Trademark Practice - Federal Circuit Reverses Standard for Finding of Fraud in Prosecution

The U.S. Court of Appeals for the Federal Circuit on August 31, 2009 handed down an important ruling that reversed the U.S. Patent and Trademark Office’s (“USPTO) six-year practice of invalidating trademark applications and registrations where the trademark owner erroneously, though accidentally, claimed use of its mark on any of its listed goods or services. See In Re Bose Corporation, 2008-1448 (Fed. Cir. 2009).

Summary of the Facts of Bose and Then-Existing Law

The Bose decision involved a common fact pattern. Bose Corporation opposed Hexawave, Inc.’s published application for the mark HEXAWAVE on the basis that Hexawave’s mark was likely to be confused with Bose’s registered mark WAVE. In response to Bose’s filing of this opposition, Hexawave filed a counterclaim for cancellation of Bose’s registration for WAVE on the basis that Bose had fraudulently represented in Bose’s renewal filing with the USPTO that Bose’s mark was in use on all goods listed in the registration when, in fact, the mark was at the time in use on only some of the listed goods. The USPTO entity presiding over the opposition/cancellation proceedings, the Trademark Trial and Appeal Board (“TTAB”), ultimately sided with Hexawave and, ignoring evidence that Bose merely made an honest mistake, entered an order canceling Bose’s entire registration.

The TTAB, in entering its cancellation order, acted in accordance with then-existing law as set forth in Medinol, Inc. v Neuro Vasx, Inc., 67 USPQ2d 1205 (TTAB 2003). In Medinol, the TTAB held that a trademark owner committed fraud on the USPTO any time it made a material representation in a USPTO filing that it knew or should have known to be false or misleading.

On the basis of this holding, the TTAB in Medinol and its progeny invalidated numerous applications and registrations in their entirety based upon inaccurate claims of use or continued use (applicants are required to make such claims during the application process and registrants are required to make such claims periodically in order to maintain their registrations) – even when such claims were the result of honest mistakes and/or the claims were inaccurate as to only one of multiple listed goods of services.

Nor surprisingly, these rulings had led to a proliferation of fraud claims brought by third parties seeking to cancel otherwise valid registrations of trademark owners.

The Federal Circuit’s Ruling in Bose and Adoption of New Legal Standard

The Federal Circuit, in reversing Medinol, ruled that the TTAB had been following a legal standard that was too unforgiving. According to the Federal Circuit, the standard for invalidating applications and registrations based upon misrepresentations is “fraud,” not negligence. In turn, “[b]y equating ‘should have known' of falsity with a subjective intent, the [TTAB] erroneously lowered the fraud standard to a simple negligence standard.”

The Federal Circuit reasoned that fraud on the USPTO can only be established if there is a “willful intent to deceive,” i.e., “if applicant or registrant knowingly makes a false, material representation with the intent to deceive the [USPTO].”

The Federal Circuit further indicated that a party seeking to prove fraud on the USPTO must present “clear and convincing evidence” of deceptive intent.

Because the party seeking to prove fraud on the USPTO in Bose was unable to meet this heavy burden, the Federal Circuit reversed the TTAB’s cancellation order.

Recommendation

Although the Bose ruling likely will diminish the risk of cancellation for fraud on the USPTO, it will not eliminate the risk entirely. For this reason, trademark owners need to be vigilant in ensuring the accuracy of their representations to the USPTO. Care thus should be given to ensuring that all statements of use (in applications and maintenance filings) are correct as to all listed goods and services. Because the determination of what constitutes lawful “use” within the meaning of federal trademark law is not always easy, we encourage you to consult an experienced trademark attorney.

Feel free to contact the John Greenberg or any of the other attorneys at The Stolar Partnership if we can be of assistance.