When a trademark registration is secured in the U.S. Patent and Trademark Office (PTO), the certificate of registration identifies and lists all of the specific goods and services on or for which the mark has been used, and is supported by an affidavit of the applicant (sworn under penalty of perjury) which confirms that, in fact, the mark is in use in commerce on all of the specified goods. Following the issuance of the registration, the registration must be maintained by the filing of another affidavit of use between the fifth and sixth years following the issuance, and then again at the tenth year. These supporting maintenance affidavits must also swear that the goods listed in the registration are in use in commerce. If all of the goods covered by the registration are not, in fact, in use, then the registrant must delete those goods where there is no use. If the registrant attests to the fact that the mark is in use on all of the goods but, in fact, they are not, a third party challenger may raise the issue (typically when there is an enforcement action by the registrant) and assert that there has been a fraud committed on the PTO. Consequently, upon the finding of such a fraud, the entire registration could be invalidated and the registrant stripped of the presumptive exclusive rights conferred by the registration.
Over the past several years, the Trademark Trial and Appeal Board (TTAB) (the administrative appellate arm of the PTO, which addresses disputes in the PTO and hears, among other things, challenges raised by one party of the validity of a registration or application owned by the other) applied its fraud standard strictly. This strict interpretation and application resulted in the invalidation of long-standing registrations based only on the mere fact that the mark was not, in fact, in use on the goods shown in the registration at the time that attesting affidavits confirmed such use. It was not necessary for there to have been any intention to commit a fraud or mislead the TTAB or the public; an inadvertent error or a simple misunderstanding of the TTAB Rules could result in forfeiture of valuable registrations.
One such situation yielded a TTAB ruling that directed the cancellation, invalidation and forfeiture of a long-standing trademark registration for the mark WAVE, owned by Bose Corporation, based upon a finding of fraud. Specifically, there was an opposition proceeding before the TTAB in which Bose alleged a likelihood of confusion between the mark sought to be registered by Hexawave and the registered WAVE mark. In the course of the dispute, Hexawave challenged the validity of the WAVE registration on the grounds that it was invalid for fraud because the mark was not in use on all of the goods covered by the registration (even though the renewal affidavit attested to such use). The TTAB held in that case, reported at Bose Corp. v Hexawave, Inc., 88 USPQ 2d 1332 (TTAB 2007), that Bose had, in fact, committed fraud in its renewal application when it claimed use on all goods in the underlying registration when, in fact, it had ceased the manufacture and sale of audio tape recorders and players under this mark. The foundation for the TTAB finding was that the Bose representative that executed the renewal application was aware of this fact.
In the TTAB proceeding, Bose asserted that it believed that the mark was in use (for purposes of registration and renewal) on these goods because Bose continued to accept previously sold audio tape recorders and players for repair pursuant to warranty. This activity required shipment in commerce of the products bearing the mark, which was commensurate with the understanding by the Bose representative that this constituted “ use in commerce.” The TTAB disagreed.
Bose appealed the TTAB ruling to the Court of Appeals for the Federal Circuit (CAFC or “the Court”). In its decision at In re Bose Corporation, 580 F.3d 1240 (Fed. Cir. 2009) the CAFC reviewed the TTAB’s legal conclusions de novo and on August 31, reversed and remanded the case.
At the outset, the Court acknowledged that a third party may petition to cancel another’s registered trademark on the ground that the registration was obtained (or maintained in force and effect) fraudulently. The Court described the elements of such a finding of fraud by noting that it requires that the registrant knowingly makes false, material representations of fact in connection with its application—a standard that requires willfulness.
Applying this basic predicate, the Court concluded that the TTAB applied the wrong standard for determining fraud. Specifically, the TTAB held that the applicant committed fraud in procuring or maintaining a registration if it made a material misrepresentation that it had known or should have been known to be false. The Court held that the TTAB had, in effect, erroneously lowered the fraud standard to a simple negligence standard by including the “should have known” aspect of its criteria.
The Court determined that although Bose had made a material representation because the particular goods were no longer made or sold, this did not rise to the level of fraud because it had been the understanding of Bose that the repair activity constituted sufficient use in commerce. Thus, there was an absence of dishonesty or willful intent to deceive. Rather, the misrepresentation was based upon an honest misunderstanding or mere inadvertence, which the Court concluded did not constitute fraud. The Court relied on testimony of the affiant that he believed that the statements made in the affidavit were true at the time he signed it.
In conclusion, the Court noted that unless challenger Hexawave could point to evidence to support an inference of deceptive intent, it had failed to satisfy the clear and convincing evidence standard required to establish a fraud claim. Therefore, the Court held that the TTAB had erred in invalidating and cancelling the registration in its entirety.
The lesson to be learned is that it remains critical for a trademark owner to ensure accuracy in obtaining registrations in the PTO and in maintaining existing registrations when required to do so, pursuant to statute. It remains more important to be correct and accurate than to have a broadly defined registration that covers goods for which the mark is not actually in use. Under circumstances where the registration is broader than the actual use, the entire registration still remains vulnerable to invalidation and cancellation. If a trademark owner wants to retain rights covering a product for which there is no current use but an intention to commence or re-commence use in the future, it is recommended that a new Intent to Use application be filed for such products. With the proper tools in place and a critical review of all filings and business objectives, a good faith belief in the accuracy of the filing and supporting declarations will now be adequate to defend against third party challenges.