Federal Circuit Clarifies Test for Fraud in Trademark Prosecution
With the Federal Circuit’s recent decision in In re Bose Corporation, the Court squarely reversed the test for trademark fraud on the Patent and Trademark Office adopted by the Trademark Trial and Appeal Board in Medinol v. Neuro Vasx, Inc.
To recap the history of these seminal decisions regarding trademark fraud, in 2003, the Trademark Trial and Appeal Board (“TTAB”) in Medinol v. Neuro Vasx, Inc. reviewed a case where trademark owner Neuro Vasx had filed an “intent to use” trademark application for its mark "NEUROVASX" for “medical devices, namely neurological stents and catheters.” As required by the United States Patent and Trademark Office (“PTO”), to obtain a federal registration from an “intent to use” application, Neuro Vasx filed its Statement of Use that the “NEUROVASX” mark was in use on the products covered by the application. In doing so, counsel for Neuro Vasx checked a box on the form indicating that the mark had been used in connection with all of the goods it had originally identified in the application. However, at the time it checked that box, Neuro Vasx had only used its mark in connection with catheters, but not with stents. Although a registration issued, the mistake was not discovered until subsequent litigation before the TTAB.
The TTAB found that Neuro Vasx’s erroneous checkmark constituted a fraud upon the PTO. Even though it accepted Neuro Vasx’s explanation that this was an honest mistake, the TTAB held that the Neuro Vasx's “explanation for the misstatement [ ] - that the inclusion of stents in the notice of allowance was ‘apparently overlooked’ - did nothing to undercut the conclusion that [Neuro Vasx] knew or should have known that its statement of use was materially incorrect.” (emphasis added). The TTAB then canceled Neuro Vasx’s entire trademark registration based upon a finding that the trademark owner had defrauded the PTO when filing its Statement of Use. Ignoring a string of case law requiring subjective intent by an applicant in order to support a finding of fraud on the PTO, the TTAB effectively ruled that mistake equals fraud.
Following that ruling, the TTAB canceled numerous trademark registrations based upon what often appeared to be little more than innocent errors by applicants who were not well-versed in the technical aspects of trademark procedures, or because of miscommunications between attorneys and clients. In effect, the TTAB established a strict liability standard for statements made by trademark owners in connection with the registration and renewal of their marks. As a result, trademark owners faced the prospect of losing valuable registration rights that may have existed for decades based upon honest mistakes in trademark applications.
On August 31, 2009, the Federal Circuit in In re Bose Corporation reversed the TTAB on two counts. First, it reversed the TTAB’s holding that Bose Corporation committed fraud on the PTO in its trademark renewal filing. Second, in doing so, it overruled the TTAB’s decision in Medinol, returning the test for fraud on the PTO to its pre-Medinol state. The Federal Circuit thus brought the law for determination of fraud on the PTO in trademark cases in line with the law of inequitable conduct on the PTO for patent cases.
Specifically, the Federal Circuit scolded the TTAB, holding that it had set the bar too low in Medinol for a finding of “fraud on the PTO.” Rather, the Bose court reaffirmed that in order to prove fraud on the PTO, there must be substantial evidence that the applicant or registrant intended to deceive the PTO. Taking dead aim at the TTAB’s analysis, the Federal Circuit noted that, “By ‘equating should of known’ of the falsity with the subjective intent” to commit fraud on the PTO, the TTAB “erroneously lowered the fraud standard to a simple negligence standard.” There is no fraud “if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive.”
Finding that even though Bose’s General Counsel knew that Bose had ceased selling certain products under the subject mark when he filed a renewal declaration with the PTO stating that the mark was still in use on all products, the Court held that no public purpose was served by cancelling the entire registration of Bose’s trademark. Instead, the case was remanded back to the TTAB to restrict the registration to reflect commercial reality by deleting the goods on which the mark was no longer in use. While the Bose case specifically addressed a trademark renewal, the scope of the Federal Circuit’s ruling extends to applications and any other filing with the PTO.
The Bose decision could have unintended consequences, including the reward of unscrupulous trademark applicants and registrants that file applications for overly broad lists of products or services. Regardless of any beneficial effect it may have had, Medinol’s test for trademark fraud on the PTO has clearly been overruled. The Federal Circuit’s holding leaves no doubt: 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.”
Practice Pointers from In re Bose:
Trademark applicants still must be careful not to make false or sloppy filings in the PTO. Errors can still be embarrassing, prejudice a judge or the TTAB, or potentially raise the equitable defense of “unclean hands.”
During the Medinol era, the threat of a cancellation for fraud became a powerful tool against registrants in inter partes disputes. This threat appears to now be gone. However, use or non-use of a mark on products can still determine the scope of a registration. It remains a fundamental element of any opposition action to investigate the use of an opposing party’s mark on all products or services listed in an application or registration.
Finally, while the Federal Circuit’s view on the test for trademark fraud appears conclusive, one of Medinol’s progeny, Grand Canyon West Ranch, LLC v. Hualapai Tribe, is currently pending before the Federal Circuit. It is anticipated that the Federal Circuit should provide additional guidance on the issue of fraud on the PTO in this case.