Monday, October 26, 2009

Precedential No 42: TTAB Denies Fraud Summary Judgment Motion Due to Inadequate Pleading of Claim

The Board has now populated the post-Bose fraud landscape with another precedential decision, this one aimed at the proper pleading of a fraud claim. It points out that allegations made solely on information and belief "must be accompanied by a statement of facts upon which the belief is founded." Moreover, "[a] pleading of fraud must also include an allegation of intent." Asian and Western Classics B.V. v. Lynne Selkow, 92 USPQ2d 1478 (TTAB 2009) [precedential].


Petitioner Asian and Western contended that summary judgment was proper because "there was no use of the mark on some of the goods [bracelets] set forth in the registration" when Ms. Selkow filed her Section 8 and 15 declaration. The Board looked at the relevant pleading and found that, in light of Bose, the fraud claim was insufficiently pleaded.

FRCP 9(b) requires that the elements of fraud be pleaded with particularity. [What are the elements of fraud? a false statement, knowingly made, with intent to deceive, which was relied upon by the injured party to its detriment. ed.]

Petitioner alleged the following regarding fraud:

3. Petitioner is informed and believes that Selkow did not have bona fide use in commerce of the KL Design Mark at either the time the application for registration was filed or the date of the registration.

4. Petitioner is informed and believes that despite not having any bona fide use of the mark in commerce, Selkow submitted false statements to the trademark office attesting to such use when she filed her application for registration. Selkow knew or should have known that the statements were false, and thus the registration was obtained fraudulently and should be cancelled.

The Board quoted the CAFC's decision in Exergen Corp. v. Wal-Mart Stores Inc., 91 USPQ2d 1656 (Fed. Cir. 2009) [a patent case] in observing that "[p]leadings of fraud made on 'information and belief,' when there is no allegation of ‘specific facts upon which the belief is reasonably based’ are insufficient." "[T]o satisfy Rule 9(b), any allegations based on 'information and belief' must be accompanied by a statement of facts upon which the belief is founded"” The Board then cited Kowal v. MCI Comm’n Corp., 16 F.3d 1271 (D.C. Cir. 1994) for the following point: "[P]leadings on information and belief [under Rule 9(b) require an allegation that the necessary information lies within defendant's control, and … such allegations must also be accompanied by a statement of the facts upon which the allegations are based."

Here, Petitioner’s fraud allegations are based solely on information and belief and fail to meet the particularity requirement of FRCP 9(b): "they are unsupported by and statement of facts providing the information upon which petitioner relies or the belief upon which the allegation is founded (i.e., known information giving rise to petitioner's stated belief, or a statement regarding evidence that is likely to be discovered that would support a claim of fraud)."

Moreover, citing Bose, the Board pointed out that "[a] pleading of fraud on the USPTO must also include an allegation of intent." A statement that the applicant or registrant "knew or should have known" that the statement was false or misleading is not sufficient "because it implies mere negligence and negligence is not sufficient to infer fraud or dishonesty."

The Board then pointed to Crown Wallcovering Corp. v. The Wall Paper Mfrs. Ltd., 188 USPQ 141, 144 (TTAB 1975) for its statement that "in order to state a claim upon which relief can be granted on the ground of fraud, it must be asserted that the false statement complained of were made willfully in bad faith with the intent to obtain that to which the party making the statements would not otherwise have been entitled."

In light of the inadequacy of the pleading, the Board dismissed Petitioner’s summary judgment motion as moot, since one cannot obtain summary judgment on an inadequately pleaded claim. Petitioner was allowed 20 days to file and serve a proper pleading.

Finally, taking one last kick at the summary judgment motion, the Board pointed out that, even if it were considered on the merits, the motion must fail because "genuine issues remain at least with respect to respondent’s intent to commit fraud on the USPTO."

"A party making a fraud claim is under a heavy burden because fraud must be ‘proven to the hilt’ by clear and convincing evidence, leaving nothing to speculation, conjecture, or surmise; any doubt must be resolved against the party making the claim. *** The factual question of intent is particularly unsuited to disposition on summary judgment."

TTABlog comment: So the question is, in the fraud context, what kind of facts must be pleaded in order to support a statement made on "information and belief?" In the ordinary (non-TTAB) case, the pleader is the victim of the fraud and so is able to set forth specific facts that constituted the fraud. In these TTAB fraud cases, the pleader is not the victim of the fraud and is not likely to have first-hand knowledge of the pertinent facts. Even after investigation, it will likely not be completely clear that a false statement regarding use has been made to the PTO. So it seems to me that in most instances, a fraud claim will be made after discovery is taken and the (perhaps suspected) facts emerge.

Text Copyright John L. Welch 2009.

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