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Incontestable Fraud on Trademark Office?

Posted by Thomas P. Howard | Oct 05, 2021 | 0 Comments

By James Juo.

The bar for proving fraud on the Trademark Office in seeking to cancel a trademark registration is high. In re Bose Corp., 580 F.3d 1240 (Fed. Cir. 2009) (“there is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive”). In order to prove fraud, one must show that (1) a statement was false, (2) the falsity was intentional, and (3) the false statements were material to obtaining or maintaining a registration. Moreover, clear and convincing evidence is required to establish a fraud claim. But, “because direct evidence of deceptive intent is rarely available, such intent can be inferred from indirect and circumstantial evidence.” The Federal Circuit noted, however, that “when a trademark registrant fulfills the obligation to refrain from knowingly making material misrepresentations, ‘[i]t is in the public interest to maintain registrations of technically good trademarks on the registrar so long as they are still in use.'”

In Bose, an erroneous claim that a trademark was used with certain goods listed in a trademark registration was found to be insufficient to invalidate that trademark registration. Counsel for Bose had signed and filed a Section 8 declaration of continued use that Bose was using the mark on all goods listed in the original registration even though Bose had stopped manufacturing and selling audio tape recorders and players. Counsel for Bose who signed the Section 8 declaration incorrectly believed there was use in commerce because Bose continued to repair previously sold audio tape recorders and players which were still under warranty, and “in the process of repairs, the product was being transported back to customers” in commerce. The Federal Circuit held that an intent to deceive could not be inferred from this error in judgment.

The Trademark Trial and Appeal Board (“TTAB”), however, recently held that “reckless disregard” for the truth is sufficient to establish the requisite intent to deceive for fraud on the USPTO. Chutter, Inc. v. Great Concepts, LLC, Cancellation No. 92061951, — USPQ2d — (TTAB Sept. 30, 2021). Chutter had filed a petition for cancellation of Registration No. 2929764 covering the DANTANNA'S mark for “steak and seafood restaurant” services for fraud on the Trademark Office.

Great Concepts' counsel signed a Section 15 declaration of incontestability for the registration, stating that there were no civil actions or USPTO proceedings pending against the DANTANNA'S mark and registration. This required language is included as part of the form Section 15 declaration of incontestability. See 15 U.S.C. § 1065 (“there is no proceeding involving said rights pending in the United States Patent and Trademark Office or in a court and not finally disposed of”).

A Section 15 declaration is an optional filing, and is not required to maintain or renew a trademark registration. But a Section 15 declaration filed with the USPTO provides a means for the registrant to quiet title in the ownership of the mark, and can give the registrant a new right, namely the right to have its registration, in litigation, accepted as conclusive evidence, rather than merely prima facie evidence, of the registrant's exclusive right to use the registered mark in commerce. See Trademark Act Section 33, 15 U.S.C. § 1115(b).

Chutter alleged that Great Concepts' Section 15 declaration was knowingly false because a cancellation proceeding and a civil action involving the DANTANNA'S mark were pending at the time; and that a “reckless disregard” for the truth was sufficient to establish an intent to deceive the USPTO.

Noting that it is “well-settled that inclusion of false statements in a Section 15 declaration is material, and if made with the relevant degree of intent constitutes fraud warranting cancellation of the involved registration under Section 14(3) of the Trademark Act”; the TTAB found that it was undisputed that, at the time the declaration was filed, Great Concepts' counsel knew of the pending legal proceedings involving the DANTANNA'S mark and registration, who asserted that he had not reviewed the document “carefully enough” to realize he was attesting otherwise in the Section 15 declaration.

The TTAB found “reckless disregard” as to the truth or falsity of the declaration because Great Concepts' counsel was inattentive about what he was signing and failed to inquire as to its accuracy. “A declarant is charged with knowing what is in the declaration being signed, and by failing to make an appropriate inquiry into the accuracy of the statements the declarant acts with a reckless disregard for the truth.” Noting that documents submitted to the USPTO must be investigated and read thoroughly before filing, the TTAB found there was a reckless disregard for the truth; one where no action was taken to remedy the error once it was brought to his attention. “This leads us to find that [Great Concepts' counsel] intended to file just what he filed, regardless of its accuracy.”

The TTAB was concerned that if such disregard carried no consequences, then “[s]tatements made with such degree of solemnity clearly are or should be investigated thoroughly prior to submission and signature to the USPTO.” For trademark registrations, the USPTO relies on declarations to be “complete, accurate, and truthful.” Applicants and registrants should not be allowed “to recklessly disregard the contents of sworn declarations and sign them without consequence for the inclusion of false statements that will be relied on by the USPTO.” Furthermore, the TTAB noted various courts have ruled that “willfulness” includes reckless behavior.

Finding “reckless disregard” to be the legal equivalent of a “specific intent to deceive the USPTO,” the TTAB granted Chutter's petition to cancel the DANTANNA'S registration.

In both Chutter and Bose, the respective declarants were aware of facts that were contrary to the statements being presented to the USPTO. The difference between them appears to be that the declarant in Bose had a good faith, if erroneous, belief as to why the false statement was still true; whereas the declarant in Chutter simply pled inattention to detail.

If appealed to the Federal Circuit, will this wrong-headed versus absent-minded distinction be affirmed for establishing fraud on the Trademark Office? Or will the subsequent failure to take any remedial steps upon learning of the false statement be the critical distinction for finding reckless disregard? And will the nature of the statement at issue, whether a Section 8 declaration of continued use to renew or maintain an existing registered trademark right, or a Section 15 declaration of incontestability which may give rise to a new right for the trademark registrant, make a difference to the appellate court?

About the Author

Thomas P. Howard

Thomas Howard is an experienced trial lawyer that handles intellectual property litigation nationwide, including copyright, trademark, trade secret and patent litigation, as well as complex civil litigation, including breach of contract, interference with contract, breach of fiduciary duty, conspiracy, fraud and fraudulent transfer of assets.


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