Friday, April 26, 2013

TTAB Dismisses Fraud Claim for Lack of Proof of Intent to Deceive

In one of my rants at the recent "Trademark Office Comes to California" Symposium, I suggested that the TTAB hold an early "hearing" in every case in which a party claims fraud - something like a "Markman hearing" on the patent side. The idea is that the Board would nip a fraud claim in the bud by requiring the claimant to show its hand regarding its proof of fraud. This might discourage and eliminate bogus fraud claims that terrorize (or bully) applicants and registrants. Here's a case in point, where the fraud claimant had no proof that Respondent intended to deceive the PTO, and so the fraud claim failed at trial. C. & J. Clark International Limited v. Unity Clothing Inc., Cancellation No. 92049418 (April 24, 2013) [not precedential].

Prior to commencement of this proceeding, Respondent Unity Clothing amended its registration to delete five clothing items from its identification of goods. After commencement, and without opposition from Petitioner, Respondent deleted a sixth item.

Petitioner Clark's only claim was fraud, i.e., that Respondent "fraudulently alleged actual use of the [registered mark] in commerce on goods when no actual use has been made." Of courses, Unity denied the salient allegations of Clark’s fraud claim.

Under In re Bose Corp., the following four elements must be established to prove fraud:

  1. applicant/registrant made a false representation to the USPTO;
  2. the false representation is material to the registrability of the mark;
  3. applicant/registrant had knowledge of the falsity of the representation; and
  4. applicant/registrant made the representation with intent to deceive the PTO.

Respondent Unity admitted, on discovery, that it falsely stated that it was using its mark on the eliminated goods when it filed its underlying application and that it knew at that time that it was not using its mark on those goods. Thus, the first and third Bose elements were satisfied. Furthermore, there was no dispute that this was a material representation because the PTO relied upon that statement in issuing the challenged registration. Consequently, the second element was satisfied.

The question, then, was whether Unity had an intent to deceive the PTO when it made the false statement.

Unity asserted that it "acted under a mistaken belief that it was proper to list related goods that were as yet unused together with related goods that were already in use." It pointed to the fact that it deleted the "unused goods" as soon as it learned that inclusion of those goods was improper. Clark had nothing to offer other than Unity's admissions.

The Board found Unity's explanation "plausible in that it mistakenly believed that it could list goods for which it was not using its mark already so long as it was making use of its mark on other goods identified in the application at the time."

We do not have clear and convincing evidence to suggest the false statements were the result of a fraudulent intent rather than Unity's principal, Mr. Hwang, simply misunderstanding the requirement that all, and not just some, identified goods must be used in commerce at the time of filing a use-based application. While the admissions are certainly relevant, applicant has not admitted that its false statement entitled it to a registration that it did not otherwise deserve. Reviewing the record in its entirety, we do not find sufficient evidence demonstrating any deceitful intent on Unity's behalf in this regard.

The Board saw "some probative value in Unity's actions in promptly amending its registration upon learning of its error." It recognized that principals of companies, and even counsel, sometimes overlook or misinterpret averments made in documents submitted to the PTO. "Without more, we do not find a fraudulent intent simply based on mistakes or oversights."

And so the Board dismissed Clark's petition for cancellation.

Read comments and post your comments here.

TTABlog comment: Is fraud dead? You betcha! Note that it is helpful to amend a registration (or, presumably, correct an application) in a timely manner to eliminate "unused" goods/services.

For a case (not a TTAB case) where fraud was recently found, see  Melodrama Publishing LLC v. Santiago, Civil Action No. 12-Civ. 7830 (S.D.N.Y. April 11, 2013). [TTABlogged here].

Text Copyright John L. Welch 2013.


At 10:25 AM, Anonymous Joe Dreitler said...

Agree that fraud appears dead in the USPTO. As you note, federal judges in some cases are not as understanding of those who file documents with a federal agency and swear under oath that the statements are true when they are not. Good for them. It also points out the value of being able to appeal a decision to a district court which is not bound by the CAFC's view that complying with the law has no adverse consequences.

At 11:07 AM, Anonymous Anonymous said...

John -- how would an early TTAB hearing on fraud, as you suggest, be of any use in determining fraudulent intent? Discovery/testimony is needed to establish what the applicant's/registrant's intentions were. That is, unless the TTAB in an early hearing will place the party under oath and ask the necessary questions or perhaps require them to sign a sworn affidavit regarding their true intentions. But that would deprive a claimant of the opportunity to directly question intent themselves.

At 11:14 AM, Blogger John L. Welch said...

One party has already made a claim of fraud, so the first step is for that party to provide its evidence that supports the claim. If it doesn't have any, or said it needs discovery first, then the claim should not have been made in the first place.

At 11:41 AM, Anonymous Anonymous said...

That would help dispose of fraud cases that fail under the first two Bose elements -- but the 3rd (knowledge) and 4th (intent) elements will almost always need discovery first. I do not think it is too difficult for a claimant to satisfy the first two elements (just show inconsistencies in the record and actual use).

At 3:31 PM, Anonymous Orrin A. Falby said...

Because fraud has to be plead with particlarity and intent cannot be alleged upon information and belief. Just thought that would cap-off John's point.

At 4:02 PM, Anonymous Anonymous said...

A lot of these successful defenses to fraud allegations seem to be a simple ignorance of the law. This is one of the only areas of the law, and the TTAB the only court, where I see that defense working.

At 5:09 PM, Anonymous Anonymous said...

where fraud potentially involves a signed declaration (as many USPTO matters do) then isn't the signed declaration sufficiently particular?


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