On August 31, 2009, the US Court of Appeals for the Federal Circuit delivered a victory to trademark owners by resetting the standard for determining whether a trademark owner has committed fraud merely by including goods or services in a verified declaration or statement of use that are not actually in use.  In re Bose Corp., Fed. Cir., No. 2008-1448, argued 5/6/09.

In a line of cases beginning with Medinol v. Neuro Vasx, Inc., 67 USPQ2d 1205 (TTAB 2003), the Trademark Trial and Appeal Board (TTAB) had held that “a trademark applicant commits fraud in procuring a registration when it makes material representations of fact in its declaration which it knows or should know to be false or misleading.”  In practice, this made it easy for the TTAB to find fraud even when the applicant merely made a mistake in a filing. In reversing Medinol and its progeny, the Federal Circuit stated: “By equating ‘should have known’ of the falsity with a subjective intent, the Board erroneously lowered the fraud standard to a simple negligence standard.”  Now fraud on the Trademark Office may be found only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the US Patent and Trademark Office.

Bose Corporation owned an incontestable trademark registration for WAVE, Registration No. 1633789, for “radios, clock radios, audio tape recorders and players, portable radio and cassette recorder combinations, compact stereo systems and portable compact disc players.” Based on this registration, Bose opposed Hexawave, Inc.’s trademark application, Serial No. 76304063, for HEXAWAVE for various electronic goods. 

Hexawave counterclaimed to cancel Bose’s WAVE registration, based on Bose’s alleged fraud in filing its renewal application for all of the goods listed in the registration when Bose allegedly knew that it no longer sold audio tape recorders and players under the mark.  Bose’s general counsel had testified that he believed that Bose’s continued repair of audio tape recorders and players, and the shipment of those repaired goods under the mark, satisfied the use requirement for purposes of filing a use declaration, but the TTAB found this belief to be “unreasonable,” and cancelled Bose’s registration in its entirety based on fraud.

The Federal Circuit held that a finding of fraud by the USPTO requires that a cancellation petitioner or opposer show, by clear and convincing evidence, that the respondent knowingly made false statements with the intent to deceive, and that those false statements were material.  Bose’s general counsel’s belief that the company fulfilled the use requirement by shipping repaired goods bearing the mark to customers negated the requisite intent to deceive.  

By requiring a challenger to prove a respondent’s intent to deceive, the Federal Circuit has raised the evidentiary burden that must be met to sustain a fraud claim.  Although intent to deceive may be inferred from indirect and circumstantial evidence, the proof must nevertheless be clear and convincing.  And the conduct must indicate sufficient knowledge and culpability.  This brings the TTAB’s standard for fraud in trademark cases back in line with patent and common law fraud standards, where most practitioners supposed it to be before the Medinol decision.

The Federal Circuit did not rule on the USPTO’s argument that reckless disregard of the truth or falsity of a submission to the USPTO should satisfy the intent to deceive requirement.  Thus, the TTAB may hold in the future that “reckless disregard of the truth or falsity” of a material statement in a declaration of use is equivalent to knowingly making a false, material representation with intent to deceive and, thus, constitutes fraud which may invalidate the entire trademark application or registration.  As a result, trademark owners must still use caution in listing only goods or services on which their mark is actually being used when submitting filings to the USPTO.

For further information on the implications of the In re Bose Corporation decision, contact any Arent Fox trademark attorney.

Sheldon H. Klein
klein.sheldon@arentfox.com
202.857.6404

Katrin Lewertoff
lewertoff.katrin@arentfox.com
212.484.3967