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Since the Trademark Trial and Appeal Board's decision in Medinol Ltd. v. Neuro Vasx, Inc., 67 U.S.P.Q.2d 1205 (TTAB 2003), the Board has taken a near strict liability approach in ruling on claims of fraud based on errors in the description of goods or services.
In the long-awaited In re Bose Corp. case, the Federal Circuit reversed the Board and its entire line of authority since Medinol. (In re Bose Corp., Fed. Cir., No. 2008-148, decided August 31, 2009). Holding that the Board in Medinol "erroneously lowered the fraud standard to a simple negligence standard," the Federal Circuit found that "a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the PTO."
Board: WAVE Mark Cancelled Because Not Still Used in Commerce on Discontinued Goods
In the Bose case, Bose had filed a Section 8 affidavit of continued use and Section 9 renewal application for its WAVE mark in 2001. In the renewal, Bose stated that the WAVE mark remained in use in commerce on various goods, including audio tape recorders and players. Yet Bose had stopped manufacturing and selling audio tape recorders and players sometime between 1996 and 1997.
Bose's general counsel, who signed the renewal, testified that he believed the WAVE mark was still used in commerce in connection with these goods because Bose continued to repair these items and ship them in interstate commerce. The Board held that this was not use in commerce and further that the general counsel's belief to the contrary was not reasonable. The Board upheld a counterclaim for cancellation for fraud and cancelled the registration.
Court Rejects the "Know or Should Have Known" Standard
The Federal Circuit reversed. In doing so, the court breathed new life into cases from the Court of Customs and Patent Appeals requiring proof of subjective intent to deceive to establish fraud on the trademark office: "absent the requisite intent to mislead the PTO, even a material misrepresentation would not qualify as fraud under the Lanham Act warranting cancellation." (quoting King Auto, Inc. v. Speedy Muffler King, Inc., 667 F.2d 1008, 1011 n. 4 (CCPA 1981). In doing so, the Federal Circuit equated the standard for fraud on the trademark office with the standard for inequitable conduct in the prosecution of a patent: "The principle that the standard for finding intent to deceive is stricter than the standard for negligence of gross negligence, even though announced in patent inequitable conduct cases, applies with equal force to trademark fraud cases."
In reaching this conclusion, the court rejected the "know or should have known" standard adopted by the board in Medinol and its progeny. While not expressly overruling its holding in Torres v. Cantine Torresella S.r.l., 808 F.2d 46 (Fed. Cir. 1986), the court effectively amended the opinion by rejecting a "should have known" standard that the Board in Medinol had claimed to follow.
Claimants May Still Look to Torres
By re-elevating the standard for fraud on the trademark office, the Federal Circuit has removed one of the more effective weapons of opposition and cancellation proceeding defendants. Yet, the disarming is not complete. The court agreed with the Board that intent may be inferred from the circumstances.
Moreover, because the Board did not overrule Torres, potential fraud claimants may look to Torres as an example of satisfactory circumstantial evidence of fraud. In Torres, the registrant attached a specimen wine label showing "Las Torres" below a tower design to its renewal application. However, five years before, the registrant had admittedly altered the mark to just "Torres" in conjunction with a different tower design. In addition, the registrant knew that even the altered mark was not in use on all of the claimed goods.
As with inequitable conduct in the patent context, it is reasonable to expect that fraud on the Trademark Office claims will continue to be litigated, albeit judged according to a stricter standard.