August 31, 2009

Federal Circuit Clarifies Fraud Standard in Trademark Cases

By Matthew L. Cutler, Principal

Court Overrules Medinol: In re Bose Corporation (Decided August 31, 2009)

During the last six years, many an unwary trademark registrant has fallen victim to the harsh decision handed down by the USPTO’s Trademark Trial and Appeal Board (“Board”) in the 2003 case entitled Medinol v. Neuro Vasx, Inc.

In Medinol, the Board held that “[a] trademark applicant commits fraud in procuring a registration when it makes material representations of fact in its declaration which it knows or should know to be false or misleading.”  Since the decision, many practitioners have argued that this “should have known” standard was erroneous and, in effect, lowered the fraud standard to one of simple negligence.

To highlight this point consider, for example, that there are a few filings with the USPTO that a trademark registrant must make during the life of a federal trademark registration to maintain the registration.  One such filing occurs between the fifth and sixth year following issuance of the federal registration when a registrant (typically through his/her attorney) files with the Trademark Office a declaration stating that the registered mark remains in use in commerce on and in connection with the goods (or services) identified in the federal registration certificate (i.e., a Section 8 affidavit declaring continued use).  As we all know, however, business is not static – particularly in these turbulent economic times.  Thus, products and services listed on the registration certificate may not identically reflect the products and/or services being offered by the company five or six years later.  Under Medinol, if the registrant failed (even by simple oversight) to remove the product or service listed on the registration that is no longer being promoted or sold by the company under the trademark, the entire trademark registration was subject to cancellation because the registrant was deemed to have committed fraud on the Trademark Office.

Today, the Court of Appeals for the Federal Circuit reversed Medinol and held 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.” (emphasis added). As such, subjective intent to deceive has been held to be an essential element of a fraud defense.

Given the harsh, frequently unfair decisions that resulted from Medinol, the long awaited Bose decision is likely to be favorably received by practitioners and trademark registrants.  The Court ruled that “there is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive.” If a registrant erroneously files an affidavit alleging use for goods that are, in fact, no longer used in interstate commerce, but did not intend to deceive the Trademark Office, the registration in question is no longer subject to cancellation on the basis of fraud on the Trademark Office.