September 2, 2009Client Alert

"Should Have Known" No Longer Sufficient for Finding Fraud in U.S. Patent and Trademark Office Proceedings

The U.S. Court of Appeals for the Federal Circuit has ruled in In re Bose Corporation (Fed. Cir. No. 2008-1448, 8/31/09) that fraud on the U.S. Patent and Trademark Office (“PTO”) occurs if an applicant or registrant knowingly makes a false, material misrepresentation with the intent to deceive the PTO. This case overrules the Trademark Trial and Appeal Board’s (“TTAB”) 2003 decision in Medinol v. Neuro Vasx, Inc., 67 U.S.P.Q.2d 1205 (T.T.A.B. 2003) in which the TTAB held that an applicant commits fraud when it makes material misrepresentations of fact in a declaration which it knows or should know to be false or misleading.

Prior to the decision in In re Bose Corporation, the TTAB had been following the standard it set forth for fraud in the Medinol in numerous cancellation proceedings, resulting in the cancellation of registrations in their entirety or at least the cancellation of an entire class of goods or services from a registration. In Bose, the Court made clear that there is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive.

Bose Corporation, the owner of the WAVE trademark, filed an opposition against an application for the mark HEXAWAVE by Hexawave, Inc. claiming HEXAWAVE was confusingly similar to Bose’s WAVE mark and other registered trademarks. Hexawave counterclaimed to cancel Bose’s WAVE registration on the grounds that Bose had committed fraud when it filed its renewal application because its declaration claimed that Bose was using the mark on all goods in the registration, including audio tape recorders and players, even though it had ceased the manufacture and sale of those goods. Bose acknowledged that it knew the audio tape recorders and players were no longer manufactured and sold but believed the WAVE mark was still in use in commerce on those goods because Bose continued to repair WAVE brand audio tape recorders and players and to transport them to customers in connection with those repairs.

The TTAB held that repair of goods did not constitute a use in commerce sufficient to maintain a trademark registration, that Bose’s belief that it was sufficient use was not reasonable, and that the statement claiming use in the renewal application was material. Accordingly, the TTAB found under Medinol that Bose committed fraud and canceled Bose’s WAVE registration in its entirety (including for goods on which the mark was still in use).

The Federal Circuit reversed and remanded, stating that it agreed with the TTAB’s position in Medinol that the appropriate inquiry when determining whether a trademark registration was obtained fraudulently is “not into the registrant’s subjective intent, but rather into the objective manifestations of that intent” and that objective manifestations “must often be inferred from the circumstances and related statement made.” However, the TTAB erred when it held that fraud could be found if an applicant or registrant makes a statement that it should have known to be false or misleading as this improperly lowered the fraud standard to the standard for a finding of simple negligence. The court went on to state, “the principle that the standard for finding intent to deceive is stricter than the standard for negligence or gross negligence, even though announced in patent inequitable conduct cases, applies with equal force to trademark fraud cases. After all, an allegation of fraud in a trademark case, as in any other case, should not be taken lightly.”

Specifically, the Federal Circuit found that because Bose believed that the statement it made in its renewal application was true at the time the renewal application was signed, there was no intent to deceive the PTO and therefore no fraud.

As we previously advised in February of this year, the trademark community has been anxiously awaiting this decision as many believed the TTAB’s ruling in Medinol applied the incorrect standard for a finding of fraud, particularly in light of the severe implications of a finding of fraud, namely the cancellation of the entire registration or at least the entire class of goods or services to which the false statement applied. Notwithstanding the Federal Circuit’s decision, trademark owners should continue to exercise care and diligence when making averments in connection with trademark applications and maintenance filings, including statements as to whether a mark is being used in commerce with particular goods or services. A trademark registration will continue to remain vulnerable to cancellation as to any goods or services set forth in a registration if the mark is not actually being used in connection with such goods or services and the trademark owner knowingly makes a false statement about the continued use of such goods or services.

For more information, please contact the author of this alert or your Michael Best attorney.

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