Wednesday, July 10, 2024

TTAB Says Chutter Still Good Law: Reckless Disregard in Obtaining or Maintaining a Registration is Enough for Fraud

In Chutter, Inc. v. Great Management Group, LLC, the Board ruled that reckless disregard for the truth is sufficient for a finding of fraud on the USPTO. [TTABlogged here]. The CAFC reversed that ruling because Section 14 of the Lanham Act, which lists the bases for cancellation of a registration, does not include fraud committed in connection with a Section 15 incontestability declaration (as opposed to fraud in obtaining a registration). [TTABlogged here]. Here, the Board now confirmed that "Chutter remains good law and binding precedent with respect to its analysis of fraud per se." Ruifei (Shenzhen) Smart Technology Co., Ltd. v. Shenzhen Chengyan Science and Technology Co., Ltd., Cancellation No. 92077931 (July 2, 2024) [not precedential] (Opinion by Judge Christopher C. Larkin).

Petitioner Ruifei claimed that Respondent Shenzhen Chengyan committed fraud on the USPTO in obtaining and maintaining its registration for the mark DISO for “earphones and headphones; portable media players, namely, MP3 players.” [The registration when issued covered a number of additional goods, but those additional items were deleted from the registration after a USPTO audit. See earlier decision TTABlogged here.] 

Unlike in Chutter, this case involved a false Section 8 Declaration of Use, not a Section 15 Declaration of Incontestability. It also involved a false Statement of Use submitted during prosecution of the underlying application. The Board observed that "[a] registration may be 'obtained fraudulently' within the meaning of Section 14(3) of the Act based on fraud committed in connection with its issuance or its maintenance. Bose at 1338-39 (citing Torres v. Cantine Torressella S.r.l., 808 F.2d 46, 48 (Fed. Cir. 1986)). [Emphasis supplied].

In Bose, the Federal Circuit left open the question of whether “a submission to the [US]PTO with reckless disregard of its truth or falsity satisfies the intent to deceive requirement.” Bose, 580 F.3d at 1246 n.2. The Board answered that question in Chutter, holding “as a matter of law that reckless disregard satisfies the requisite intent for fraud on the USPTO in trademark matters.”

The Board found that Respondent made false statements in its Statement of Use and in its Section 8 Declaration when it asserted that the subject mark was in use on all the goods listed in its application and its registration as issued. After a USPTO audit of the registration, Respondent deleted all the goods except those for which it could prove use: namely, "earphones and headphones; portable media players, namely, MP3 players." 

If Petitioner shows that Respondent committed fraud on the USPTO with respect to any of the goods identified in the ’173 Registration at the time of the fraud, the ’173 Registration must be cancelled as to the handful of goods remaining in the single-class registration at the time of trial even if Respondent did not commit fraud as to those goods per se.

Turning to the critical issue of intent, the Board observed that it was "unaware of any precedential decision post-Bose in which the Board found fraudulent intent in the absence of testimony from the relevant declarant as to his or her state of mind when making false statements to the USPTO." In Chutter and in the NATIONSTAR case, a finding of subjective intent to deceive was based on the deposition testimony of the person who made the false statement.

Here, there was no testimony taken of the persons who made the false statements. The Board refused to infer from the evidence of record that these statements were subjectively intended to deceive the USPTO or in reckless disregard of the truth of the statements.
Petitioner could have deposed CEO Wang and Ms. Jiang to develop direct evidence or better circumstantial evidence regarding the declarants’ respective understanding of the use of the DISO mark, the false statements in the Statement of Use and Section 8 Declaration, and other matters relevant to the declarants’ states of mind, but did not do so.

In sum, Petitioner failed to prove the essential element of fraud: it "failed to carry its heavy burden of showing by clear and convincing evidence that CEO Wang or attorney Jiang intentionally deceived the USPTO, or acted with reckless disregard of the truth, in connection with the preparation and filing of Respondent’s inaccurate Statement of Use and inaccurate Section 8 Declaration.

And so, the Board denied the petition for cancellation.

Read comments and post your comment here.

TTABlogger comment: This opinion is worth a read. Seems to me it should be precedential for its confirmation of the viability of Chutter.

Text Copyright John L. Welch 2024.


At 10:29 AM, Anonymous Tom McCarthy said...

Several district courts have rejected the Trademark Board’s Chutter change of the standard for intent to deceive for fraud. Those courts have refused to lower the requirement to a standard of “reckless disregard.” Weems Industries, Inc. v. Teknor Apex Company, 2023 WL 2333901, *8, n.10 (N.D. Iowa 2023) (Rejecting T.T.A.B.’s “reckless disregard” theory. “[B]oth the Federal Circuit and the Eighth Circuit have held that an intent to deceive must be willful.” Summary dismissal of defense of fraud.); ; Florida Virtual School, v. K12, INC., 2023 WL 8357735,*5 (M.D. Fla. 2023) (The T.T.A.B.’s “reckless disregard” rule is not the law in the Eleventh Circuit. Court found no fraud.); La Terra Fina USA, LLC, v. Reser’s Fine Foods, Inc., 2024 WL 1973468, *3 (N.D. Cal. 2024) (Rejecting the T.T.A.B.’s “reckless disregard” theory. “The Trademark Trial and Appeal Board cannot set a new legal standard.” Granted dismissal of fraud claim.)


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