the defendant (“Roche”) as Stanford did not possess the necessary interest in the patents-in-suit.  Despite the fact that the inventor had signed an agreement purporting to assign his rights to Stanford, the inventor had in fact only agreed to assign his rights at some indeterminate time in the future.

Factual Background

The patents-in-suit claim methods which use the polymerase chain reaction (“PCR”) technique to measure nucleic acid from HIV and correlate such measurements to the therapeutic effectiveness of certain drugs.  The relevant technology was developed as a result of a collaboration between Stanford researchers and Cetus, a company specializing in PRC techniques.

One of the named inventors, Mark Holodniy, was a Stanford researcher who signed a “Copyright and Patent Agreement” (“CPA”) with Stanford in 1988, which provided that Holodniy “agree[s] to assign or confirm in writing to Stanford [Holodniy’s rights in his inventions].”  Holodniy began working with Cetus in 1989, and he signed a “Visitor’s Confidentiality Agreement” (“VCA”) with Cetus.  This agreement provided that Holodniy “will assign and do[es] hereby assign to CETUS, [Holodniy’s] right, title and interest” in those inventions that Holodniy may devise “as a consequence of” Holodniy’s work at Cetus.  Holodniy concluded his work with Cetus and began working with other researchers at Stanford in testing the new PCR assay that Holodniy had developed while at Cetus.  Their results eventually led to the filing by Stanford in 1992 of the patent application to which the patents-in-suit claim priority.  Meanwhile, Roche purchased Cetus’s PCR business in 1991.

In 2000, a Stanford licensing associate gave a presentation at Roche where Stanford asserted its ownership of the invention and offered to license its rights in the invention to Roche.  The parties negotiated terms for such a license over the next several years, but never finalized an agreement.  In 2005, Stanford filed an infringement action against Roche in the Northern District of California.

The District Court Holding

Roche asserted before the district court that the patents-in-suit were invalid, and that Roche was the actual owner of these patents.  Roche’s ownership assertion took three forms: (i) a declaratory judgment counterclaim; (ii) an affirmative defense to Stanford’s infringement claim; and (iii) a challenge to Stanford’s standing to sue for infringement of the patents-in-suit.

The district court only considered Roche’s declaratory judgment counterclaim, and found this claim to be barred by California statutes of limitation, laches and the Bayh-Dole Act.  The district court did not consider Roche’s ownership assertion as an affirmative defense or challenge to standing, stating that such assertions “are properly viewed as counterclaims subject to the applicable statute of limitations.”  However, the district court also found the patents to be invalid as all the claims were obvious.  The parties cross-appealed.

The Federal Circuit Decision

On appeal, the Federal Circuit held that the district court erred in failing to consider Roche’s affirmative defense and challenge to Stanford’s standing.  While the Federal Circuit agreed with the district court’s finding that Roche’s declaratory judgment counterclaim was foreclosed by the statutes of limitation, the court reasoned that affirmative defenses and challenges to standing are not subject to statutes of limitation, laches or equitable estoppel arguments.

The court then turned to the question of which party had proper title to the patents-in-suit.  Holodniy’s CPA with Stanford purported to assign Holodniy’s interest in his inventions to Stanford, but the court found the precise language of the CPA to be of critical importance.  Specifically, the court noted that the CPA stated that Holodniy “agree[s] to assign” his rights to Stanford.  The court followed the precedent it had established in prior cases holding that such language operates as an “agreement to assign” in the future, and does not suffice on its own to effect an actual assignment. Conversely, Holodniy’s VCA with Cetus provided that Holodniy “do[es] hereby assign” his rights in his inventions to Cetus.  In contrast to the language in the CPA, the VCA did operate as a present assignment of Holodniy’s rights – even his future rights – in his inventions to Cetus, notwithstanding Holodniy’s prior “agreement” to assign such rights to Stanford.  Therefore, legal title in Holodniy’s inventions accrued to Cetus immediately upon Holodniy’s conception of the inventions, after which point Holodniy had no interest left to assign to Stanford.

All co-owners of a patent are required to join as plaintiffs in an action alleging infringement of such patent.  Given that Stanford never possessed Holodniy’s interest in the patents-in-suit, according to the court, Stanford lacked standing to bring this infringement action against Roche.  The Federal Circuit remanded to the district court with instruction that Stanford’s claim should be dismissed for lack of standing.

Petition for Rehearing

On October 30, Stanford filed a petition for panel rehearing and rehearing en banc, specifically asserting that regardless of whether Holodniy entered into an assignment agreement with another entity, the Bayh-Dole Act provides Stanford with a right to title of the inventions.  According to Stanford, under the Bayh-Dole Act, Holodniy’s rights (and therefore, Roche’s rights) are subject to Stanford’s decision to retain title to the inventions.  Several research centers, including the Association of American Medical Colleges, the Regents of the University of California and others, filed an amicus curiae brief supporting Stanford.

Roche’s response, filed November 23, argued that the date of invention was later than the date on which Holodniy assigned his rights to Cetus.  As such, Stanford’s election of rights under the Bayh-Dole Act could not “retroactively void” Holodniy’s prior assignment to Cetus.  The Federal Circuit denied the petition on December 22, 2009.

Practice Tips

This case once again highlights the critical importance of proper assignment language in contracts which purport to transfer an inventor’s rights in his or her inventions to the entity with whom the inventor is employed or otherwise engaged.  A contract which merely provides that the inventor “agrees to assign” his rights vests the assignee with, at most, equitable title in the inventions.  A subsequent contract in which the inventor “hereby assigns” those same rights to a separate assignee will defeat the earlier assignment.

A related point is that companies should be aware that their employees or consultants may sign conflicting assignment contracts.  Employers should be diligent in monitoring their employee’s activities whenever an employee is engaged or collaborating with a third party, and should educate its employees in advance against entering into any agreements with such a third party without first discussing the matter with the employer.

A final practice point concerns the importance of bringing a timely declaratory judgment action in the event there is a dispute as to ownership.  Companies should familiarize themselves with the applicable statutes of limitation, as they will vary from state to state.  This case also provides guidance as to when a declaratory judgment cause of action begins to accrue.  Roche argued that its cause of action could not begin to accrue until a patent has actually issued.  The Federal Circuit, however, reasoned that a declaratory judgment cause of action begins to accrue when the company that wishes to assert ownership is put on notice that such ownership is in dispute.  In this case, Stanford asserted its ownership of the subject patents in a presentation given to Roche, and so Roche’s cause of action regarding its ownership accrued at this point in time.  If a company learns that a third party is asserting ownership over the company’s invention, whether or not such third party has received an issued patent covering such invention or has otherwise taken any formal legal action regarding such invention, the company should be aware that the clock has begun ticking on the company’s right to bring a declaratory judgment action.

0In re Bose Corp: Revisiting Fraud at the USPTO

Following the Trademark Trial and Appeal Board’s decision in Medinol Ltd. v Neuro Vasx Inc., 67 USPQ2d 1205 (TTAB 2003), the U.S. Patent and Trademark Office (“USPTO”) had embarked on a forceful path to encourage candor in the prosecution and enforcement of trademarks in the United States.  As a result, the USPTO was cancelling registrations at an increasingly aggressive rate, claiming that the registrations were obtained by fraud.  To the delight of many trademark owners, the U.S. Court of Appeals for the Federal Circuit recently issued a decision which may slow the rate of cancellations, and may give parties pause before asserting a claim of fraud against a third-party applicant or registration. 

By its decision in In re Bose Corporation, 91 USPQ2d 1938 (Fed. Cir. 2009), the Federal Circuit has set forth a new standard by which to weigh a fraud claim, explaining that a trademark is obtained fraudulently only if the applicant or registrant knowingly makes a false material representation with the intent to deceive the USPTO. 

The Importance of Medinol Ltd v. Neuro Vasx Inc.

In Medinol, the Trademark Trial and Appeal Board (“TTAB”) explicitly directed that applicants and registrants would be held to a higher standard than that of simple knowledge, with the inquiry of an alleged fraud resting on whether the applicant or registrant knew or should have known the facts attested to in the declaration.  The TTAB also imposed on applicants and registrants a duty not only of candor with the USPTO, but also of investigation.  Ignorance would no longer be a defense against a fraud claim.  Finally, the TTAB made it clear that it would not tolerate a laissez faire attitude towards the USPTO and the documents submitted thereto – no matter how pro forma those documents seemed.

Collectively, these actions drastically broadened the fraud doctrine.  However, the Federal Circuit’s decision in In re Bose has already slowed this trend. 

The Federal Circuit’s Decision in In re Bose Corp.

In Bose, Hexawave moved to cancel Bose’s registration for the mark WAVE, claiming the same was procured by fraud on the USPTO.  Specifically, Hexawave argued, Bose committed fraud when it claimed continued use of the mark WAVE on all of the goods identified in its registration for the mark WAVE, including audio tape recorders and players. 

In fact, Bose had stopped manufacturing and selling audio tape recorders and players.  According to Bose’s in-house counsel, while Bose no longer manufactured these goods, Bose continued to repair the audio tape recorders and players bearing the WAVE mark.  In counsel’s mind, these repairs – and the shipment of the repaired goods to Bose’s customers – constituted continued use of the WAVE mark in connection with these goods.

The TTAB disagreed with this position, and held that the repair and shipment of such goods did not constitute use sufficient to maintain a registration for the same.  It also concluded that counsel’s belief that such use was sufficient was not reasonable, and issued an order to cancel Bose’s WAVE registration in its entirety.  Bose appealed the decision.

In its decision on appeal, the Federal Circuit concluded that the TTAB erroneously lowered the fraud standard by equating “should have known” with a subjective intent.  Rather, the Federal Circuit explained, any false or material representation must be accompanied by proof of a subjective intent to deceive, no matter how difficult such intent may be to prove.

Turning to the facts of the Bose case, the court concluded that Bose’s in-house counsel, who signed the declaration in question, knew that Bose had stopped manufacturing and selling the audio tape recorders and players in question.  In considering counsel’s explanation that he believed repairing the damaged, previously sold WAVE audio tape recorders and players met the “use in commerce” requirement, the court explained:

We do not need to resolve the issue of the reasonableness as it is not part of the analysis.  There is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a wilful intent to deceive…. Unless the challenger can point to evidence to support an inference of deceptive intent, it has failed to satisfy the clear and convincing evidence standard required to establish a fraud claim.

In re Bose Corporation, 91 USPQ2d 1938, 1942 (Fed. Cir. 2009).

As a result, the court vacated the TTAB’s order cancelling the WAVE registration, and remanded the case back to the TTAB to delete from the registration those goods which were not currently in use in commerce, namely the audio tape recorders and players.

After In re Bose

Notwithstanding the more stringent standard articulated by Bose, any claims made to the USPTO may be challenged by a third party and may result in a timely and costly defense.  Such claims may be scrutinized for accuracy and, more importantly, intent.   

For example, in a September 2009 interlocutory order in Societe Cooperative Vigneronne des Grandes Caves Richon-Lezion and Zicron-Jacob Ltd. V. Albrecht-Piazza LLC (Opposition No. 91190040-2009), the applicant was instructed to amend its counterclaim alleging fraud to accurately reflect this new standard.  Citing Bose, the ruling noted the insufficiency of the applicant’s original counterclaim in which it alleged that the opposer filed a registration renewal but, based on information and belief, the opposer was no longer selling some of the goods listed in the registration.  The ruling concluded that pleadings of fraud made on “information and belief” where there is no separate indication of actual knowledge of the facts supporting the claim are insufficient. (See also, E.&J. Gallo Winery v. Quala S.A., Opposition No. 91186763 (December 9, 2009), wherein the TTAB denied the opposer’s motion to amend its Notice of Opposition to include a claim of fraud because opposer did not include any specific allegations of an intent to deceive.)

The TTAB elaborated on this position in its October 2009 decision in Enbridge, Inc. v. Excelerate Energy Limited Partnership (Opposition 91170364).  Denying the opposer’s motion for summary judgment due to the applicant’s fraud on the USPTO, the TTAB explained that a party alleging fraud must point to “clear and convincing evidence that supports drawing an inference of deceptive intent.”  It noted the applicant’s explanation of “an inadvertent, honest mistake” when it claimed use of its mark on goods for which it had never used the mark, and concluded that the opposer failed to demonstrate that there was no genuine issue of material fact as to whether the applicant had the requisite intent to deceive the USPTO.

It is clear from Bose and the few decisions which have followed that trademark owners should carefully consider each and every statement made in any application or declaration filed with the USPTO, and in any pleading or motion filed with the TTAB.  While the new trend suggests that the USPTO may be forgiving of claimed inadvertent, innocent mistakes by applicants and registrants, it will be less so with trademark owners alleging fraud against third parties.  As such, trademark applicants and registrants must contemplate what the term “use” really means – and carefully consider the risks of claiming or challenging any such claims of use. 

0Publications and Conferences


“Scheduled Maintenance”
Metropolitan Corporate Counsel
December 1, 2009
Author:  Daniel Wilson

“Overview Of Monday’s Oral Arguments In Bilski
IP Law360
November 12, 2009
Authors: Andrew J. Baca, Eleanor M. Hynes


Navigating the Digital Ocean: Riding the Waves of Change - 11th Annual Privacy and Data Security Conference 
February 9-10, 2010
Victoria, British Columbia

This annual conference, organized by Reboot Communications, draws an international audience of delegates with an interest in cutting edge policy, programs, research and technologies aimed at the protection of privacy and security. Jackie Klosek is on the “Cloud Computing” panel.

AIPLA Women in IP Cross-Country Networking Dinner
February 11, 2010
New York, NY

The AIPLA Women in IP Committee has organized a series of networking dinners to be held simultaneously in 27 cities across the United States. Before the conclusion of each of the dinners, all cities will be linked by a teleconference for a welcome by the president of the AIPLA, Alan Kasper, and the chairs of the Women in IP Law Committee, Carey Jordan and Alyson Barker.  Goodwin Procter will be hosting the dinner in New York City. 

ABA’s 11th Annual Emerging Issues in Healthcare
February 17-19, 2010
Phoenix, AZ

This ABA conference brings together Health Law Section members, leadership and interest groups to exchange ideas and network with colleagues on the most critical issues in the healthcare industry. Jackie Klosek will speak on employer-sponsored wellness programs and privacy issues.

ACI’s International Trade Commission Litigation & Enforcement
February 24-25, 2010
New York, NY

Litigation before the International Trade Commission is rapidly increasing and becoming a dominant topic of conversation for the intellectual property bar as IP owners learn that the ITC is an attractive forum for patent infringement litigation. Charles Sanders will serve as a panelist.

Open Source Business Conference
March 17-18, 2010
San Francisco, CA

Goodwin Procter will be sponsoring the legal track during this two-day conference, which will discuss open source and open standards issues.  

PLI’s Advanced Licensing Agreements 2010
March 25-26, 2010
New York, NY

This program is designed to address some of the more complex issues that arise in drafting and negotiating IP licenses. The program will feature updates on current legal developments, best practices, negotiating frequently contested issues, identifying and avoiding common pitfalls, keeping the relationship on track, litigation planning and avoidance, and ethics.  Ira Levy is the Chair of this conference and Steve Charkoudian will be speaking. 

NYIPLA’s 88th Annual Dinner in Honor of the Federal Judiciary
March 26, 2010
New York, NY

Goodwin Procter will host clients and guests in our hospitality suite in the Waldorf Astoria’s Peacock Alley both before and after this prestigious dinner.  Hon. Richard Linn, Circuit Judge for the United States Court of Appeals for the Federal Circuit, will be honored with the 8th Annual NYIPLA Outstanding Public Service Award, and the keynote address will be given by former New York State Governor Mario Cuomo.  Goodwin Procter partner Mark Abate is currently serving as president of the NYIPLA, and Ira Levy will be speaking during the CLE program, "Calculation of Damages in a Patent Case."

FRA’s Successfully Implementing Hitech Privacy & Security Regulations
April 15-16, 2010
Chicago, IL

This conference, hosted by FRA will provide information on implementing a thorough hitech compliance program. Jackie Klosek will speak on “Identifying and Implementing Breach Detection Strategies Within Your Organization” and “Changes in Contracts, Communication, Interaction and negotiations with Business Associate Agreements.”