Precedential No. 21: TTAB Upholds Fraud Claim Against Distributor of Massage Chairs Who Registered Manufacturer's Mark FUJIIRYOKI

For only the second time since the CAFC's 2009 decision in In re Bose, the Board upheld a claim of fraud, ordering cancellation of a registration for the mark FUJIIRYOKI for massage chairs. William Shen, the CEO of Respondent ACIGI, filed the underlying application and then assigned the registration to ACIGI soon after issuance. The Board found that Shen knew he was not the owner of the mark, that his false statement of ownership was material to the registration, and that he intended to deceive the USPTO. Fuji Medical Instruments Mfg. Co., Ltd. v. American Crocodile International Group, Inc., 2021 USPQ2d 831 (TTAB 2021) [precedential] (Opinion by Judge Thomas Shaw). 

Petitioner Fuji is a Japanese company that makes and has sold massage chairs since 1954. It has exported massage chairs to the United States since at least 1968. Respondent ACIGI became Fuji's exclusive U.S. distributor in 2005 and was still in that role when Mr. Shen filed the underlying trademark application in 2015 in his own name, the application being signed by Mr. Shen's attorney.

Fraud: Fraud in the procurement (or maintenance) of a trademark registration occurs when an applicant or registrant makes a false representation of a material fact with the intent of obtaining or maintaining a registration to which it is otherwise not entitled. In re Bose Corp., 580 F.3d 1240, 91 U.S.P.Q.2d 1938, 1939-40 (Fed. Cir. 2009); Nationstar Mortg. LLC v. Ahmad, 112 U.S.P.Q.2d 1361, 1365 (TTAB 2014). A party alleging fraud must prove the claim by clear and convincing evidence. Bose, 91 U.S.P.Q.2d at 1939.

The Board observed that, between a manufacturer and a distributor, the manufacturer is presumed to own the trademark that is applied to the goods. J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION, § 29:8 (5th ed. 2021). See also Nahshin v. Prod. Source Int’l, LLC, 107 USPQ2d 1257, 1263 (T.T.A.B. 2013). That presumption is rebuttable. See Global Maschinen GmbH Banking Sys., Inc., 227 U.S.P.Q. 862, 866 (T.T.A.B. 1985). The following factors are relevant when considering if the presumption has been rebutted:

• (1) which party created and first affixed the mark to the product;
• (2) which party’s name appeared with the trademark on packaging and promotional materials;
• (3) which party maintained the quality and uniformity of the product, including technical changes;
• (4) which party does the consuming public believe stands behind the product, e.g., to whom customers direct complaints and turn to for correction of defective products;
• (5) which party paid for advertising; and
• (6) what a party represents to others about the source or origin of the product.

UVeritech, Inc. v. Amax Lighting, Inc., 115 U.S.P.Q.2d 1242, 1249 (T.T.A.B. 2015).

Applying that framework, the Board found that Fuji created the mark and applied it to the goods. Fuji was “routinely represented to consumers as the source of the goods.” Fuji arranged for repair of broken chairs, supplying ACIGI with replacement parts and technical training. Although ACIGI did pay for most of the advertising, that is not surprising when the manufacturer “is based in Japan and has little experience with the U.S. Market.” The Board concluded that Fuji was the owner of the mark.

Mr. Shen claimed that he had written permission to file the application, but no such evidence was submitted. Shen also claimed he had verbal permission, but the Board found his testimony not credible. And Shen claimed that Fuji had abandoned the mark, since a prior registration and application by Fuji had lapsed. The Board pointed out, however, that a mark is not abandoned just because a registration or application lapses. Moreover, Shen's assertion that Fuji abandoned the mark while ACIGI was selling its chairs "defies logic and the law [and] strains credulity."

Shen's claim of ownership of the mark was a false and material representation: he falsely stated that he owned the mark and was unaware of anyone else who claimed to own the mark [Note: that's not what the declaration says - ed.]; he misstated that he owned the mark even though his wife was co-owner of ACIGI; and he submitted a specimen of use falsely implying that ACIGI manufactured massage chairs at the time. The false statement of ownership was a material misrepresentation because an application filed by someone who is not the owner is void. 37 C.F.R. § 2.71(d); Lyons, 123 USPQ2d at 1027; Chien Ming Huang v. Tzu Wei Chen Food Co., 849 F.2d 1458, 7 USPQ2d 1335, 1335-36 (Fed. Cir. 1988).

Finally, as to intent to deceive, the Board found that Mr. Shen's testimony demonstrated his lack of credibility. He was "not very sure" who owned the stock in ACIGI, he misrepresented the terms of an agreement with Fuji, and asserted that his "level of English is limited" but later claimed that he "read[s] English very well."
 

Such contradictions, inconsistencies, and indefiniteness diminish the overall credibility of Shen’s testimony. Accordingly, we find Shen’s testimony is entitled to little weight. B.R. Baker v. Lebow Bros., 66 U.S.P.Q. at 236; Nationstar, 112 U.S.P.Q.2d at 1370-73 (Applicant’s evasiveness and failure to respond directly to straightforward questions led the Board to find “applicant’s testimony not at all credible.”).

The fact that Shen's attorney signed the application "did not relieve Shen of his duty to state the truth." See Smith Int’l v. Olin Corp., 209 U.S.P.Q. at 1047 (“Even if the affidavit was prepared by its attorney, Smith must be held accountable for any false or misleading statements made therein.”).

The evidence of record—both direct and circumstantial—establishes that Shen knew the ... declaration was filed in his name, that he was not the owner of the FUJIIRYOKI mark, and that Petitioner actually owned the mark.

The Board observed that this is not a case where a false statement "is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive." In re Bose, 91 U.S.P.Q.2d at 1942. The fact that Shen did not tell Fuji that he had applied to register the mark "demonstrates that Shen both knew he was not the owner of the mark ... and had an intent to deceive the Office into granting a registration to which he knew he was not entitled."

The Board found the evidence "clear and convincing" that Shen intended to deceive the USPTO: not only the documentary evidence but also Shen's "grossly evasive testimony and his self-serving claims."

Affirmative Defenses: The Board rejected ACIGI's several affirmative defenses. ACIGI alleged waiver and estoppel by acquiescence, but that defense is not available against a claim of fraud. Saint-Gobain Abrasives, Inc. v Unova Indus. Automation Sys., Inc., 66 U.S.P.Q.2d 1355, 1359 (T.T.A.B. 2003) (“It is well established that the equitable defenses of laches and acquiescence are not available against claims of genericness, descriptiveness, fraud, and abandonment.”). ACIGI also alleged abandonment by naked licensing, asserting that it manufactured its own chairs under the mark without any quality control by Fuji, and further that it sub-licensed the mark to others. In any case, However, there was no evidence that ACIGI was manufacturing its own chairs or sub-licensing the mark. In any case, "[u]nder  the doctrine of licensee estoppel, during the time that a license is in force, a licensee cannot challenge the validity of the licensed mark including on the ground that the licensor has not exercised sufficient quality control." Estate of Biro v. Bic Corp., 18 U,S,P,Q,2d 1382, 1386 (TTAB 1991); Leatherwood Scopes Int’l Inc. v. Leatherwood, 63 U,S,P,Q,2d 1699, 1703 (TTAB 2002)

Conclusion: The Board granted the petition for cancellation on the ground of fraud.

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TTABlogger comment: Compare this decision to the Board's recent denial of a fraud claim regarding the mark SEYIDOGLU [TTABlogged here], also involving a U.S distributor who registered a foreign manufacturer's trademark.

Text Copyright John L. Welch 2021.