TTAB Fraud Standard

May 2009
By Kyle-Beth Hilfer and Yuval H. Marcus

The Trademark Trial and Appeal Board ("Board") of the U.S. Patent and Trademark Office ("PTO") has routinely invalidated trademark registrations based on findings of fraud following its decision in 2003 in Medinol v. Neuro Vasx, Inc. The Board’s fraud standard does not require proof of scienter or intent to defraud, but rather a mere showing that the applicant knew, or should have known, that certain statements made in trademark applications or renewal declarations were inaccurate. This standard has been challenged in several appeals now pending before the U.S. Court of Appeals for the Federal Circuit. In addition, the Board recently clarified how the Medinol fraud standard applies to multi-class applications. This article considers these recent developments and offers practice tips in light of the decisions discussed.

The Medinol Case

In Medinol v. Neuro Vasx, Inc., 67 USPQ2d 1205 (TTAB 2003), the Board canceled a registration based on fraud, finding that the applicant had submitted a declaration listing goods that were not in use at the time that the declaration was filed. Petitioner Medinol sought cancellation of a trademark registration for the mark NEUROVASX covering "medical devices, namely, neurological stents and catheters." Medinol alleged that Neuro Vasx committed fraud in its Statement of Use because NEUROVASX was never used for stents. Neuro Vasx admitted the nonuse, but it claimed that the inclusion of stents in the application was an oversight, an error with no intent to defraud. The Board found Neuro Vasx had filed its Statement of Use fraudulently, stating that "a trademark applicant commits fraud in procuring a registration when it makes material representations of fact in its declaration that it knows or should know to be false." Since the Statement of Use would not have been accepted and the registration would not have issued absent the misrepresentation, the Board refused to delete stents from the registration as a way to cure the fraud.

The Bose Case

The Board maintained its strict application of the fraud standard in Bose Corporation v. Hexawave, Inc., 88 USPQ2d 1332 (TTAB 2007). In a decision rendered on Nov. 6, 2007, the Board found that Bose knowingly had made false and material representations when filing its Section 8 & 9 renewal papers. Bose knew that it no longer manufactured or sold audio tape recorders and players under this trademark, but nonetheless listed them in its recitation of goods. Bose, in its defense, acknowledged that it had ceased production and sale of these goods before filing its renewal papers in 2001. It argued, however, that it had maintained interstate use of its mark by offering repair services for goods bearing the WAVE trademark and then transporting such repaired goods back to the owner. Bose also reasoned that it did not have to own the goods in order to be making use of the trademark. The Board found no support for Bose’s argument and rejected the proposition that transporting repaired WAVE goods that Bose does not own constitutes use in commerce. Because the Board found no reasonable basis for Bose’s general counsel’s belief in this argument, the Board found Bose had committed fraud on the USPTO and canceled the entire WAVE mark. Citing to Medinol, the Board asserted that "fraud cannot be cured by the deletion of goods from the registration."

The Grand Canyon Case

Similarly, in June 2008, the Board applied the fraud standard in Grand Canyon West Ranch, LLC v. Hualapai Tribe, 88 USPQ2d 1501 (TTAB 2008). This was an opposition proceeding based in part on an allegation of fraud. Grand Canyon West Ranch ("Grand Canyon") opposed the Tribe’s application to register the mark GRAND CANYON WEST for various airport and air transportation services. The Board found that the Tribe was not providing transportation of passengers "by means of rail, tram, non-motorized vehicles featuring bicycles, and domestic animals." Although the services in question were added to the application pursuant to an examiner’s amendment, the Board was not persuaded that there had been any misunderstanding in the Tribe’s communications with the examiner or that an "examiner’s amendment is unlike the verified statement of goods in an affidavit of continued use … or a statement of use, as in the Medinol case." The Board concluded that the Tribe "either knew or should have known that the statements regarding its services in the examiner’s amendment were false … It is applicant’s responsibility to ensure that accurate information is transmitted to the USPTO … The identification set forth in the examiner’s amendment was, at least in part, false, and it was applicant’s responsibility to correct it promptly as the action invites."

Bose and the Tribe have both filed appeals to the U.S. Court of Appeals for the Federal Circuit. In addition to asking for reconsideration of the Board’s interpretation of the use in commerce requirement, Bose questioned "whether the board erred in determining that Bose intended to deceive the USPTO and committed fraud when its general counsel declared the mark was in use on all goods based on Bose then repairing the goods and transporting the repaired goods in commerce."

AIPLA Support

The American Intellectual Property Law Association ("AIPLA") has filed briefs of Amicus Curiae in support of both Bose and the Tribe. AIPLA asserts in both cases that fraud requires intentional deception or reckless conduct and that the Board "has misapplied the ‘knew or should have known’ standard to find fraud on strict liability or negligence." Pointing out that the Board found fraud in Medinol for "vastly different degrees of culpability," AIPLA argues that not all errors are "so reckless" as to equal scienter. AIPLA’s brief also accuses the Board of using "circular" reasoning in its test for materiality. It finally argues that "errors in statements of use may be immaterial when a registration properly covers highly related goods" and that "injury cannot be presumed from erroneous inclusion of goods." In both cases, AIPLA argues that there is no evidence of intent to deceive or a recklessness that equates to an intent to deceive to support a finding of fraud. In addition, AIPLA points out that the inclusion of the goods or services at issue did not cause any injury since they are sufficiently similar to the other goods or services listed to not expand materially the scope of the registration or application at issue.

The G&W Laboratories Decision

While the Federal Circuit considers the Bose and Grand Canyon appeals, the Board has issued a decision clarifying whether fraud in connection with a single class within a multi-class registration would invalidate the entire registration or just the tainted class. In G&W Laboratories, Inc. v. G W Pharma Limited, 89 USPQ2d 1571 (TTAB 2009), the Board clarified that the Medinol line of cases does not require cancellation of an entire multi-class application where a false statement was made as to only one class of goods. G&W Laboratories, Inc. commenced an opposition relying upon two registrations for the marks G&W and G&W and Design. Each registration covered goods in class 5 and services in class 35. The applicant, G W Pharma Limited, counterclaimed for cancellation of both registrations in their entireties, alleging fraudulent procurement on the grounds that the marks had not been used in connection with the class 35 services. Opposer then deleted the class 35 services and moved to dismiss the counterclaims with respect to those services on the grounds of mootness and with respect to the class 5 goods for failure to state a claim. Adhering to its long-standing stance that a post registration deletion of goods/services does not cure fraud, the Board denied the motion as to the class 35 services. The Board did, however, grant the motion dismissing the counterclaims with respect to the class 5 goods. The Board reasoned that "a multiple-class application can be viewed as a series of applications for registration of a mark in connection with goods or services in each class, combined into one application." The fact that one class of goods or services had been fraudulently procured, therefore, does not adversely affect the validity of the other classes of goods or services covered by the registration.

Conclusion

It is crucial that trademark counsel apply Medinol’s lessons when advising clients. Prior to filing a use-based trademark application, a Statement of Use, or any renewal papers, it is essential to confirm that the mark is in fact in use with each and every good or service listed in the application. To the extent that some goods and/or services are not in use, counsel should draft a separate intent to use application to cover such goods and/or services or, in the case of an existing registration in need of renewal, the recitation of goods and/or services should be amended to omit those not in use. Counsel should also recommend a comprehensive review of a client’s trademark portfolio to assess whether any published applications or issued registrations are vulnerable. For applications not yet published, counsel should promptly file amendments to delete the goods and/or services that are not in use.

Before asserting trademark registrations in an opposition or cancellation proceeding, counsel should review the file history for each registration and confirm that no false statements were made either during the application process, or when renewals were filed. In particular, for registrations that contain more than one type of good or service, counsel should confirm that the mark was in use for all listed goods and services at each time that a declaration was filed. As a defendant in an opposition or cancellation proceeding, counsel should serve discovery requests that probe whether the mark in the applications/registrations asserted by the opposer/petitioner was in use for all of the goods and/or services listed at each point and time when a declaration was submitted to the PTO. If the mark was not in use for all goods and/or services listed, counsel should move for leave to amend the Answer to assert counterclaims for cancellation of the registration based on fraud, and file a motion for summary judgment.

It is possible that the Federal Circuit decisions in both Bose and Grand Canyon will rest on fact-specific findings that will leave Medinol as good precedent. For example, the Federal Circuit might reverse the Board’s decision in the Bose case on the basis that the Board erred in concluding that Bose’s belief that it was using the WAVE mark was both mistaken and unreasonable. Unless these Federal Circuit decisions reverse Medinol completely or strongly limit its scope, the Board will likely continue its strict applications of its fraud standard.

Kyle-Beth Hilfer, P.C. specializes in advertising, marketing, intellectual property, and licensing law. Yuval H. Marcus is an attorney at Gottlieb, Rackman & Reisman, P.C., a law firm that specializes in intellectual property law.