The Trademark Trial and Appeal Board recently issued a decision clarifying the standard for pleading fraud in trademark cases in Asian and Western Classics B.V. v. Selkow, No. 92048821 (TTAB Oct. 22, 2009). In that case, the Board held that, to be properly pleaded, allegations of fraud based solely upon information and belief must be accompanied by a statement of facts upon which the belief is founded and must also include an allegation of intent.

Background

In 2000, Lynne Selkow filed an application for the mark KL & Design for jewelry and obtained a registration in 2001 (US Reg. No. 2423452). In 2007, Asian and Western Classics B.V. (AWC) filed an intent-to-use application for the mark KL for jewelry, watches and clocks (US Appln No. 77/166,127). The US Patent and Trademark Office refused registration, however, citing Selkow’s prior registration. AWC subsequently filed a petition to cancel Selkow’s registration, arguing that Selkow obtained the registration fraudulently because she did not have bona fide use in commerce of the mark at the time the registration issued.

Reliance on Exergen

AWC filed a motion for summary judgment, arguing that no genuine issue existed regarding whether there was use of the mark on some of the goods in the registration when Selkow filed her Section 8 and 15 declaration. The Board, however, denied the motion on the basis that the fraud claim was insufficiently pleaded. The Board supported its decision by citing to Exergen Corp. v. Wal-Mart Stores Inc., 575 F.3d. 1312, 91 USPQ2d 1656 (Fed. Cir. 2009), a patent case recently decided by the US Court of Appeals for the Federal Circuit.

In Exergen Corp. v. Wal-Mart Stores Inc., the Federal Circuit emphasized the heightened pleading requirements under Rule 9(b) of the Federal Rules of Civil Procedure for the defense of inequitable conduct in a patent infringement case. After submitting an initial Answer to the Complaint in the District Court for the District of Massachusetts, the Defendants moved to add inequitable conduct as an affirmative defense and counterclaim. The District Court denied the Defendants’ motion for leave to amend its answer to allege inequitable conduct, due to Defendants’ failure to allege with particularity. The Federal Circuit upheld the District Court’s decision, citing F.R.C.P 9(b), which requires that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” The Federal Circuit asserted that the pleading must set forth the specific factual bases for the inequitable conduct, stating that inequitable conduct “must be pleaded in detail,” particularly the “who, what, when, where, and how” of the alleged fraud. The Federal Circuit also stated that “[a]lthough ‘knowledge’ and ‘intent’ may be averred generally, our precedent, like that of several regional circuits, requires that the pleadings allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind.”

Applying Exergen in the trademark context, the Board held that AWC’s allegations of fraud failed to meet the Rule 9(b) requirements because they were based solely on information and belief. To be sufficiently pleaded, the Board explained that any allegations based on “information and belief” must be accompanied by a statement of facts upon which the belief is founded.

Further, the Board identified intent as a specific element of a fraud claim based on the Federal Circuit’s recent decision in In re Bose Corp., 580 F.3d 1240 (Fed. Cir. 2009). According to Bose, a pleading of fraud must allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind. AWC’s pleadings, however, were unsupported by any statement of facts providing the basis of the allegation. As a result, the Board ruled that AWC’s pleadings were insufficient to infer fraud or dishonesty on the part of Selkow.

Outcome

The board ruled that the motion for summary judgment was moot, finding AWC’s fraud claim insufficient and improperly pleaded. The Board also noted that the issue was inappropriate for summary judgment because genuine issues remained with respect Selkow’s intent to commit fraud on the PTO.

Conclusion

Petitioners alleging fraud in a proceeding before the Board should take care to plead such claims with particularity, in compliance with F.R.C.P. 9(b). Allegations based on information and belief should be accompanied by a statement of facts upon which such beliefs are founded, including sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind.

For more information about trademark or patent law or for assistance in compliance with these laws, please contact Yelee Kim.