Guest Article: Carrie Webb Olson on Fraud
By now, most U.S. practitioners have come to either love or loathe the current and evolving state of the law concerning "fraud" in the prosecution and maintenance of federal trademark applications and registrations. Below is a summary of the law and some practice tips for avoiding problems down the road.
What is it?
Fraud occurs when a trademark applicant or registrant makes a false statement regarding a material issue, resulting in the issuance or continuation of a trademark registration before the U.S. Patent and Trademark Office ("PTO"). Fraud exists only when the misstatement involves a “material issue” concerning the application or registration. Misstatements concerning ministerial matters are not subject to a fraud analysis and can be remedied. However, if the registration would not have issued or been maintained but for the misstatement, e.g., relating to use, then fraud has occurred and the registration will be irreparably tainted.
When does it occur?
Fraud occurs at the time of submission of a sworn document to the PTO. Once a fraudulent statement has been made, there is no remedy.
The prevailing and most damaging occurrence of a false statement arises when a trademark owner files a Statement of Use, a Section 8 Affidavit of Use and/or a Section 9 Renewal application. These documents and the statements made therein are tied directly to the identification of goods and/or recitation of services listed in the application or registration. When filing any of these three documents, the applicant/registrant is swearing, under oath, that it is "using" the mark in connection with each and "every item" listed in the application or registration.
What are the consequences?
Any registration that issues or is maintained due to a misstatement is forever marred and vulnerable to challenge by third party. A successful challenge based on fraud results in the cancellation of the entire registration.
The cases recite a litany of failed defenses to fraud claims, including poor health, English as a second language, failure to understand the statements in the Declaration and PTO form and innocent mistake. None of these arguments have been successful in saving a challenged application or registration.
Unlike general law where the intent of the party plays a critical role in a finding of fraud, the current line of cases decided by the Trademark Trial and Appeal Board ("TTAB") results in a finding of fraud where the applicant or registrant “knew or should have known” that the statements were false. The subjective intent of the party is not a factor - it is the objective manifestation of the party’s intent that is determinative in a finding of fraud before the TTAB.
When does it arise?
The TTAB has created a clear rule with a clear remedy. Therefore, asserting fraud in opposition and cancellation proceedings, either as a defense or as a strategy for removing obstacles to registration of a junior mark, can be a very effective tool.
In most cases, a fraud defense will fall on an unwitting plaintiff, who will then have to scramble to either counter the assertion and/or prepare to assert its common law rights in and to a trademark.
Why does it happen?
In most cases, the mistake will be innocent – particularly in the case of the Section 8 Affidavit and the Section 9 Renewal filings. By the time these documents are due to be filed, the registrant has owned the mark for at least five years. During this time, development and commercialization of the brand is well underway. In fact, the mark may have evolved into areas that are different from that which was originally contemplated.
However, unless there are enforcement issues that arise during the first 5 years of the life of a trademark registration, communication between the business professionals and their trademark attorneys may be relatively quiet. When the opportunity to file the Section 8 affidavit comes due, the trademark practitioner is likely to prepare a form from the PTO website, which must be signed and submitted with a specimen.
Complications and/or confusion can arise due to several factors: First, there is a difference between the specimen requirements and the declaration requirements associated with these maintenance documents. The Rules require submission of a single specimen for any one of the items in each Class listed in the registration. However, the signature on the declaration is verifying that the mark is in use in connection with all the items listed in the registration. Second, the PTO electronic forms for signature do not specifically identify each of the items listed in the registration. They simply state that the mark is in use with "all goods and/or services listed in the registration."
If the form is passed along to the client for signature, the client may not immediately recognize the gravity of the statement being made. The business person may simply acknowledge in his or her own mind that the mark is in use and sign the document. Many busy executives will not investigate, but rather, rely on counsel to either advise them of the criticality of the situation and/or present them with accurate documents for signature.
The Board appears to be honing in on the "should have known" standard to remind us of the seriousness of the papers that we file with the PTO and to maintain the integrity of the process. However, many practitioners believe that the penalty outweighs the crime in these situations. Nonetheless, the issue presents a good opportunity for trademark practitioners to sharpen their practice and increase the level of communication with their clients concerning "use" as a legal term before the PTO, versus "use" as a business term among executives and marketing professionals.
There is no such thing as a "routine filing" when it comes to U.S. trademark practice. Given that the PTO maintenance forms do not specifically identify the goods and/or services listed in the registration, it is a good idea for the trademark practitioner to list these items and to point out the need for the use on all of the items listed in its correspondence to the client concerning the filing.
When maintenance documents come due, the trademark practitioner and the business client should undertake an investigation into the scope of use of the mark before any documents are signed and filed with the PTO. Trademark attorneys should consider reaching out to their clients to start the conversation well before the deadline to file the documents. The TTAB will consider the steps taken by the signatory to confirm the accuracy of the statements to determine whether the applicant/registrant "should have known" about any misstatements.
An ancillary consideration is whether attorneys should sign official PTO documents on behalf of their clients. While certainly permissible according to the Rules, presenting these documents to the client, with careful instructions for review and signature, could create a higher level of attention to the accuracy of the information contained therein. In view of the current climate, such a practice may be prudent.
The issue of fraud has created a buzz in the trademark community over the past few years. While most practitioners have modified their practice to address the issues going forward, there is still the problem of the irreparably tainted registration, which may have been"fraudulently" maintained or renewed prior to widespread attention to this issue.
Therefore, sound practice would entail conducting an audit of any trademark registrations that are key to the company's business and are likely to be enforced against second-comers to the market. A careful review of recitations of services and identifications of goods alongside marketplace specimens in support of each and every item listed in the registration will identify misstatements and potentially vulnerable registrations. Where problems are identified, the registrant should consider filing replacement applications with the PTO.
Prior to commencing any opposition, cancellation or federal trademark infringement action, a trademark owner should confirm that the registration(s) to be asserted are not vulnerable to attack. If problems are identified, a trademark owner may still bring an action; however, the plaintiff should be prepared to litigate its claims based on common law trademark rights. While a common law trademark owner’s burden of proof is higher, and scope of protection can be narrower than that of a federal trademark registrant, there may still be a basis for seeking protection under the law.
In sum, the recent TTAB decisions on fraud serve to remind trademark owners, and their lawyers, that PTO declarations are serious documents, which incorporate a solemn oath attesting to the facts therein. It is clear that there is a duty to investigate the facts prior to signing the documents. Prudent practice and attention to detail will increase the cost of maintaining a trademark portfolio, both inhouse and in private practice. However, alerting trademark owners to the requirements for filing an accurate document and discussing those requirements as they relate to the client’s business can prevent the loss of registration due to a misstatement uncovered at a later date.
© 2008 Carrie Webb Olson. All Rights Reserved.
About the Author: Carrie Webb Olson is an associate with Edwards Angell Palmer & Dodge, LLP, in the firm's Boston office. For more information, including case citations, you may contact Carrie at firstname.lastname@example.org.