Thursday, October 19, 2023

Divided CAFC Panel Reverses TTAB's Chutter v. Great Concepts Fraud Decision

A divided panel of the CAFC reversed the TTAB's decision in Chutter, Inc. v. Great Management Group, LLC and Great Concepts, LLC [TTABlogged here], concluding that "a Section 14 cancellation proceeding is not available as a remedy for a fraudulent Section 15 incontestability declaration." The CAFC remanded the case to the Board for consideration of "whether to declare that Great Concepts’ mark does not enjoy incontestable status and to evaluate whether to impose other sanctions on Great Concepts or its attorney." Great Concepts, LLC v. Chutter, Inc., 2023 USPQ2d 1215 (Fed. Cir. 2023) (modified, January 10, 2024).

In a significant fraud ruling, the Board had ordered cancellation of Great Concepts' registration for the mark DANTANNA'S for restaurant services, finding that Great Concepts' counsel had signed the Section 15 Declaration with reckless disregard for the truth, and ruling for the first time that "reckless disregard is equivalent to intent to deceive and satisfies the intent to deceive requirement" for a fraud claim.

The CAFC panel majority focused on the language of Section 14 of the Trademark Act, which "permits a third party to file '[a] petition to cancel a registration of a mark' '[a]t any time if' the registered mark’s 'registration was obtained fraudulently.'" 15 U.S.C. § 1064 (emphasis by the CAFC). 

The question becomes what Great Concepts obtained, but this is not difficult to answer. What Great Concepts acquired through Mr. Taylor’s fraudulent Section 15 declaration was incontestable status for its already-registered trademark. Under the Lanham Act, registration and incontestability are different rights. *** Hence, fraud committed in connection with obtaining incontestable status is distinctly not fraud committed in connection with obtaining the registration itself.

The panel majority noted that Section 14 lists a number of bases for cancellation of a registration, but fraud committed in connection with an incontestability declaration is not one of them. "When, as here, Congress sets out a lengthy list of statutory provisions, we will not lightly add to that list, lest we contradict what may well have been an intentional omission."

The panel majority dismissed the argument that its ruling will encourage fraud. Chutter and dissenting Judge Reyna contended that "if the only consequence for filing a fraudulent affidavit in pursuit of incontestability is the loss of incontestability, there is no consequence, since the mark owner was not entitled to incontestable status in the first place. "

[N]othing in this opinion should be read to mean that the Board is powerless to address fraud, including fraud committed solely in conjunction with the filing of a Section 15 declaration. *** [W]e are in full agreement with the parties that, at minimum, the Board may sanction any attorney who commits fraud before it.

The panel majority pointed out that its ruling makes only this one remedy unavailable, "leaving the Board, we expect, with sufficient mechanisms to adequately deter fraud."

Even if it were true that our decision would result in an unwelcome increase in fraud perpetrated against the Board – which, again, we do not believe it will – we would nonetheless adhere to the unambiguous language of the statute. *** Whether we would prefer a different result be reflected in the statute is irrelevant to our responsibility to decide the case before us based on the law as it exists.

The CAFC did not reach the issue of whether Great Concepts' attorney committed fraud.

Read comments and post your comment here.

TTABlogger comment: Maybe Congress will step in and amend the statute. Probably not. Suppose the declaration is signed by an individual who is not an attorney. What sanctions could be imposed on him or her? BTW: Note that marks are made "incontestable," not registrations. Also, there is no such thing as an "incontestable" registration.

BTW: Does the Director have the power to cancel a registration?

Text Copyright John L. Welch 2023.


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