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.