Friday, November 13, 2009

A Medinol-like Fraud Case in California Worth Watching

The Seattle Trademark Lawyer blog (here) reports on a federal district court action in California that is worth keeping an eye on. Defendant Wine Group alleged that Plaintiff One True Vine's pleaded registration for the mark LAYER CAKE for "white wine, red wine" was invalid on the ground of fraud because (as Plaintiff admitted) the mark had never been used for white wine. Plaintiff contended that it did not realize that its Statement of Use included “white wine, red wine” and not merely “wine.” One True Vine, LLC v. The Wine Group LLC, Civil Action No. C 09-1328 (MHP) (N.D. Cal. November 3, 2009).

Plaintiff moved to amend its pleaded registration to delete "white wine." Defendant opposed. The court granted the motion to amend, but noted that the amendment of the registration did not let Plaintiff off the hook for a potential finding of fraud.

Defendant does not argue that such an amendment would materially alter the character of the mark. Rather, defendant argues that the motion is “both too late and too early.” According to defendant, the proposed amendment is too late because plaintiff has failed to amend the registration in the past—and because plaintiff has already asserted the existing registration in the TTAB and in this court, as the basis for its infringement claim. Defendant points to no authority, however, suggesting the existence of a time limit on the court’s authority to correct the register pursuant to the Lanham Act.

Defendant also argues that the proposed amendment is too early. This is so, according to defendant, because defendant’s counterclaim to cancel plaintiff’s registration has not yet been adjudicated. Defendant is apparently concerned that such an amendment will in some way moot or invalidate its counterclaim. Yet plaintiff cannot nullify a claim that it procured its trademark through fraud on the USPTO by now amending its trademark registration. If, as defendant alleges, plaintiff committed fraud on the USPTO, a post hoc amendment of the trademark register does not serve to moot or rectify such fraud. Granting the instant motion does not render the counterclaim moot. Accordingly, there is no reason not to amend the register to correct what all agree is erroneous information.

This factual situation looks a lot like the facts in Medinol v. Neuro Vasx: two listed items in the identification of goods, use on only one of the two, a claim of inadvertent mistake. Of course, the Board found fraud in Medinol under the TTAB's "should have known" standard that was recently rejected by the CAFC in Bose.

What standard will the court apply? How will defendant prove fraud? Is it enough for plaintiff to say that the error was inadvertent? Suppose the two listed goods were wine and nuclear reactors, and the Registrant claimed that the inclusion of "nuclear reactors" was inadvertently overlooked? Suppose plaintiff here had never sold any white wine at all under any label? What if Defendant showed that plaintiff had made the same error in other registrations?

Well, let's see what happens.

Text Copyright John L. Welch 2009.


At 7:53 PM, Anonymous Anonymous said...

John, I enjoy your blog and programs. Thanks for the contributions. Re the fraud issues, doesn't the question of whether the registrant has made the same mistake in the past cut both ways - consistently mistaken vs. a sign of intent? [I assume you can respond in a comment, but if I have to get an "identity", I guess I'll get the badge.]

At 11:45 AM, Blogger John L. Welch said...

Good question. At some point, though, does the repeated filing of false declarations cross the line into "reckless disregard" for the truth? Is that enough for fraud?

At 9:11 PM, Anonymous Anonymous said...

Yes, that test case will come up probably soon enough. Thanks for the thoughts.

At 10:32 PM, Anonymous Anonymous said...

In the 9th Circuit, a party may seek cancellation of a trademark registration on the basis of fraud if it can prove:
1) Falsity - a false representation regarding a material fact,
2) Scienter - the registrant's knowledge or belief that the representation is false,
3) Intent - the intent to induce reliance upon the misrepresentation,
4) Reliance - reasonable reliance thereon; and,
5) Damages - damages proximately resulting from the reliance.
See Robi v. Five Platters, Inc., 918 F.2d 1439, 1444 (9th Cir. 1990). The 9th Circuit has held that this is a “heavy burden.” Id.

The party claiming fraud is going to have to prove by clear and convincing evidence that Defendant made false statements with the intent to deceive the USPTO.

In other words, even pre-Bose, the claim was stupid. Post-Bose, it is sanctionable.


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