Change is here: finding fraud at the TTAB

Intellectual Property and Technology News

For several years, the Trademark Trial and Appeal Board (TTAB) has been grappling with how to treat false statements made to the United States Patent and Trademark Office (USPTO) in trademark applications and registrations. Now, a recent decision from the Court of Appeals for the Federal Circuit (CAFC) has made the answer to that question much clearer. See In re Bose Corp., No. 2008-1448, 2009 U.S. App. LEXIS 19658 (Fed. Cir. Aug. 31, 2009).

 

The traditional approach to fraud requires proof of an intent to deceive. In 2003, however, the TTAB deviated from this standard, in effect imposing a negligence standard by presuming fraud when an applicant or registrant makes a false, material representation of fact in its application or registration and knew or should have known the information was false. Medinol Ltd. v. Neuro Vasx Inc., 67 U.S.P.Q. 2d 1205 (T.T.A.B. 2003).  In Medinol, the TTAB drew a clear, yet severe, line when it canceled a trademark registration because the registrant had incorrectly declared a mark was in use. The TTAB refused to allow the registrant to amend the registration to exclude the goods at issue, choosing instead to void the entire registration as fraudulent. Noticeably absent from the Medinol doctrine is any requirement of an intent to deceive. Since Medinol, the TTAB frequently applied this negligence standard to cancel registrations for fraud.

 

Change Is here

 

The CAFC has now reinvigorated the intent requirement and voided Medinol to the extent the TTAB had “equat[ed] ‘should have known’ of the falsity with a subjective intent.” In re Bose Corp., 2009 U.S. App. LEXIS 19658, at *8-9. The TTAB had found fraud in a renewal for audio tape recorders and players where the products were being serviced but no longer manufactured, reasoning that this form of use did not qualify as use in commerce. Bose Corp. v. Hexawave, Inc., 88 U.S.P.Q. 2d 1332 (T.T.A.B. 2007). On appeal, Bose argued that its repair of audio tape recorders constituted use in commerce and that Hexawave had offered no evidence of fraud.

 

The CAFC heard oral arguments in May and handed down its decision on August 31, 2009, reversing and remanding the TTAB. In its opinion, the Court found that Bose did not commit fraud in renewing its mark and that the TTAB had erred in cancelling the mark in its entirety. The Court held that “a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the PTO.” In re Bose Corp., 2009 U.S. App. LEXIS 19658, at *10. Fraud must be proven “to the hilt” by clear and convincing evidence of intent. To rectify the registration, the Court suggests striking the offending goods from the registration.

 

Prior to In re Bose Corp., recent cases at the TTAB had signaled change was coming for the Medinol doctrine. Although the TTAB refused to allow amendment to the registration in Medinol, in Grand Canyon West Ranch LLC v. Hualapai Tribe, 78 U.S.P.Q. 2d 1696 (T.T.A.B. 2006), denying reconsideration of fraud claim, 88 U.S.P.Q. 2d 1501 (T.T.A.B. 2008), the TTAB held that where fraud has not been alleged, an incorrect allegation of use about some, but not all, of the goods identified in an application will not cause an entire application to be canceled. Instead, the TTAB ruled that an applicant will be permitted to amend its application to delete the goods on which the mark has not been used. Absent a fraud claim, the TTAB held that an application is not void in its entirety so long as the mark was used on some of the goods or services as of the filing date. This decision is now on appeal at the CAFC.

 

In January of this year, the TTAB addressed for the first time the issue of fraud in a multiclass registration in G&W Labs., Inc. v. G W Pharma Ltd., 89 U.S.P.Q. 2d 1571 (T.T.A.B. 2009). In doing so, it significantly narrowed the applicability of the Medinol doctrine. In G&W Labs, the TTAB held that a finding of fraud relative to one class in a multi-class application does not require cancellation of the registration in its entirety. Instead, the proper remedy is to strike the affected class or classes.

 

Then, in May, in response to public requests for more guidance on the issue of fraud, the TTAB reclassified a non-precedential opinion, Zanella Ltd. v. Nordstrom, Inc., 90 U.S.P.Q. 2d 1758 (T.T.A.B. 2008), as precedential. There, the TTAB ruled that a registrant’s pro-active corrective action, taken before issues of fraud have been alleged, creates a rebuttable presumption that the registrant did not intend to deceive the USPTO. If a registrant voluntarily restricts a registration only to those goods on which the mark is actually in use, this raises a genuine issue of material fact regarding whether a registrant intends to commit fraud. Although Zanella does not explicitly hold that subsequent amendments may cure alleged fraud, the decision indicates a loosening of the Medinol standard.

 

While Medinol took a strict approach to fraud, these recent decisions somewhat blunt the risk to trademark owners who exercise timely diligence in assessing the accuracy of their applications or registrations. Medinol is no longer the standard for fraud. Instead, as noted in In re Bose Corp., “[u]nless 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.” 2009 U.S. App. LEXIS 19658, at *16. Indeed, “[a] party seeking cancellation of a trademark registration for fraudulent procurement bears a heavy burden of proof.” Id. at *5 (citation omitted).

 

Act pre-emptively

 

What do these developments mean for trademark owners? Despite this notable shift, potential fraud claims and counterclaims remain a potent means of attack in trademark conflicts. It is imperative that trademark owners verify all dates of use and specific goods and services in their applications and registrations—especially when filing a new application, declaration of use or renewal. Moreover, trademark owners must maintain proper records substantiating these facts to defend against any challenges.

 

Going forward, trademark owners should consider “fraudits,” audits of potential fraud in trademark portfolios, to identify potential vulnerabilities. Based on current case law, the key times for making an amendment to an application or registration are pre-publication for applications and prior to any conflict arising for both applications and registrations. In other words, before bringing an Opposition or Cancellation Proceeding before the TTAB or any infringement claim, the trademark owner should be certain that its own application or registration is in order. A trademark owner who fails to take these steps risks jeopardizing its mark’s validity. Ultimately, trademark owners should review their applications and registrations to ensure the accuracy of all facts, and then act to remedy any inaccuracies before a conflict arises.

 

For more information, please contact Ann Ford and John Nading.