Last week, the Federal Circuit, in In re Bose Corporation, No. 2008-1448, slip op. at 8 (Fed. Cir. August. 31, 2009),1 clarified the standard for finding fraud in trademark filings made at the U.S. Patent and Trademark Office (PTO). Under Bose, “[t]here is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive.” This decision raises the standard for finding fraud on the PTO, which had been lowered significantly in recent years, and eases the measures that trademark owners need to take in verifying factual information submitted in the trademark registration process, and brings the trademark standard in line with the inequitable conduct standard applicable to patents.

Trademark owners must make factual statements in applying for federal registration of marks and in maintaining those registrations. Many such facts are considered material, such as whether a mark is in use in connection with particular products and services. “Fraud in procuring a trademark registration or renewal occurs when an applicant knowingly makes false, material representations of fact in connection with his application.” Torres v. Cantine Torresella S.r.l., 808 F.2d 46, 48 (Fed. Cir. 1986). A third party may seek to cancel a trademark registration on the basis of fraud. Thus, those factual statements, if false, can become the basis of fraud claims in a trademark dispute.

Fraud Standard Under Medinol Prior to the issuance of this decision, the courts and trademark owners had followed the standard laid down in Medinol v. Neuro Vasx Inc., 67 USPQ2d 1205 (TTAB 2003). Under the Medinol standard, fraud could be found if a trademark owner, or the individual signing a declaration knew or should have known that a statement was false or misleading. (For a more in depth discussion of Medinol, please see our prior Update on Medinol.)

New Standard In Bose, the Federal Circuit 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.” The court concluded that, in Medinol, the TTAB had been erroneous in lowering the fraud standard to one of simple negligence, and that neither mere negligence nor even gross negligence in itself justifies an inference of an intent to deceive.

Application of the “should have known” standard was fraught with uncertainty in determining how much verification one must obtain before making a material factual statement in a trademark filing. Several cases applying Medinol found fraud even when the actions of the trademark owner seemed reasonable and consistent with practices of others. Because of the risk of possible cancellation of the entire trademark registration if fraud were found, some trademark owners and practitioners adopted more conservative and time-consuming practices, such as no longer allowing an attorney to sign declarations in reliance on the reasonable assurances of the appropriate business contacts that the dates of use and other facts were accurate, instead requiring independent verification of each fact. Medinol also left it unclear as to what corrective steps were appropriate and advisable if one discovered that one had made a misstatement and what the impact of a fraud finding with respect to a single class would be on a multi-class registration.

Practical Ramifications of New Standard Under this new standard, trademark owners should continue to verify that the statements made in trademark filings are accurate, but can be comfortable that unless they have a willful intent to deceive, fraud is not likely to be found. Rather, if a factual misstatement is discovered, the trademark registration merely will be corrected as appropriate. For instance, if a filing is challenged and a trademark owner is found to have made a factual misrepresentation (such as that the mark was in use in connection with xylophones, when in fact it was not), through inattention (such as by looking at an old product catalogue) or a misunderstanding (such as by not understanding what constitutes “use,” as was the situation in Bose) but without a willful intent to deceive, xylophones would be deleted from the coverage of the registration, but the registration itself (assuming it covered products in addition to xylophones) would not be invalidated on the basis of fraud.

Conversely, bringing challenges based on fraud in an opposition or cancellation proceeding, which had become much more common following Medinol, is now more difficult because the challenger must support such a claim with clear and convincing evidence to support an inference of deceptive intent.

Another recent decision by the TTAB clarifies an issue left unclear by Medinol and limits the impact if fraud is found. If one has a multi-class trademark registration (covering, for instance, xylophones and pianos in Class 15 and written music in Class 16) even if fraud is found with respect to one of the classes, the registration will likely be invalidated only with respect to that class. See G&W Laboratories Inc. v. G W Pharma Limited, 89 USPQ2d 1571 (TTAB 2009) (fraud as to one class of a multi-class trademark registration does not subject entire registration to cancellation).

The standard articulated in Bose conforms more closely to a reasonable person’s understanding of fraud2 and should provide comfort to trademark owners that applying business reasonable decisions to the trademark registration process will not unnecessarily make one’s registration vulnerable.