Last year, the U.S. Court of Appeals for the Federal Circuit set a new standard for analyzing fraud claims in procuring or maintaining a trademark registration. Namely, fraud occurs when an applicant or registrant “knowingly makes a false, material representation with the intent to deceive the PTO.” In re Bose Corp., 580 F.3d 1240 (Fed. Cir. 2009). The USPTO previously analyzed fraud claims under a “knew or should have known” standard. If a trademark owner submitted a statement claiming use of its mark for all the goods or services in an application or registration, but was, in fact, not using the mark on one of the goods or services, the application or registration became void because the owner knew or should have known it was not using the mark on all the goods or services. Earlier this year, the Trademark Trial and Appeal Board addressed the open issue of whether a reckless disregard for the truth is sufficient evidence of a deceptive intent.
Bose stated in its 2001 renewal application that it was using its WAVE mark in commerce on all the goods in the registration, even though it had stopped manufacturing audio tape recorders and players in 1997. Bose contended that its statement of use was proper because it repaired recorders and players and transported them back to their owners. Although transportation of repaired goods does not satisfy the use in commerce clause, the court found insufficient evidence that Bose made its erroneous statement with deceptive intent. Equating fraud to patent inequitable conduct, the court held that a deceptive intent is required to establish fraud, overruling the USPTO’s “should have known” standard as it lowered fraud to simple negligence. Deceptive intent may be established by direct evidence or may be inferred from indirect or circumstantial evidence, but there is no fraud if a false representation is occasioned by an honest misunderstanding, as in Bose, or is inadvertently made without a willful intent to deceive. In its decision, the court declined to address whether a reckless disregard for the truth is sufficient evidence of a deceptive intent.
That question was addressed in March of this year, when the USPTO suggested that a reckless disregard for the truth might be sufficient to show deceptive intent. DaimlerChrysler Corp. v. American Motors Corp., 94 USPQ2d 1086 (T.T.A.B. 2010). DaimlerChrysler sought summary judgment on its claim that American Motors committed fraud upon the USPTO when American Motors submitted statements that it had used its AMC mark on automobiles and parts when, in fact, it had not used the mark at all. In ruling against DaimlerChrysler, the USPTO found that DaimlerChrysler had not introduced any evidence that American Motors had a deceptive intent, “or at least had a reckless disregard for the truth.” Although its decision suggests that a reckless disregard for the truth may be proof of deceptive intent, the USPTO did not explain what types of evidence it would have determined to be a reckless disregard for the truth.
Bose made fraud claims more difficult to prove. Nonetheless, it is important for trademark owners to ensure the accuracy of statements made to the USPTO, as deceptive intent can be inferred from indirect or circumstantial evidence, or may be established by a reckless disregard for the truth. Although trademark owners retain common law rights in their mark upon a finding of fraud, the time and resources spent obtaining the registration are lost. Trademark owners can refile, but that would require additional expenditures that may not be accommodated easily as trademark prosecution budgets shrink. Therefore, it is important to ensure the accuracy of statements made to the USPTO.