CAFC Reins in TTAB Fraud Decisions

The Court of Appeals for the Federal Circuit ruled yesterday that fraud on the U.S. Patent and Trademark Office (“PTO”) requires proof of actual intent to deceive, which may not be inferred merely because a trademark applicant made a misstatement that it should have known was false. The court held that “a trademark is obtained fraudently under the Lanham Act only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the PTO.” In re Bose Corp., 2008-1448, slip op. p. 7 (Fed. Cir., Aug. 31, 2009).

The case arose when Bose, the owner of the mark WAVE, filed an opposition to Hexawave’s registration application for HEXAWAVE. Hexawave countered by filing a cancellation of Bose’s mark alleging fraudulent renewal of the mark based on the inclusion of audio tape recorders and players in the described goods even though these products had been discontinued. The Trademark Trial and Appeal Board (“TTAB”), following a number of its recent decisions, found that it was a material misstatement, that Bose should have known it was false, and that Bose’s stated reason for not deleting the products from the description was not reasonable.

The court agreed that the description was a material misstatement, which finding Bose had not contested, but decided that the reasonableness of Bose’s reasoning was irrelevant to the proper analysis. The court focused on the elements of fraud, ruling that the TTAB has mistakenly supplanted the requirements of fraud with a mere negligence standard. The court stated that “Subjective intent, however difficult to prove, is an indispensable element in the analysis.” Id. As in other areas of fraud, intent may be inferred from indirect or circumstantial evidence, but the court placed a significant burden of proof on those alleging fraud requiring clear and convincing evidence.

The ruling should come as a relief to many trademark registrants. The TTAB’s recent decisions on fraud had clearly lowered the threshold of fraud on the PTO to the point that any error in anything filed in connection with a trademark registration had the potential of torpedoing valuable registrations. Restoring the threshold of fraud to its historical levels should remove Damocles’ sword hanging by the thread of a single error over every trademark application or renewal.