On September 30, 2021, in a precedential decision, the Trademark Trial and Appeal Board (“TTAB”) clarified that “reckless disregard satisfies the requisite intent for fraud on the USPTO in trademark matters.” Chutter, Inc. v. Great Management Group, LLC,2021 USPQ2d 1001 (TTAB 2021). This question was left open by the Federal Circuit in the seminal case of In re Bose. Since Bose, the number of times the TTAB has upheld a finding of fraud has been few and far between, given the high bar set to demonstrate fraud. While the Chutter case may be relaxing these standards, trademark owners are cautioned to fully understand the implications of their dealings with the USPTO before they submit any documents. The consequences of signing or submitting inaccurate documents could be devastating.
Background of the Law
The modern fraud line of cases began in 2003 with the Medinol case, where the TTAB set the standard that “[a] trademark applicant commits fraud in procuring a registration when it makes a material representation of fact in its declaration which it knows or should know to be false or misleading.” Medinol Ltd. v. Neuro Vasx, Inc., 67 USPQ2d 1205, 1209 (TTAB 2003). At issue in the Medinol case was the fact that Neuro Vasx submitted a declaration that its trademark was in use on both stents and catheters when, in fact, it was not. The TTAB ordered the NEUROVASX registration to be cancelled, because of the fraud it found.
When the Bose decision reached the Federal Circuit, the CAFC ruled the TTAB’s standard of “should have known” was too lax. “[B]y equating ‘should have known’ with a subjective intent,” the Board “erroneously lowered the fraud standard to a simple negligence standard.” In re Bose Corporation, 580 F.3d 1240, 1244 (Fed. Cir. 2009). Although Bose had failed to delete “audio tape recorders and players” from its renewal application because it had ceased to sell them (although occasionally servicing those goods), the Federal Circuit reversed the TTAB, finding Bose had no clear intent to deceive. “We hold 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.” Id. at 1245.
Facts of the Case
In Chutter, the pendulum swings again. At issue in this case is a Combined Section 8 and Section 15 Declaration of Use and Incontestability, signed and filed in 2010 by Great Concepts’ General Counsel. In Great Management’s Section 15 Affidavit of Incontestability, counsel erroneously checked the box declaring “there is no proceeding involving said rights pending and not disposed of either in the U.S. Patent and Trademark Office or in the courts,” even though a prior-filed cancellation proceeding was still pending at the TTAB, and a civil action was pending in the U.S. District Court for Northern Georgia at the time the declaration was signed and submitted. Great Concepts’ General Counsel also did not personally sign the declaration, which is against the Trademark Rules of Practice. Upon discovering the error, Great Concepts’ counsel did not take any action to correct the declaration on file with the USPTO.
The Board’s Decision
It is well-settled that the USPTO does not accept Section 15 Affidavits of Incontestability. Rather, the USPTO reviews the affidavit to determine whether its contents are consistent with the requirements of the statute and then acknowledges that all requirements in accordance with the rules have been met. A Section 15 affidavit, when properly in force, allows a registrant to obtain rights they would not otherwise have, namely “the right to have its registration in litigation accepted as conclusive evidence, rather than merely prima facia evidence of the registrant’s exclusive right to use the registered mark in commerce.” Therefore, the inclusion of a false statement in a Section 15 affidavit is material and, if made with the “relevant degree of intent,” constitutes fraud. The Board found that Great Concepts’ counsel acted with “reckless disregard” as to the truth of the statements in the declaration since he (1) did not familiarize himself with the contents of the declaration and (2) failed to make any inquiry as to the accuracy of what he was signing. Moreover, he was not aware of the legal requirements of the Section 15 Declaration. The Board also found that Great Concepts’ counsel took no “action to remedy the error once it was brought to his attention” and “was especially reckless because he admittedly was unfamiliar with the requirements for filing a Section 15 Declaration.”
The Board granted the Petition to Cancel on the grounds of fraud.
Impact of the Decision
It remains to be seen whether this decision will be appealed or whether the Federal Circuit will have a chance to weigh in. For now, here is some guidance for trademark owners and attorneys alike.
For trademark owners or in-house IP counsel:
- Make sure you carefully review anything you are asked to sign. The best person to sign a declaration is someone with firsthand knowledge of the business – those in charge of marketing or operations or, in smaller companies, CEOs. General Counsels typically do not have enough day-to-day interaction with the physical goods and services to be appropriate candidates for signing declarations and attesting that the goods and services are in actual use in U.S. commerce.
- Although the Medinol standard has been relaxed, remember that the USPTO has instituted a random audit program and new fees for deleting goods and services after a Section 8 Continued Use Declaration is submitted. It’s still a recommended and best practice to thoroughly review all your goods and services and delete from the registration any that are not in use when any Section 8/71 declarations are submitted.
- You must personally sign any declaration. A paralegal or assistant can prepare it for you, but you must personally sign any document to be submitted to the USPTO.
- While the TTAB doesn’t define its standard for “reasonable investigation,” if you don’t personally know whether something is in use in commerce, ask others in your organization who do know and have them provide documentary proof and/or photographs. Make an inquiry before assuming any goods or services are in use.
For outside trademark counsel:
- Before asking the client if they want to submit a Section 15 incontestability affidavit, which requires five years of continuous use of the mark in commerce after registration, and check to see if the registered mark fulfills every Section 15 requirement. It’s easy enough to see if the client has any pending TTAB or court cases, which disqualifies the client from filing a Section 15 affidavit until they are concluded. If the registered mark does not qualify yet for incontestability, add a docket reminder to follow up with the client.
- Do not sign your name to any declarations that your client should be signing, and do not sign your client’s name to declarations, even if you are authorized by the client to do so. You do not have firsthand knowledge of anything happening with your client. If possible, ask the client to provide documentary or photographic evidence of use of the mark in commerce for every good or service covered by the registration.
- Explain the importance of these declarations to your clients, including any lawyer you interact with who is not trained in USPTO procedure. As these cases demonstrate, the declarations are important and can result in a loss of trademark rights for your clients.
- While the TTAB doesn’t define its standard for “reasonable investigation,” if you don’t know whether something is in use, you aren’t off the hook because you ask your client to sign. Ask for specimens and check the client’s website. Make sure you are comfortable with the information the client sends back before you submit it to the USPTO.
If you have any questions about this decision or need help with your trademarks, please contact us.
Stacey C. Kalamaras is the founding partner of Kalamaras Law Office, LLC. She has extensive intellectual property experience with a particular focus on trademark prosecution and enforcement. She has protected some the world’s largest brands in more than 150 countries and specializes in helping small and medium sized businesses grow and protect their brands. Contact her at firstname.lastname@example.org.
Stacey is also the founder and lead instructor of Trademarkabilities®, an online trademark academy for lawyers, whose mission it is to prepare lawyers to be confident and effective practitioners before the USPTO. To learn more, please visit https://www.trademarkabilities.com/.