Wednesday, April 22, 2009

TTAB Rules, Non-Precedentially, that Fraud May be "Cured" Post-Registration

The ever-informed Maury Tepper brought to my attention a non-precedential decision from October 2008 involving the issue of fraud, and particularly whether fraud can be "cured" after a registration has issued. This Board panel adopted the approach of the panel majority in University Games in ruling that correction of a false statement regarding use, if made before a registration has been challenged, creates "a rebuttable presumption that [registrant] did not intend to commit fraud." Zanella Ltd. v. Nordstrom, Inc., 90 USPQ2d 1758 (TTAB 2008) [not precedential]. [Redesignated as precedential on May 13, 2009 [see TTABlog posting here].

Applicant Nordstrom counterclaimed for cancellation of five registrations asserted by Opposer Zanella in its notice of opposition, and then moved for summary judgment.

The Board entered summary judgment as to one registration, finding that Zanella had committed fraud vis-a-vis one of the registrations by including in its application and in its Section 8 declaration the following goods as to which it was not using the subject mark (shown above): "mantles, blouses, waistcoats, socks, stockings, ties, scarves, hats, swimwear or underwear."

As to the other four registrations, however, Zanella "corrected" the registrations by omitting various "unused" items when it filed its Section 8 declaration in each case. Zanella argued that the registrations as maintained are not fraudulent because they “were corrected prior to Nordstrom’s use of its mark and prior to this proceeding.” Zanella also asserted that, at a minimum, the corrective actions raise a genuine issue of material fact as to its fraudulent intent.

Nordstrom contended that Zanella's delay in correcting these registrations and its "history of false claims" supported a finding of fraud.

The Board looked favorably on Zanella's actions:

We find that opposer's timely proactive corrective action with respect to these registrations raises a genuine issue of material fact regarding whether opposer had the intent to commit fraud. In particular, opposer's action in correcting any false statements prior to any actual or threatened challenge to the registrations creates a rebuttable presumption that opposer did not intend to deceive the Office. See University Games Corp. v. Inc., 87 USPQ2d 1465, 1468 (TTAB 2008). In this case, we find that applicant’s evidence submitted in support of the motion for summary judgment, namely, opposer's discovery responses and the file histories of the registrations, fails to rebut the presumption of no intent to commit fraud on the Office. Accordingly, we find a genuine issue of material fact remains with respect to whether opposer had the intent to commit fraud on the USPTO with respect to these registrations.

And so the Board denied the motion for summary judgment as to the four "corrected" registrations.

Maury M. Tepper, III

TTABlog comment: Let the post-registration fraudits begin!! [Maybe we should call them "f®audits"?]

It appears from this decision that fraud may be curable even after registration, as long as the false statement regarding use is corrected before the registration is challenged. Note well that this is a non-precedential decision by one panel of the TTAB, so it is not etched in stone. But it is certainly a promising approach to the fraud problem.

In University Games, Judge Walsh, in a concurring opinion, espoused the view that a correction made before publication completely obliterated any fraud because the PTO Examining Attorney had not relied on the false statement in approving the application for publication.

We may now begin to see some coherence to the TTAB's view of fraud and how to cure it: an amendment to correct a false statement filed before the application or registration has been challenged, gives rise to a rebuttable presumption that the owner lacked the requisite intent to commit fraud on the PTO. Judge Walsh would take this a step farther, saying that, prior to approval for publication, the correction wipes out any materiality and therefore eliminates fraud altogether.

As to drawing the line at which correction no longer cures fraud, I can understand why an attempt to cure after a fraud claim has been made in a proceeding should not "cure" fraud. Otherwise there would be no incentive to make any correction until one is caught. But why should a challenge on other grounds (e.g., see the GRAND CANYON WEST case) foreclose the possibility of a curing amendment? Is it because, in the usual situation, fraud is uncovered only after discovery is taken and therefore the fraud may not be known (and thus will not have been pleaded) at the time of commencement of the proceeding? Would a party's discovery requests regarding possible fraud trigger the other side's attempt to cure, before the discovering party has a chance to obtain the discovery it needs to support a fraud claim?

What we need are a few more precedential decisions that clearly map the fraud minefield.

[This decision was not included in the TTAB's FOIA database because it is interlocutory, even though it was "final" as to one of the registrations, and therefore it sailed under the TTABlog radar.]

Text Copyright John L. Welch 2009.


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