Thursday, March 09, 2023

Guest Post by Michael Hall: "Ignoring Federal Circuit Precedent, the Board Toes the Line on the Burden of Proof for Genericness Refusals"

Michael Hall of Womble Bond Dickinson has kindly provided the following thought-provoking comments on the current status of the TTAB's genericness jurisprudence, and particularly on the Board's recent Uman Diagnostics decision applying a "preponderance of the evidence" standard for proof of genericness while ignoring venerable CAFC precedent requiring "clear and convincing" evidence. [Note: Yours truly, the TTABlogger, represented Uman at oral argument before the Board. The comments by Mr. Hall were unsolicited.].

Ignoring Federal Circuit Precedent, the Board Toes the Line
on the Burden of Proof for Genericness Refusals

What is the burden of proof the Office must meet in order to refuse a mark as generic? Since 1987, Federal Circuit precedent has required a showing of “clear and convincing evidence” (or “clear evidence,” which the Federal Circuit considers the equivalent). Last year, however, the USPTO issued an Examination Guide purporting to “clarify” that the proper burden is the lower “preponderance of the evidence” standard. And a few weeks ago, the Board issued its first precedential decision addressing this burden since issuance of the Exam Guide. Unfortunately, in my opinion the Board’s decision shrank from candidly acknowledging the Exam Guide and it flagrantly ignored a generation of case law to the contrary, choosing instead to remark without explanation that the burden of proof is a “preponderance of the evidence.” Although surprising at first blush, the decision’s parroting of the Exam Guide was probably to be expected given the subordinate position of the Board to Office management.

I. The Burden of Proof From 1987-2022

In 1987, the Federal Circuit held that in order to support a genericness refusal, the Office must show by “clear evidence” that the term is generic. In re Merrill Lynch, Pierce, Fenner, and Smith, Inc., 828 F.2d 1567, 1571, 4 U.S.P.Q.2d 1141, 1143 (Fed. Cir. 1987). In so holding, the court relied upon the then-current version of the TMEP, which required “clear evidence of generic use.” Id. In the decades since Merrill Lynch, both the Federal Circuit and the Board have on countless occasions reiterated and applied this standard. For example, in 2016 the Federal Circuit explained:

[I]n registration proceedings the PTO always bears the burden of proving genericness by clear and convincing evidence. Here, the Board’s opinion acknowledged the presumption of non-genericness and the correct burden of proof: “When a proposed mark is refused registration as generic, the Office has the burden of proving genericness by ‘clear evidence’ thereof.” The Board sustained the examiner’s determination that “churrascos” is a generic term with respect to restaurant services only after concluding that the examiner had proved this fact by clear and convincing evidence.

In re Cordua Rests., Inc
., 823 F.3d 594, 600-01, 118 U.S.P.Q.2d 1632, 1635 (Fed. Cir. 2016) (citations omitted). See also In re, 415 F.3d 1293, 1296, 75 U.S.P.Q.2d 1420, 1421 (Fed. Cir. 2005) (“To deny the registration of a mark as generic, the PTO has the burden of ‘substantial[ly] showing . . . that the matter is in fact generic . . . based on clear evidence of generic use.’”) (citation omitted); In re Twenty-Two Desserts, LLC, 2019 U.S.P.Q.2d 292782, at *1 (T.T.A.B. 2019) (quoting Federal Circuit precedent for the proposition that “[t]he Office must demonstrate a term is generic by ‘clear evidence’ of generic use”); In re Am. Online, Inc., 77 U.S.P.Q.2d 1618, 1623 (T.T.A.B. 2006) (“In light of the evidence of record, we cannot conclude that there is clear evidence that [the term is generic]. Therefore, the refusal on the ground of genericness is reversed.”).

Sometimes the Federal Circuit has used the phraseology “clear and convincing evidence” in place of “clear evidence,” but the court has made it clear, citing both U.S. Supreme Court precedent and its own, that it views these locutions as equivalents. See In re, L.P., 573 F.3d 1300, 1302, 91 U.S.P.Q.2d 1532, 1533-34 (Fed. Cir. 2009) (explaining that “clear evidence” is the equivalent of “clear and convincing evidence” and is a heavier burden than a preponderance of the evidence). For the sake of consistency, I use “clear and convincing evidence” in this article.

II. The Office’s 2022 Exam Guide

In May 2022, the Office issued Examination Guide 1-22 titled Clarification of Examination Evidentiary Standard for Marks Refused as Generic. According to this Exam Guide (endnotes omitted):

Prior USPTO examination guidance suggested a heightened, “clear evidence” standard for an examining attorney to establish a prima facie case of genericness. Any heightened standard would be inconsistent with both (1) the standard for third parties to challenge the registration of marks as generic and (2) the “reasonable predicate” meaning of “prima facie case” in the context of other refusals in examination.

This examination guide clarifies that an examining attorney does not bear a greater burden in supporting a position that an applied-for mark is generic beyond the evidentiary showing required by the relevant legal test.

( . . . )

In 1987, the Federal Circuit decided the first case to refer to “clear evidence” in the context of a genericness refusal, In re Merrill Lynch, Pierce, Fenner, and Smith, Inc. The Court cited to § 1305.04 of the First Edition of the TMEP (Revision 6 (1983)) as requiring a showing based on “clear evidence of generic use.”

In subsequent cases involving genericness refusals, the Federal Circuit cited to Merrill Lynch, its later decisions citing that case, and/or the TMEP, which was revised after Merrill Lynch, for the “clear evidence” standard. The Federal Circuit further interpreted “clear evidence” to have an evidentiary burden meaning of “clear and convincing evidence” that was not intended by the TMEP and is inconsistent with the preponderance of the evidence burden the Federal Circuit requires to prove claims that a registered mark is generic in the inter partes cancellation context. Moreover, for other types of refusals, the Federal Circuit has consistently held that to make a prima facie case supporting a particular refusal, the examining attorney must set forth a “reasonable predicate” or basis for the finding or conclusion underpinning the refusal. To resolve the confusion, the USPTO will no longer use the terminology “clear evidence” in the TMEP to refer to the examining attorney’s burden to support genericness refusals.

In other words, Office management appears to believe that because the Federal Circuit originally cited the TMEP in Merrill Lynch back in 1987, by amending the TMEP in 2022 the Office can effectively overrule decades of Federal Circuit precedent requiring clear and convincing evidence to support a genericness refusal. And sure enough, whereas the July 2021 version of the TMEP (Section 1209.01(c)(i)) stated that “[t]he examining attorney has the burden of proving that a term is generic by clear evidence,” the same section in the July 2022 version (here) does not.

III. The Board’s 2023 Decision in In re Uman Diagnostics AB

I found the Exam Guide’s reasoning bizarre and unpersuasive but that is beyond the scope of this article. I was, however, very interested to see how the Board would treat this issue, and now it has issued the first precedential decision addressing this burden-of-proof issue since issuance of the Exam Guide. In In re Uman Diagnostics AB, 2023 U.S.P.Q.2d 191 (T.T.A.B. 2023), the applicant’s mark was refused as generic and, in the context of addressing one of the applicant’s arguments, the Board remarked:

Where the record shows a “mixture” of uses, our task remains the same: to determine whether a preponderance of the evidence shows that the proposed mark’s “primary significance” to the relevant consuming public is to refer to the product or to indicate source.

at *28 (emphasis added). Well, that was a letdown. The Board inserted the phrase “preponderance of the evidence” into its decision in such an unobtrusive manner that it’s almost as if the Board hoped it would go unnoticed. The Board cited no authority for the proposition that the burden of proof in genericness refusals is a preponderance of the evidence, and made no mention of the Federal Circuit’s or its own voluminous precedent stating and applying the “clear and convincing” standard. There was also no mention of the Exam Guide. And although the Board’s decision cited the Federal Circuit’s decision in Cordua several times, the Board conspicuously ignored Cordua’s statement that “in registration proceedings the PTO always bears the burden of proving genericness by clear and convincing evidence.”

That’s more than a little strange, and bear in mind that “[t]he Board, being thoroughly familiar with current case law, will apply the correct case law,” In re Active Ankle Sys., Inc., 83 U.S.P.Q.2d 1532, 1534 (T.T.A.B. 2007), and that before issuing a precedential decision such as Uman, “[t]he Board engages in thorough internal review,” DC Comics v. Cellular Nerd LLC, 2022 U.S.P.Q.2d 1249, at *8 (T.T.A.B. 2022). Is it possible the Board just plum forgot 35 years of case law and something as basic as the burden of proof?

While possible, I for one find that highly unlikely. I believe the most likely explanation is that the Board – or Office management – deliberately inserted the phrase “preponderance of the evidence” into the decision in order to align the Board’s precedent with the position taken in the Exam Guide issued nine months earlier. The result is there is now a precedential decision stating that the burden of proof in genericness refusals is a preponderance of the evidence, which, I’d wager, will be cited in the TMEP at its next revision and in the form paragraphs used by examining attorneys.

Before dismissing this as a conspiracy theory, consider this report issued in December 2022 by the U.S. Government Accountability Office, which conducted an extensive investigation into the workings of the Patent Trial and Appeal Board. The GAO’s report, which included a survey of and interviews with current and former PTAB judges as well as Office stakeholders, contains a number of eye-opening findings, some of which are quoted below (all bolding added; footnotes omitted):

  • “The majority of judges (75 percent) we surveyed responded that the oversight practiced by USPTO directors and PTAB management has had an effect on their independence, with nearly a quarter of these respondents reporting that these practices have had a large effect on their independence.” – p. 23.

  • Many judges we surveyed said director-created policy and guidance had an effect on their ability to decide cases independently. While one purpose of Management Review is to enforce the use of the director-created policy or guidance, many judges we interviewed noted that policy based on the director’s interpretation of case law sometimes differed from the interpretations of PTAB judges. . . . One judge stated that, ‘the guidance memos from the director, the precedential decisions, [and] the Management Review process . . . significantly limit the panel to write as we see fit. We are obliged to follow the guidance memos as if they are applicable law,’ while another judge stated that ‘Management Review is by far the most significant factor’ affecting their independence.” – pp. 24-25.
  • "Some judges we interviewed noted that while they personally have not been on a case in which management or a director directly interfered, they have heard about certain cases that were alleged to have negative consequences for judges who pushed back on management’s revisions. They stated that they have, therefore, then felt pressure as to how they render their own decisions, irrespective of management’s involvement. Some judges we interviewed responded that to avoid attention from management, they self-edit their decisions prior to review. A judge stated that, ‘[Management Review’s] very existence . . . creates a preemptive chilling effect: consideration of management’s wishes is at least a factor in all panel deliberations, and is sometimes the dominant factor.’” – pp. 26-27.
  • “While many judges we interviewed attributed their sense of obligation to a need to follow directives from their superiors, some reported through interviews that management had occasionally contacted the panel members directly to mandate a change to some aspect of the draft decision, and indicated, at times, that the panel could be changed to replace the judge that did not make the desired changes. For example, some judges we interviewed reported a fellow judge was removed from a panel for disagreeing with the intended outcome of the decision, and the decision was issued with two judges instead of three. Some judges we interviewed thought that management had removed a number of judges from [America Invents Act] proceedings for reported noncompliance and that this made judges feel that they must follow management directives or their careers could be affected.” – p. 28.
  • “Some judges we interviewed also reported a lack of clarity about the inner workings of the oversight practices and decision-making within PTAB. While the general process for Management Review was documented in an internal procedural document, some judges described Management Review as a ‘black box’ with little transparency into what happens between the time they submit their draft decision for review and when they receive comments. Many judges we interviewed expressed uncertainty, for example, as to who in management is reviewing the decisions, the timing of reviews, the extent to which judges can converse with management about their comments, what criteria management use in reviews, and what role, if any, USPTO directors play in approving these comments. One judge stated that, ‘during the Management Review process, several members of the Management Review ‘team’ extensively revised my dissenting opinion, which resulted in a dramatic rewriting, including a wholesale deletion of about half of the decision. The revisions and/or rewritings were all substantive in nature. Due to the lack of transparency of the process, I never knew who was responsible for the revisions and/or rewritings.’” – p. 29.
  • “Some stakeholders questioned the extent to which judge panels could be pressured to reach a particular outcome on a case. Many stakeholders also expressed concern regarding the nature and degree of influence that USPTO directors had on panel decisions. For example, some stakeholders said they were concerned about the extent to which certain decisions were solely those of the three-judge panel or whether USPTO directors played a role in those decisions. Some former PTAB judges who were currently representing parties before PTAB, suggested that outside stakeholders – including parties to a case – would be unaware of the Management Review process, for example, and therefore are not likely to know the extent to which directors or PTAB management may have influenced or changed proceedings. One former judge said that when a decision is issued, it is only under the judges’ names without any indication of management’s involvement, such that any influence outside of the panel remains hidden from the parties and the public. . . . Some of the sitting judges we surveyed echoed stakeholder concern over the lack of transparency of PTAB oversight practices outside of the agency. For example, some judges stated that on at least one occasion within their own cases, the parties were not notified when a director or PTAB management had directly influenced the outcome of a particular [America Invents Act] proceeding or ex parte appeal.” – p. 34.
  • “Many judges we interviewed noted that in cases where there is pressure from PTAB management to change or modify an aspect of their decision, or when management rewrites parts of a decision for the panel, there would be no record that an issued opinion was management’s rather than that of the three-judge panel. One judge we interviewed noted that some of the guidance judges are required to follow is not public and therefore cannot be cited in a decision as a rationale. . . . In such cases, according to the judge, a judge would have to find a work around with another rationale or draft the decision as if it was the judge’s opinion, not required internal guidance.” – p. 35 and footnote therein.
  • “Further, many current judges also noted that without notice to the parties involved, PTAB management can potentially influence outcomes of [America Invents Act] cases and ex parte appeals by changing the composition of the three-judge panel. . . . Nor would parties know whether management had removed a judge from a panel because of the judge’s refusal to make changes aligned with agency policy or position, according to some judges we interviewed. One judge we spoke with described a situation wherein management had expanded a panel to include members of PTAB executive management, without the knowledge of the parties or the names of the management officials appearing on the final decision. A former judge recounted being replaced on a panel, presumably because management wanted a unanimous decision, and this judge was not aware of the replacement until the decision was issued.” – pp. 36-37.

The GAO’s report pertains to judges at the PTAB, not TTAB, but I have no reason to believe management’s oversight of the TTAB would be materially different. Based on the GAO’s findings above, it would seem we know that (i) Board members take into account “management’s wishes,” (ii) Board members are required to follow “director-created policy and guidance” (like, say, an Exam Guide?), and even that (iii) Office management may “rewrite[] parts of a decision for the panel [and] there would be no record that an issued opinion was management’s rather than that of the three-judge panel.”

I have long known the Board does not enjoy the same independence as a federal district court, but I never fully appreciated just how under the thumb of Office management it is. In retrospect, I should never have had any illusions the Board might or even could issue a precedential decision that did not align with the Exam Guide.

One final thought: Why would the Board – or the person(s) behind the curtain who edited Uman – not candidly acknowledge the Exam Guide, or indeed provide any explanation at all? Because they’re smart. They know that sooner or later this issue will go before the Federal Circuit, and when that day arrives the Solicitor’s Office will have to delicately explain to the Federal Circuit why the Office no longer considers itself bound by Federal Circuit precedent on this point. They know that no attempted explanation – such that an Exam Guide lacking the force of law could overrule Federal Circuit precedent – would sit well with the court so they wisely opted to say nothing.

IV. Conclusion . . . and Confirmation?

The takeaway here, I think, is simply the sobering realization that behind the veneer of legal analysis and fact-finding, there are undisclosed, behind-the-scenes influences that can shape and determine the outcome of Board decisions.

I suppose it’s still possible I’ve read too much into Uman’s reference to a “preponderance of the evidence,” but the good news is that we have a fairly reliable method to determine the truth because this article will surely come to the attention of the Board. If I’m barking up the wrong tree – if the reference to a “preponderance of the evidence” was an oversight – the Board will issue a correction to its decision acknowledging the proper burden of proof and perhaps addressing the elephant in the room otherwise known as the Exam Guide. On the other hand, if I’m correct that the wording “preponderance of the evidence” was very deliberately included in Uman, it will not issue a correction. I’m betting there won’t be a correction, but we’ll see.

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Michael Hall is senior counsel at Womble Bond Dickinson (US) LLP and a former USPTO examining attorney. The opinions expressed herein are solely his, and do not necessarily represent the opinions of his firm, its clients, or anyone else.

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Read comments and post your comment here.

Text Copyright Michael Hall 2023.


At 9:27 AM, Anonymous Anonymous said...

Ignoring the whole "conspiracy theory" reasoning set forth by the author, I'd be interested to hear what the author thinks about the two different standards of proving genericness set forth by the Federal Circuit. As noted in the Exam Guide, the standard set by the Federal Circuit in an inter partes cancellation proceeding is preponderance of the evidence. Cancelling a registered mark, I think, would be far more detrimental than denying registration in the first place; if anything, the standard of proof for genericness in an inter partes cancellation proceeding should be "clear and convincing evidence." Why, then, does the Federal Circuit require a higher standard of proof only in an ex parte proceeding? If the Federal Circuit created this higher ex parte standard based on a misreading of the TMEP section it cited for its justification to create it, then should that fact just be ignored? Can't the Federal Circuit look at the TMEP again to realize its error? I agree that the Board should have at least noted this in its decision as justification for not continuing to treat genericness in an ex parte proceeding differently than in an inter partes cancellation proceeding so that, when one of these cases ultimately goes to the Federal Circuit, there is an explanation of the Board's reasoning for aligning the two standards of proof.

At 10:59 AM, Anonymous Michael Hall said...

Anonymous at 9:27am: I was writing tongue in cheek when I described it as a "conspiracy theory." I believe what I described in the article very likely happened. To believe otherwise, one must believe the Board (or more specifically, whoever inserted the phrase "preponderance of the evidence") forgot 35 years of precedent regarding something as basic as the burden of proof, that it was unaware or forgot this very issue was the subject of an Exam Guide nine months earlier, and that the incorrect burden of proof in the decision slipped through the thorough internal review undertaken for precedential decisions. As I wrote, I find that unlikely, but we'll see if a correction is issued.

As for the normative question what the burden of proof for genericness refusals *should* be, I find that far less interesting, but I don't see an incongruity in having a different standard ex parte vs. inter partes. "To determine that a trademark is generic and thus pitch it into the public domain is a fateful step," as the 7th Circuit wrote in 2003 (Softbelly), and the Board has also commented that "the stakes are 'the fateful step' of full 'eradication' of an applicant’s 'commercial rights,'” (In re Trek 2000 Int’l Ltd., 97 U.S.P.Q.2d 1106, 1114 (T.T.A.B. 2010)). The record is usually less developed in ex parte examination than in inter partes proceedings, and in the latter we also have input from an opposer/petitioner so there's typically a clear issue between two interested parties.
There's a reasonable argument we should have a higher standard ex parte than inter partes.

"If the Federal Circuit created this higher ex parte standard based on a misreading of the TMEP section it cited for its justification to create it, then should that fact just be ignored? Can't the Federal Circuit look at the TMEP again to realize its error?" Who do you want to do the ignoring? Are you saying the Office and the Board should ignore Federal Circuit precedent? Of course the Federal Circuit could revisit the issue and potentially overrule its precedent (en banc), but the Office and the Board are not free to ignore precedent. That's the rule of law.

At 12:17 PM, Anonymous Michael Hall said...

Less than three months ago, the Board - and in referring to "the Board" I mean management - issued a precedential decision stating, "Proceedings before the Board are governed by, inter alia, precedential decisions in prior cases. These decisions include . . . the decisions of the U.S. Court of Appeals for the Federal Circuit . . ." DC Comics v. Cellular Nerd LLC, 2022 U.S.P.Q.2d 1249, at *6 (T.T.A.B. 2022).

The logic here is straightforward: Given that the Federal Circuit's precedential decisions govern Board proceedings and the Federal Circuit's precedential decision in Cordua (for example) states that "in registration proceedings the PTO always bears the burden of proving genericness by clear and convincing evidence," how can Uman state that the burden is a "preponderance of the evidence"?

Now, if Uman's misstatement of the burden of proof was a mistake, I could certainly understand that. Everyone makes mistakes. But if it was a mistake, I would expect the Board (management) to issue a correction to Uman noting the correct burden of proof. It doesn't want a precedential decision out there that misstates the law, right? If there is no correction forthcoming, what conclusion is there to be drawn other than that management is intentionally setting forth a burden in Uman that it knows is contrary to binding Federal Circuit precedent?

At 6:24 PM, Anonymous Cameron Shackell said...

The matter of fact (vs law) of #genericness is increasingly easy to establish due to the massive data consumers generate online and the #AI tech available to analyze it. When will the law catch up? Genericness is a major economic issue (hence the laws). Provocative post!


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