Further Development in Fraud on USPTO

Further Development in Fraud on USPTO

There is very recent case where Federal Circuit reversed and remanded the TTAB’s order of cancelling the registration in its entirety. In re Bose Corporation, 2009 WL 2709312 (C.A.Fed), Hexawave counterclaimed for cancellation of Bose’s WAVE mark, asserting the Bose committed fraud in its registration renewal application when it claimed use on all goods in the registration while knowing that it had stopped manufacturing and selling certain goods. But, “[a]the time [of]…renewal, Bose continued to repair previously sold audio tape recorders and players, some of which were still under warranty”, and therefore “…in his belief, the WAVE mark was used in commerce because “in the process of repairs, the product was being transported back to customers.” The Board [TTAB] concluded that the repairing and shipping back did not constitute sufficient use to maintain a trademark registration for goods. And “…transporting repaired goods constituted use was not reasonable.” Finally, the Board [TTAB] found that the use statement in the Section 8/9 renewal was material. As a result, the Board [TTAB] ruled that Bose committed fraud on the PTO in maintaining the WAVE mark registration and ordered the cancellation of Bose’s WAVE mark registration in its entirety.

But, Federal Court said that “[b]y equating “should have known” of the falsity with a subjective intent, the Board erroneously lowered the fraud standard to a simple negligence standard.” “Knowing conduct thus stands in contrast to negligent conduct, which typically requires only that the defendant knew or should have known each of the facts that made his act or omission unlawful….” Further, court state that “[m]ere negligence is not sufficient to infer fraud or dishonesty.” And, hold 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. There is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive. Finally court hold that Bose did not commit fraud in renewing its WAVE mark and the Board erred in canceling the mark in its entirety. Though [court] agree with the Board, however, that because the WAVE mark is no longer in use on audio tape recorder and players, the registration needs to be restricted to reflect the commercial reality.

Thus from the above cases it can be inferred that though intent to deceive is a critical factor in a fraud determination it shall not be inferred too easily, and mere mistake or negligence shall not be equated to fraud.

TRADEMARK FRAUD AND RECENT DEVELOPMENT IN USA

TRADEMARK FRAUD AND RECENT DEVELOPMENT IN U.S.

Do not want to lose your Trademark Registration in U.S.A (United State of America) this is a time to be proactive. In the year 2003 T.T.A.B (Trademark Trial & Appellant Board) made a history by ordering the cancelation of Trademark registration in relation to allegations of fraud on the USPTO (United State Patent & Trademark Office).

In Medinol v. Neuro Vasx, Inc., 67 U.S.P.Q.2d 1205 (T.T.A.B. 2003), board stated that, in certain circumstances, an applicant or registrant could commit unintentional fraud on the USPTO, with the consequence being the invalidation of the entire application or registration. In Medinol, the T.T.A.B. cancelled a trademark registration because the statement-of-use filed in connection with the application listed goods for which the trademark was not actually used.

In Medinol, Neuro Vasx filed an application based on its intent-to-use a trademark for two medical devices, “stents and catheters.” Neuro Vasx later used the mark only on catheters, but failed to delete stents when filing the statement-of-use required for issuance of the registration. Not having any reason to doubt Neuro Vasx, the USPTO issued a registration covering both products. When Medinol sought to cancel the registration based upon Trademark Fraud, Neuro Vasx claimed that they had made an innocent mistake and tried to amend the registration to delete stents. However, the T.T.A.B. did not allow Neuro Vasx to correct the error by deleting stents, the product to which the fraudulent claim was made. Instead, the T.T.A.B. cancelled the entire registration, setting aside the issue of whether the applicant had any specific intent to mislead the USPTO.

Since Medinol, standard of fraud in the USPTO has been relaxed but the basic standard laid down in Medinol is still firm. In this process of relaxation the first solace came in the year 2006 in case of Maids to Order of Ohio, Inc. v. Maid-to-Order, Inc., 78 U.S.P.Q.2d 1899 (T.T.A.B. 2006), where Board mentioned that, if the applicant or registrant “had a reasonable or legitimate basis for the false representation,” then it has not committed fraud. In Maids to Order of Ohio, the registrant had alleged in its application that her husband and she were using its mark on cleaning services in interstate commerce. Based in Illinois, the registrant had on two occasion’s cleaned houses in Wisconsin and in Colorado and San Diego each one time. They also sent there advertisement to companies outside of Illinois. The board found that the registrant had a reasonable basis for its good faith belief that it had used the mark in interstate commerce at the time of each of its filings, regardless of whether it had actually met the legal standard. The board concluded that the “belief is sufficient to negate an inference of fraud upon the USPTO in obtaining and maintaining the registration.” But, even now if applicant fails to show the legitimate basis for the false representation the principal laid down in Medinol is still applicable in such case regardless it may be an innocent mistake.

But, one of the major issues which were left unattended by board since Medinol and in many similar cases after that was, whether it was possible to correct an inadvertent error once made in statement-of-use. In its very recent decision board finally provided some comforting guidance on this issue in Zanella Ltd. v. Nordstrom, Inc., 90 U.S.P.Q.2d 1758 (T.T.A.B. 2008), in Zanella, Nordstrom, Inc filed an intent-to-use application to register the mark ZELLA for various items of women’s and girl’s athletic sportswear and active apparel. Zanella Ltd filed an opposition against Nordstrom’s application on the basis of likelihood of confusion with Zanella’s registered mark ZANELLA. In the Notice of Opposition, Zenella pleaded five incontestable registrations for the mark ZANELLA for variety of men’s and women’s clothing.

Later, Nordstrom, through discovery, learned that Zanella had not used its ZENELLA mark on several goods covered by the pleaded registration. Consequently, Nordstrom filed motions (i) to amend its answer to include a counterclaim to cancel all five pleaded registrations on the ground of fraud, and (ii) for summary judgment based on its fraud counterclaim. The board granted Nordstrom’s motion to amend its answer, and also granted Nordstrom’s summary judgment motion with respect to one of the pleaded registrations, ordering its cancellation. With respect to this registration, the Board found that there is was no dispute that Zanella had not used its ZANELLA mark in connection all of the goods covered by that registration either at the time of filing of its application or when it filed its fifth-year-Declaration of Use and Incontestability under Section 8 and 15 of the Trademark Law. Citing Medinol, the board ordered cancellation of the entire registration. With respect to the remaining four pleaded registrations, the board denied Nordstrom’s summary judgment motion, holding that there was a genuine issue of material fact as to whether Zanella had the intent to commit fraud on the USPTO. The factual difference between the cancelled registration and these remaining four registrations’ was that Zenella had affirmatively deleted those goods on which it was not using the ZANELLA mark. For three of them, Zanella made the deletion at the time of filing Section 8 and 15 declarations. With respect to the last remaining registration, it had voluntarily requested the USPTO delete the goods on which it had not used the mark much after it filed a Section 8 and 15 declarations. These deletions all occurred prior to Zanella’a attempt to enforce these registrations against Nordstrom’s application.

The Board found that Zanella’s “timely proactive…action…in correcting any false statements prior to any actual or threatened challenge to the registrations creates a rebuttable presumption” that Zanella “did not intend to deceive” the USPTO. The board held that the evidence submitted by Nordstrom in support of its summary judgment motion, namely, Zanella’a discovery responses, admitting non-use and the file histories of the registrations alone, “failed to rebut the presumption of no intent to commit fraud” on the USPTO.

This decision is significant because it allows registrants to take proactive and timely steps to correct a registration by deleting those goods and services inadvertently included in any statement of use. As a result of this decision, if such proactive steps are timely taken, challenges to registrations on fraud grounds are now likely to be significantly harder to establish.

Conclusively, though the Board took a strong stand while making a decision in Medinol case, now Board has given some comfort to the proactive registrant’s and registrant’s who can show that they had a reasonable or legitimate basis for the false representation. From the above mentions decisions it can be infer that, if registrant’s can show there reasonable, legitimate, and subjective intent of not to commit a fraud on USPTO they may successfully argue against the allegation of fraud.

Though registrant’s objective intent doesn’t count but there could be many possible way to show subjective intent of not to commit fraud against USPTO. And if such subjective intent can be shown successfully, registrant’s trademark registration may not be cancelled.