TMA & OTHER LEVELED-UP PTO MEASURES TO COMBAT FRAUD

In 2020, US Congress enacted the TMA. Some of its changes merely codify the existing practice of the PTO, such as the letter of protest. Others, notably two new ex parte proceedings (i.e., expungement and reexamination), were designed to assist with the PTO’s initiatives to clear the US trademark register of fraudulent registrations and applications, as well as “deadwood” or trademarks no longer in use.

As outlined in the PTO’s final rules implementing TMA provisions, most changes went into effect on December 18, 2021, including:

  1. Expungement and Reexamination Proceedings: The TMA created these new ex parte proceedings, which allow third parties—including the PTO Director—to challenge registrations for nonuse. As stated in the PTO’s final rules on this matter, “When the register includes marks that are not currently in use, it is more difficult for legitimate businesses to clear and register their own marks.” Petitions for expungement and reexamination require, among other things, a $400 fee and information regarding the basis for the petition, including a verified statement of the facts with the details of the petitioner’s “reasonable investigation of nonuse.” The PTO Director will then review the petition and the electronic record to determine whether to institute a proceeding. If instituted, an office action will be issued, requiring the registrant to provide evidence rebutting nonuse.
  2. Letters of Protest: The TMA codified the long-standing practice at the PTO for letters of protest, which allow third parties to submit evidence relevant to a trademark’s eligibility for registration while the application is under examination. Letters of protest filed before publication must include evidence supporting the ground(s) for refusal, whereas letters of protest filed after publication face a higher evidentiary bar, namely, evidence establishing a prima facie case for the refusal. The TMA specifies that the PTO has two months to act on the submission and that the PTO Director’s decisions with respect to letters of protest are final and non-reviewable. However, while there are no appeal rights if a letter of protest is not considered (nor is there an ability to “amend” or “supplement” a letter of protest once filed), parties may file a new letter of protest so long as the relevant application’s publication period has not ended.

On December 1, 2022, changes to the office action response timeline will go into effect. Previously, applicants/registrants had six months to respond to office actions. Under the new provisions, this timeframe will be shortened to three months (for most applications), with the option for a one-time three-month extension upon payment of a $125 fee.

Fraud, Sanctions and Cancellations

The TMA is just one of many steps being taken to address fraudulent filings. Concerned that some US lawyers were assisting non-US applicants without conducting proper diligence as to the authenticity and veracity of information included in trademark applications, the PTO began investigating parties who were lodging suspiciously large numbers of trademark filings on behalf of overseas applicants. The PTO has since issued several sanction orders where it found evidence of fraudulent applications and violations of the PTO Rules of Professional Conduct. The sanctions for at least two US lawyers who assisted Chinese applicants with illegitimate applications included a 12-month probationary period and mandatory classes on ethics and trademark law. The PTO also sanctioned a Chinese trademark agency, terminating more than 15,000 application proceedings involving the agency and barring the agency from all further correspondence or submission to the PTO, noting that the agency is “not and never w[as] authorized or recognized to practice before the USPTO in trademark matters.”

In keeping with the concentrated effort of the PTO and the TMA to clear “deadwood” clutter from the registry, the Federal Circuit and the Trademark Trial & Appeal Board (TTAB) provided clarification on—and arguably lowered—the standard for proving fraud. Notably, in Chutter, Inc. v. Great Management Group, LLC and Chutter, Inc. v. Great Concepts, LLC, 2021 USPQ2d 1001 (TTAB 2021), the TTAB held that “reckless disregard” for the truth can satisfy the “intent to deceive” requirement for fraud set forth in the seminal case, In Re Bose Corp., 91 USPQ2d 1938 (Fed. Cir. 2009). In Chutter, Inc., the TTAB granted a petition to cancel a registration for DANTANNA’S, finding that the defendant’s conduct (i.e., filing a Combined Declaration of Use and Incontestability under Sections 8 and 15 of the Trademark Act that declared, incorrectly, that there was no pending proceeding involving the relevant mark) constituted reckless disregard for the truth and, therefore, demonstrated an intent to deceive the PTO—sufficient evidence for a finding of fraud.

Additionally, in Galperti, Inc. v. Galperti S.R.L., Case No. 21-1011 (Fed. Cir. Nov. 12, 2021), the Federal Circuit (for the second time) held that the TTAB erred in dismissing a petition to cancel for fraud based on the applicant’s statement of “substantially exclusive” use of its mark for five years, which the applicant submitted in support of its claim of acquired distinctiveness under Section 2(f) of the Trademark Act. Specifically, the Federal Circuit held that, as a matter of law (and contrary to the TTAB’s assertions otherwise), (1) a party challenging a Section 2(f) claim based on substantially exclusive use of that trademark does not need to have acquired distinctiveness in its own mark in order for the challenger’s use to undercut the applicant’s claim of substantially exclusive use; and (2) use of the mark by any party, regardless of its relationship to the challenger, is relevant to the assessment of the applicant’s claims of substantially exclusive use.

Both Chutter, Inc. and Galperti, Inc. helped lessen the burden for parties seeking to cancel certain registrations based on fraud. These decisions, in conjunction with the efforts of Congress and the PTO, should help to address fraudulent filings cluttering the register.