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'Innocent' errors in trademark application can torpedo a registration

In Medinol Ltd. v. Neuro Vasx, Inc., 67 U.S.P.Q.2d 1205 (TTAB 2003), the Trademark Trial and Appeal Board (TTAB) concluded that the registration for NEUROVASX had been procured through fraud and ordered that the registration be canceled.

Specifically, the TTAB ruled that – by submitting a sworn statement attesting to use of the mark on neurological stents and catheters when, in fact, it had only been used on stents – the registrant either intentionally deceived the Trademark Office or recklessly disregarded the truth. Either way, the TTAB determined that the registrant had engaged in fraud and that the appropriate sanction was cancellation of the entire registration.

Medinol signaled a shift in the TTAB’s approach to fraud claims. Traditionally, the standard for fraud in the TTAB has been stringent, requiring a showing that the applicant knowingly made a false statement of material fact. Mister Leonard Inc. v. Jacques Leonard Couture Inc., 23 U.S.P.Q.2d 1064, 1065 (TTAB 1992).

Indeed, the TTAB has repeatedly indicated fraud must be proven “to the hilt” by clear and convincing evidence and that adjudication of fraud claims permits “no room for speculation, inference or surmise….” See e.g., Smith International Inc. v. Olin Corp., 209 U.S.P.Q. 1033, 1044 (TTAB 1981).

Yet, in Medinol the TTAB found fraud despite the absence of any evidence the registrant intended to mislead the Trademark Office. In fact, the TTAB noted in Medinol that it accepted the registrant’s claim of inadvertent error, but it deemed the conduct to be fraudulent because the objective circumstances confirmed that the registrant should have known his representation to the Trademark Office was false.

What’s the standard?

Has the TTAB replaced the traditional burden of proof for fraud (requiring clear and convincing proof of an intent to deceive) with something akin to a negligence standard (knew or should have known of the statement’s falsity)?

The answer to this question will likely depend on the facts of the case. A review of the published and unpublished TTAB decisions addressing fraud in the three years since Medinol offers some insight into whether an inadvertent error in a trademark application will lead to a finding of fraud and cancellation of the entire registration.

In American Flange & Mfg. Co., Inc. v. Rieke Corp., 2006 TTAB LEXIS 195 (TTAB June 5, 2006), the party opposing the registration sought to block registration of two product design marks, alleging that the applicant committed fraud by failing to disclose certain information to the examining attorney in response to an office action.

The TTAB emphasized that a finding of fraud generally requires “crystal clear” evidence “that the statement in question is false. Usually the applicant or registrant effectively admits that the statement is false, or the record otherwise clearly establishes [it]….”

The TTAB declined to find fraud in American Flange, observing that – while it ultimately rejected the applicant’s arguments concerning the relevance of certain information withheld during the application process – it believed the arguments were made in good faith. Because there was a genuine controversy about the applicant’s obligation to produce the information, the TTAB concluded that the record contained “insufficient evidence that [A]pplicant had the intent required to establish fraud.”

A different outcome was reached in Standard Knitting, Ltd. v. Toyota Jidosha Kabushiki Kaisha, 2006 TTAB LEXIS 9 (TTAB Jan. 10, 2006), a consolidated proceeding in which both parties challenged each other’s applications/registrations for the mark TUNDRA.

The applicant alleged that the opposing party had engaged in fraud when it represented in its applications that the mark was “in current use in commerce” on the identified goods when, in fact, it was not.

The opposing party maintained that the false statement was the result of an “honest mistake” rather than an intent to deceive. The TTAB was skeptical of the opposing party’s contentions and concluded that the “asserted mistake, assuming it truly was a mistake, was not a reasonable one.” Importantly, the declarant admitted that he did not conduct any investigation into the veracity of his representations and that he had simply relied a colleague’s assurance.

The TTAB concluded that the opposing party had “disregarded the significance” of its sworn representation. This “reckless disregard for the truth” constituted fraud, and the TTAB canceled the opposing party’s three registrations. Accordingly, while the applicant did not present “crystal clear” evidence that the opposing party knowingly made a false representation to the Trademark Office, the TTAB found fraud.

In Hasbro, Inc. v. Goldman, 2005 TTAB LEXIS 378 (TTAB Aug. 29, 2005), the applicant sought to cancel the opposing party’s registration for COTTON CANDY based on allegedly false statements contained in its declarations.

Interestingly, no testimony was offered from the declarant, but it appears from the record that he did not consult with the person most knowledgeable about use of the mark prior to signing the declaration. Yet, the TTAB concluded that the evidence “as a whole [ ] indicates some ambiguity as to whether [Opposer’s] statement . . . was or was not false” and speculated that the opposing party “may have had a reasonable basis” for making the representation.

Observing that the record did not afford the “kind of clarity” generally required to support a finding of fraud (such as an admission of falsity), the TTAB concluded that “on this record,” the opposing party did not commit fraud.

Inconsistent rulings?

It is difficult to fully reconcile these decisions. In certain cases, the TTAB seems to demand nearly uncontroverted proof that an applicant intentionally deceived the Trademark Office. In other cases, the TTAB appears willing to find fraud where the applicant failed to take his/her oath seriously.

The factor that seems to most heavily influence the fraud analysis is the applicant’s credibility, as evaluated through the objective record evidence.

While it may be difficult to predict the outcome of a fraud claim before the TTAB, Medinol and its progeny offer some important lessons.

First, before submitting a sworn statement to the Trademark Office, be sure that you (or your client) have taken steps to personally verify the accuracy of the representations. Failure to do so places the entire registration at risk. Second, do not assume that “innocent mistakes” will be forgiven by the TTAB. While not all mistakes will constitute fraud, Medinol signaled a shift in how the TTAB will adjudge “innocence.”

Jason Kravitz is a partner in the technology and intellectual property litigation group of Nixon Peabody’s Boston office. He can be reached at jkravitz@nixonpeabody.com or (617) 345-1318. Nixon Peabody (www.nixonpeabody.com) is a full-service law firm with over 600 attorneys in 16 offices across the country.

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