Friday, July 19, 2013

Precedential No. 28: TTAB Denies 12(b)(6) Motion to Dismiss Fraud Counterclaim

The Board denied Opposer Caymus Vineyards' motion to dismiss Applicant Caymus Medical's counterclaim for cancellation of a registration for the mark CAYMUS for wine, on the ground of fraud, ruling that Applicant's pleading was adequate to state a claim. However the Board granted opposer's motion to dismiss applicant's second counterclaim, which was based on Section 2(e)(2) [geographic descriptiveness], on the ground that it was barred by the 5-year statute of limitations embodied in Section 14 of the Trademark Act. Caymus Vineyards v. Caymus Medical, Inc., 107 USPQ2d 1519 (TTAB 2013) [precedential].

Fraud claim: The Board observed that under In re Bose, a party claiming fraud must allege that the other party obtained the subject registration by "knowingly making a false, material representation of fact with intent to deceive" the USPTO. "[A]llegations of fraud must be set forth with particularity, although malice, intent, knowledge, and other conditions of a person's mind may be averred generally." [What about reliance? - ed.].

Construing the allegations of the counterclaim in the light most favorable to applicant, the Board found that applicant had alleged with sufficient particularity facts that, if proven at trial, would establish fraud. Applicant alleged "when and how the fraud allegedly occurred and the content of the false representations," and indicated "what was obtained by reason of the asserted fraud."

Specifically, the Examining Attorney had asked opposer, when an applicant, whether CAYMUS had any geographical significance or any meaning in a foreign language." As a result of that conversation, the Examining Attorney entered the following amendment: "[t]he wording 'CAYMUS' has no significance other than trademark significance."

Applicant alleged that opposer knowingly, and with deceptive intent, failed to disclose that CAYMUS "had primarily geographic significance, and that its grapes are grown and/or its wine is produced near or at the Caymus locale." Applicant further alleged that opposer made this false statement in order to induce the USPTO to rely thereon, which the USPTO did by issuing, renewing, and maintaining the registration.

Opposer contended that because the amendment was entered by the Examining Attorney and was not opposer's statement per se, the attribution of knowing, deceptive intent is "speculative." The Board was unmoved: "It is applicant's responsibility to ensure that accurate information is transmitted to the USPTO." If opposer believed that the amendment did not accurately reflect the information provided by its counsel, it had an obligation to immediately inform the Examining Attorney. "Deliberately omitting relevant information, as has been alleged by applicant, may be treated as the equivalent of a false statement in its effect and also, under certain circumstances, show the necessary element of intent." And, of course, a client is bound by the actions of its attorney.

Opposer maintained that "CAYMUS" has no geographic, but only historical and cultural significance, but the Board pointed out that this was irrelevant to whether applicant had properly stated a claim of fraud. Instead it constituted a response on the substantive issue.

Therefore, the Board denied the motion to dismiss applicant's fraud counterclaim.

Section 2(e)(2) claim: Although opposer's pleaded registration was more than five years old, applicant maintained that because of opposer's fraud, the Section 14 bar to cancellation should not apply to its claim of geographic descriptiveness . The Board disagreed:

The assertion that opposer may have fraudulently procured its registration, while stating a valid ground for cancellation of a registration that is more than five years old, does not allow applicant to assert a ground that is available only when a registration is less than five years old.

The Board therefore granted opposer's motion to dismiss applicant's second counterclaim as time-barred by Section 14 of the Act.

Read comments and post your comments here.

Text Copyright John L. Welch 2013.


At 9:33 AM, Anonymous Robert M. O'Connell, Jr. said...

Is this the first fraud claim to survive a motion to dismiss at the Board since Bose?
-- Bob O'Connell

At 8:32 PM, Blogger John L. Welch said...

No. See, for example , the Meckatzer case from 2010.

At 4:54 PM, Anonymous Rob said...

The TTAB will not grant any judgment on a fraud claim until the CAFC explains what fraud is (rather than what it's not). So the pendulum has gone all the way back, from "everything can be fraud" to "nothing can be fraud." Unwise judges, just like hard cases, make bad law.

At 9:35 AM, Anonymous Paul Reidl said...

The Board really needs to sort this out. Too many folks still think that fraud is their silver bullet when as a practical matter it is under current Board decisions just a nuisance and distraction. That gets in the way of settlement and the efficient preparation and resolution of the case. If the Board is not going to recognize fraud as anything other than metaphysical possibility, then how can a party ever state a claim on which the Board is likely to grant relief? And if a party cannot do that, why deny a Rule 12 motion and keep the issue in the case?


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