One-minute read
Fraud cases before the TTAB have become prolific in the US in recent years, but many practitioners remain unaware of the potentially debilitating consequences of a fraud charge. Since a landmark 2003 case, applicants who cannot prove use or intent to use their mark for all the goods or services claimed in the application risk facing a fraud action and ultimately losing their trademark rights. Foreign applicants, including those using the Madrid Protocol route, may be particularly vulnerable if they have not sought local advice. Some practitioners believe the trend to find fraud reflects a desire to keep the registry clear, but overleaf a TTAB judge denies that charge. As more cases clarify the boundaries, applicants need to watch developments and devise strategies to minimize the risks.
Under section 1 of the US Lanham Act, trademark applicants must specify that a mark is being used in commerce, or that they have a bona fide intention to use the mark in commerce, for all goods listed in the application. A mark owner also must eventually sign a “declaration of use” specimen under section 8 of the Lanham Act, attesting under penalty of “fine or imprisonment, or both” that “willful false statements may jeopardize the validity of the application or any resulting registration” and that “the mark is now in use in commerce; and all statements made of his own knowledge are true and all statements made on information and belief are believed to be true.”
This provision presents a common pitfall for trademark owners, who sometimes—often innocently enough—end up using the mark on only some of the goods claimed in the original application. In today’s session CM02 ‘Fraud at the PTO’: A Barrier to the US Market? trademark practitioners and a USPTO judge will discuss the perceived crackdown on the issue of fraud by the Trademark Trial and Appeal Board (TTAB) in recent years, and cover strategies for avoiding such a finding.
Medinol: a new era in fraud
The USPTO and trademark practitioners alike agree that the 2003 case Medinol v. Neuro Vasx signaled a new age in fraud cases at the TTAB. The case involved an application for the mark NEUROVASX, to be used on “medical devices, namely, neurological stents and catheters,” which was granted to Medinol in 2000, following the applicant’s signing of a statement of use. In 2002, Neuro Vasx filed a petition for cancellation of the mark, alleging that it was not being used for stents at the time of the signing of the statement of use. In response, Medinol said: “At the time the Statement of Use was prepared, the fact that the goods identified in the Notice of Allowance also included ‘stents,’ in addition to catheters, was apparently overlooked.” Medinol went on to deny any allegations of deliberate fraud, and claimed that its repeated attempts to have “stents” deleted from the application proved as much.
The TTAB’s response was one that served as a “wake-up call to the profession,” according to Tony Fletcher of Fish & Richardson. The Board said: “Respondent’s explanation for the misstatement (which we accept as true)—that the inclusion of stents in the notice of allowance was “apparently overlooked”—does nothing to undercut the conclusion that respondent knew or should have known that its statement of use was materially incorrect.” The Board therefore granted summary judgment in favor of Neuro Vasx on the issue of fraud.
The order was significant for several reasons. First, prior to Medinol, the TTAB had not drawn a bright line as to whether one’s subjective good faith was sufficient evidence to disprove fraud. “There were scattered cases before Medinol, but Medinol drew a black and white line,” says John Welch of Lowrie Lando & Anastasi in Boston, who also authors the TTABlog. “Medinol says, ‘forget [good intentions], you should have known.’ It made it real simple,” says Welch.
Secondly, the Board’s decision to enter summary judgment in favor of Neuro Vasx represented a sua sponte action. The motion for summary judgment had initially been made by Medinol, which claimed that its action to delete “stents” from the application should have made the issue moot. “The thing that stuck about Medinol is that, not only was it a summary judgment case, but the Board took it on sua sponte and then reached out to strike down the whole registration,” says Bill Bryner of Kilpatrick Stockton.
Although the origin of the shift in the TTAB’s standard is not fully clear, some practitioners speculate that it may be linked to the growing size of the trademark register: “As hundreds of cases passed through the mill and asked questions about use, [the TTAB] must have eventually come to a realization,” says Fletcher. “There are 3 million trademarks registered and quite a few are in multiple classes and for many goods. That’s lots of stuff on the register that’s dead wood, and it’s expensive to clear by litigation. But if you create as a sanction even one item that could constitute fraud and vitiate the entire registration, that can be effective.”
Judge David Sams of the TTAB, who will be dissecting the relevant case law at the TTAB and Federal Circuit during today’s session, denies that suggestion. “We have no agenda,” says Sams. “When an issue is teed up to us we have to make decisions.”
John Welch adds another perspective on the issue: “Fraud’s kind of a harsh word,” says Welch. “It’s like telling someone they’re a crook. So accusing people of fraud is a shocker and it caught the eye of the bar [who realized that] it’s a very solid way of winning an opposition or cancellation. It’s all about winning these things, and this is a way to do it relatively inexpensively.”
Whatever the reasons, it has become increasingly clear that fraud cases can no longer be taken lightly, which Cynthia Johnson Walden says is the impetus for today’s session: “We’ll talk about the care with which people execute these statements of use,” she says. “You need to be extra careful about it, because it can jeopardize the whole filing.”
The foreign factor
“Foreign applicants don’t have to include as much detail about what products they’re using the mark for and don’t have to claim use—for that reason, foreign IP owners will comprise an important part of today’s audience,” says Johnson Walden. While the impact of fraud cases on foreign applicants has yet to be fully felt, most agree that it’s only a matter of time. “There hasn’t been a case on the point yet, but it could happen any day,” says Johnson Walden. “The Madrid Protocol [for instance] makes it easy to file on your own without local advice. We just want to make sure that everyone’s aware of the pitfalls.”
Bill Bryner points to a 2007 case, Hurley Int’l LLC v. Volta, that may be one of the first to signal the potential problems posed to foreign applicants. In that case, an Australian musical duo called “The Sign” filed a use-based application to register their mark for entertainment-related services. Hurley, the opposer, discovered that the mark was not being used on some of the services in the US, and alleged fraud. The Australian couple attempted to amend their use-based application to a section 44(e) application, which allows foreign applicants to rely on their foreign registration of the mark and does not require use prior to a US registration. However, the Board rejected the attempt, and said that “the proposed amendment does not serve to cure a fraud that was committed.” The Board also rejected the couple’s assertions that they simply misunderstood the meaning of “use in commerce.”
Bryner says that cases such as these, plus several that are “in the hopper” should be an indicator to foreign applicants that they need to begin to “look long and hard at the goods they want to use and tailor their filings accordingly.” However, Bryner concedes that this can be restrictive for foreign applicants, who are allowed much broader descriptions of goods in their own countries.
Advice for applicants
So how do applicants avoid this potentially crippling claim? According to Fletcher: “If you have a reasonable prospect of using [the mark], go ahead and list the goods. When you initially file, if you’re claiming intent to use, there’s no clear law on what constitutes an intent to use; the big problem doesn’t arise until you file a declaration of use in commerce.”
However, although the rule on what constitutes a “bona fide intent to use” is still muddy, one recent unpublished case, Intel Corp v. Emeny, suggests that the Board may be trying to define the concept more succinctly. In that case, the Board said that a bona fide intent to use must be judged by objective evidence, such as marketing plans and minutes of discussions from meetings. Bryner says that this case “coupled with the cloud of Medinol” warrants more cautionary tactics. “I would suggest two things,” says Bryner. “First, be very careful in particular about sworn statements of use. I almost suggest going down one by one on the goods—it will be painful for the owner, but will pay at the back end. Second, as a practical matter, I see very little and almost no upside to filing multi-class applications. If you’ve got a mark you intend to use in multiple classes, the administrative hassle of keeping up with six filings instead of one is outweighed by Medinol. By filing multiple, single classes, you quarantine the one bad class and it won’t kill the rest.”
In addition to Tony Fitzgerald, who will give the US practitioner’s perspective, and Judge Sams, who will review the TTAB case law, today’s panel also will include Margaret Ann Ramage of Alexander Ramage Associates in the United Kingdom, who will present a UK standpoint. N
Interview: Judge David Sams, USPTO Trademark Trial and Appeal Board
Judge Sams of the TTAB will be reviewing the relevant case law relating to fraud claims in today’s session. He will cover both TTAB and Federal Circuit cases, in order to bring a context to outside practitioners. “I’ll be reviewing cases that the Board and the Federal Circuit have decided in order to help practitioners counsel clients with respect to the fraud issue,” says Sams. “It’s very important.”
What key cases will you be covering in today’s session?
Medinol v Neuro Vasx (2003) involved a situation where a party filed a Statement of Use on two items and only used one. It was challenged and the TTAB found it was fraud. We’ve seen a lot of similar pleadings since then. The Board has never taken the position that it changed the law, but I think it’s the reason for the increased focus on the issue.
What would you say to those who feel the increased focus on fraud cases has to do with keeping the register clear?
We only hear the cases that are brought to us. We have no agenda. When an issue is teed up to us we have to make decisions.
What cases have been important post-Medinol?
Post-Medinol there have been a number of cases. There have been a few where there wasn’t a finding of fraud. In Maids to Order of Ohio (2006) [see box] for instance, there was an accusation about having used the mark in commerce improperly, but we found that there was a good faith belief of proper use, so we didn’t find fraud.
Do you know in how many cases the TTAB has found fraud since Medinol?
We don’t keep track of those numbers. I think cases have fallen on either side of the fence since Medinol. The numbers do mostly fall on the Medinol side though.
What about pre-Medinol? Were there a lot of fraud claims still?
Before Medinol, the most common type of fraud case was when a party swore they didn’t know their mark was being used in commerce [by another party], but that was usually coupled with likelihood of confusion and just appended to that issue. Those aren’t so common these days.
Have you had any fraud cases involving the Madrid Protocol or foreign applicants?
I don’t know of any case with implications for Madrid. Most of these cases involve US applicants.
What Federal Circuit cases exist?
Torres v Cantina Torresella (1986) involved an appeal from the TTAB. The applicant filed a renewal application and claimed it was using the registered mark on all items in the registration, but it wasn’t using it in the form in which it was registered for wine—it was using a mark, but not the one that was registered. The CAFC affirmed the Board’s decision that this constituted fraud.
Recent fraud cases at the TTAB
Fraud claims sustained
Herbaceuticals, Inc. v. Xel Herbaceuticals, Inc., Cancellation No. 92045172 (March 7, 2008)
Summary judgment on the ground of fraud granted.
Sinclair Oil Corp. v. Kendrick, 85 USPQ2d 1032 (TTAB 2007)
Board granted summary judgment on the ground of fraud, finding that the applicant falsely claimed use of the mark for her services when she had never offered such services.
Hachette Filipacchi Presse v. Elle Belle, LLC, 85 USPQ2d 1090 (TTAB 2007)
The TTAB granted summary judgment on the ground of fraud and canceled a registration for the mark ELLE BELLE, rejecting the respondent’s assertion that its president misunderstood the statements made in its original use-based application.
Hurley Int’l LLC v. Volta, 82 USPQ2d 1339 (TTAB 2007).
Board granted summary judgment on ground of fraud, despite foreign applicant’s claims that they misunderstood the requirements of Section 1(a), did not understand the legal meaning of “use in commerce,” and honestly believed that use in Australia was sufficient.
Sinclair Oil Corp. v. Kendrick, 85 USPQ2d 1032 (TTAB 2007)
TTAB said that applicant cannot “cure” fraud by moving to amend the application.
Standard Knitting, Ltd. v. Toyota Jidosha Kabushiki Kaisha, 77 USPQ2d 1917 (TTAB 2006).
The Board found that false statements made to the PTO regarding use of the marks on certain clothing items constituted fraud.
Fraud claim(s) dismissed
Tri-Star Marketing LLC v. Nino Franco Spumanti S.R.L., 84 USPQ2d 1912 (TTAB 2007)
Board dismissed a petition for cancellation, finding that the respondent had not committed fraud in obtaining and maintaining its registration for the mark RUSTICO for “wines and sparkling wines.”
Maids to Order of Ohio, Inc. v. Maid-to-Order, Inc., 78 USPQ2d 1899 (TTAB 2006).
The Board rejected the petitioner’s fraud claim and granted the respondent’s 2(d) counterclaim for cancellation, claiming that the petitioner failed to meet its “heavy burden” to prove fraud.
Haldex Brake Corp. v. Zikry, Opposition No. 91160715 (TTAB 2006) (unpublished)
The Board found that the applicant “may well have been unaware of the technical requirements for an allegation of ‘use in commerce’ under the Lanham Act.”
