by Stephen J. Quigley, (squigley@ostrolenk.com) Ostrolenk Faber LLP
Committing fraud on the Trademark Office suggests a nefarious scheme by a trademark owner to subvert the law. However, recent rulings by the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office demonstrate that a fraud finding can be triggered by little more than carelessness or a simple oversight in a claim of use of the mark for goods or services. The consequences of fraud can be cancellation of the registration, or at least that class of goods or services in which the fraud occurred.
What Constitutes Fraud?
Fraud in obtaining or maintaining a trademark registration occurs when the owner knowingly makes a false, material representation of fact concerning the goods or services for which a mark is being used. Standard Knitting Ltd. v. Toyota Jidosha Kabushiki Kaisha, 77 USPQ2d 1917, 1926 (TTAB 2006). The key element is “knowingly” – fraud will not be found if the statement, even though false, was made with a reasonable and honest belief that it was true. Id. The “reasonable” threshold, however, is high. Merely claiming an honest, albeit mistaken, belief that the mark is in use on certain goods may not escape a finding of fraud.
In addition to the goods and services identified by the mark, representations of fact that could be subjected to a fraud claim include the current manner in which the mark is used, the date of first use of the mark, actual use of the specimen displaying the mark, and whether the applicant is aware of anyone else who is using a confusingly similar mark.
Statements concerning the use of a mark on goods or services “are essential to the integrity of the application and registration process”, Grand Canyon West Ranch LLC v. Hualapai Tribe, 88 USPQ2d 1501, 1509 (TTAB 2008). As noted by the Board in Hiraga v. Arena, 90 USPQ2d 1102 (TTAB 2009), the Trademark Office depends on the accuracy of information provided by applicants and registrants regarding goods and services because it has no ability to independently verify the truth of identifications of goods and services and other critical information. When false information as to a critical element of the application or registration is provided, the test for determining fraud is whether the applicant or registrant knew or should have known that the information in question was false. Medinol Ltd. v. Neuro Vasz Inc., 67 USPQ2d 1205, 1209 (TTAB 2003).
Statements under oath in use based applications, statements of use, Section 8 declarations of use, and renewals should be made “with a degree of solemnity requiring thorough investigation prior to signature and submission to the USPTO.” Herbaceuticals Inc. v. Xel Herbaceuticals Inc., 86 USPQ2d 1572, 1577 (TTAB 2008). Thus, pleading that the failure to weed out goods or services for which the trademark is not then in use was inadvertent or a matter of an innocent oversight will not avoid cancellation of the registration. “Fraud cannot be cured merely by deleting from the registration those goods on which the mark was not used at the time of the signing of a use-based application or a Section 8 affidavit.” Turbo Sportswear Inc. v. Marmot Mountain Ltd., 77 USPQ2d 1152, 1155 (TTAB 2005).
Partial cancellation of the registration after having previously submitted incorrect information, e.g., failing to remove those goods or services for which the mark is no longer in use, may not be an option either. As stated by the Board in Herbaceuticals:
Partial cancellation would merely place [the registrant] in the same position in which it would have been had it filed statements of use which accurately recollected the goods on which the marks were being used. Rather, if fraud can be shown in the procurement of a registration, the registration is void in the international class or classes in which fraud based on nonuse has been committed. 86 USPQ2d at 1577.
A less rigid interpretation of the fraud rule applies during the examination stage of the application. In University Games Corp. v. 20Q.net Inc., 87 USPQ2d 1465, 1468 (TTAB 2008), the Opposer falsely claimed use of its mark on t-shirts and videos in its application. Deleting these goods during the examination gave rise to a rebuttable presumption that there was not a willful intent to deceive the Office. In other words, “a misstatement in an application as to the goods or services on which a mark has been used does not rise to the level of fraud where an applicant amends the application prior to publication.” Hurley International LLC v. Volta, 82 USPQ2d 1339, 1344, n. 5 (TTAB 2007).
Scrutinize Intent to Use Applications
Intent to use applications are particularly vulnerable to fraud. A Statement of Use is required many months or even years after the application was filed. If, at the time the Statement of Use is executed, the owner has not reviewed and removed those goods/services for which the mark is not then in use, the registration could be cancelled. In Medinol Ltd. v. Neuro Vasz Inc., 67 USPQ2d at 1205, the Board cancelled the entire registration because the Statement of Use included neurological stents and catheters when the mark was in use only on catheters. The owner of the mark knew or should have known that its statement regarding the goods on which the mark was in use was false – whether the owner intended to claim rights it was not entitled to was immaterial. “[T]he appropriate inquiry . . . is not into the registrant’s subjective intent, but rather into the objective manifestations of that intent.” Id., at 1209. At the time of signing a Statement of Use, the trademark owner has an obligation to know about, and remove, those goods/services that are not in commerce.
Electronic filings signed by the attorney are also potential hazards. Relying solely on “information and belief” that the client’s representations are accurate is not sufficient because the attorney is “in a position to know (or to inquire) as to the truth of the statements providing reason to believe.” Herbaceuticals Inc. v. Xel Herbaceuticals Inc., 86 USPQ2d at 1577.
Opposers Beware
Before a potential opposer or cancellation petitioner initiates an inter partes proceeding, it had better be sure that the registration the opposer or petitioner will rely on can withstand a fraud counterclaim. In the Turbo case, the applicant moved to counterclaim to cancel five of the pleaded registrations on the ground that the marks were not in use by the opposer on all of the goods in the registration at the time the applications or Section 8 declarations were filed. The Board granted the motion stating that “if applicant is able to establish the elements of fraud even as to one of the goods listed in opposer’s single-class registration, the entire registration is subject to cancellation.” Turbo Sportswear Inc. v. Marmot Mountain Ltd., 77 USPQ2d at 1155.
Avoiding Fraud
The Trademark Office’s rigorous “knew or should have known” standard for finding fraud is the subject of two appeals currently before the Court of Appeals for the Federal Circuit. Even if the Court rules that a more flexible and lenient test for finding fraud should apply, trademark owners must nonetheless be aware that there are potentially fatal consequences if an accurate list of their goods or services is not provided to the Trademark Office in used based applications, statements of use, Section 8 declarations, and renewals. Including a passage along the lines of the following in the notice to the trademark owner should serve as a sufficient warning:
The [use based application; statement of use; Section 8 declaration; renewal] must include only those goods/services for which you are actually using the mark at this time. If you are not using the mark on any of the goods/services listed in the [application; notice of allowance; registration] they should be deleted. The failure to do so could result in the cancellation of the entire registration.
Stephen J. Quigley (squigley@ostrolenk.com) Ostrolenk, Faber LLP