Susan J. Hightower Pirkey Barber LLP Austin, TX. with thanks to Linda K. McLeod Finnegan, Henderson, Farabow, Garrett & Dunner, LLP Washington, DC

Transcription

1 Susan J. Hightower Pirkey Barber LLP Austin, TX with thanks to Linda K. McLeod Finnegan, Henderson, Farabow, Garrett & Dunner, LLP Washington, DC

2 The Medinol Years The Bose Opinion The Future of Fraud 1

3 I. The Medinol Years Medinol, Ltd. v. Neuro Vasx, Inc. (TTAB 2003) (summary judgment) Statement of use covered neurological stents and catheters; mark NEUROVASX used only on catheters 2

4 Medinol:The New Standard Board rejected registrant s claim of inadvertent error Fraud can occur without subjective intent when applicant knows or should know statement is materially incorrect Inquiry is into objective manifestations of intent False claim on goods/services always material Deletion of goods cannot cure fraud Entire registration cancelled 3

5 The Medinol Line Intent requirement changed from subjective intent to deceive to objective knows or should know falsity TTAB applied Medinol to find fraud with no specific intent in approximately 22 cases over 6 years Many were decided on summary judgment Fraud found in virtually every opposition with overbroad use claim 4

6 II. The Bose Opinion Bose Corp. v. Hexawave Inc. (TTAB 2007) Bose opposed registration of HEXAWAVE Opposition based on three WAVE and ACOUSTIC WAVE registrations Applicant Hexawave Inc. counterclaimed to cancel one WAVE registration for fraud 2001 renewal included goods not made or sold under mark since 1997 Bose argued transporting branded goods for repair was use in commerce Bose won opposition, but lost the registration 5

7 Bose v. Hexawave: The Goods WAVE was in use on 5 of 6 goods in Bose s renewal application Radios, stereo systems, portable CD players, etc. But not audio tape recorders and players 6

8 Bose v. Hexawave: The TTAB Holding Board found: Use was insufficient to maintain registration Bose offered no case law to support its use argument It didn t own the goods it transported General Counsel s belief was unreasonable Registration canceled for fraud Alternatively: Should opposer prevail on appeal, audio tape recorders and players at least must be deleted from registration 7

9 The Bose Appeal: How and Why Bose s grounds of appeal: It was using the WAVE mark in commerce No evidence of intent to deceive Hexawave did not participate in appeal Federal Circuit granted PTO Director permission to defend Board decision Changed style of case to In re Bose 8

10 Oral Argument: Attention Must Be Paid Why wasn t the fraud standard waived? Is transport of repaired goods use? What do we do about Torres v. Cantine Torresella (Fed. Cir. 1986)? Is recklessness enough? 10

11 Oral Argument: A Balancing Act Chief Judge Michel s balancing: It seems to me the PTO has crossed a very, very fundamental line in using negligence phraseology... in a regime that all will have to agree involves civil fraud. The question involves balancing different competing interests. Of course you want to have maximum accuracy in submissions to the Patent Office. On the other hand, you don t want to cancel registered marks unless something pretty bad is happening. That s why Congress chose fraud rather than negligence or some lesser showing. 11

12 Federal Circuit Decision Knowing Falsehood [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 By equating should have known with intent to deceive, TTAB lowered the fraud standard to simple negligence 12

13 Federal Circuit Decision Knowing Falsehood (cont.) Court distinguishes Torres TTAB read Torres too broadly [O]ne should not unduly focus on the phrase should know and ignore the facts of the case. Torres admitted that he made false statements to PTO when he filed renewal application 13

14 Federal Circuit Decision Intent to Deceive There is a material distinction between a false statement and fraudulent one, the latter involving an intent to deceive, whereas the former may be occasioned by a misunderstanding, a mere negligent omission or the like. Intent to deceive is a stricter standard than mere negligence or gross negligence 14

15 Federal Circuit Decision Intent to Deceive (cont.) Subjective intent to deceive, however difficult it may be to prove, is an indispensable element in the [fraud] analysis deception must be willful to constitute fraud Willful intent to deceive cannot be based on proof of simple negligence or gross negligence Intent to deceive can be inferred from indirect and circumstantial evidence, but such evidence must be clear and convincing 15

16 Federal Circuit Decision Reckless Disregard Court declined to address whether reckless disregard of truth satisfies the intent to deceive requirement Even assuming reckless disregard qualifies, there is no basis for finding the conduct reckless in this case Neither PTO nor any court had interpreted use in commerce to exclude repairing and shipping previously sold goods 18

17 III. The Future of Fraud Elements of fraud must be proven to the hilt by clear and convincing evidence Intent to deceive may be inferred from indirect and circumstantial evidence, but such evidence must be clear and convincing no room for speculation, inference or surmise any doubt must be resolved against the charging party 19

18 Application of In re Bose by the TTAB Enbridge, Inc. v. Excelerate Energy Ltd. (Oct. 6, 2009) Motion for summary judgment of non use fraud denied, citing Bose Pleading fraud: Societe Cooperative Vigneronne Des Grandes Caves Richon Lezion v. Albrecht Piazza LLC (Sept. 20, 2009) TTAB required amendment of non use fraud claim. The Board will not approve pleadings of fraud which rest solely on allegations that the trademark applicant made material representations of fact in its declaration which it knew or should have known to be false or misleading. Pleadings of fraud made on information and belief where there is no separate indication that the pleader has actual knowledge of the facts supporting a claim of fraud also are insufficient. 20

19 Post Bose Pleading in the Courts CTF Development, Inc. v. Penta Hospitality, LLC (N.D. Cal. Oct. 26, 2009) Motion to strike counterclaim of non use fraud in trademark registration denied in infringement case. All six elements sufficiently alleged: A false representation Regarding a material fact Knowledge or belief that the representation is false Intent to induce reliance on the misrepresentation Reasonable reliance on the misrepresentation Damages resulting therefrom 21

20 Famous Footnote 2 What constitutes reckless disregard of the truth? Is it enough for intent? Supreme Court: While the term recklessness is not self defining, the common law has generally understood it in the sphere of civil liability as conduct violating an objective standard: action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known. Safeco Ins. Co. v. Burr (2007) Model Penal Code: Criminal mens rea: conscious disregard of a substantial and unjustifiable risk; gross deviation from the standard of conduct of a law abiding person in the actor s situation 22

21 Burden of Proof After Bose Federal Circuit: In re Seagate Tech. (2007) We fully recognize that the term [reckless] is not self defining. However, [t]he civil law generally calls a person reckless who acts... in the face of an unjustifiably high risk of harm that is either known or so obvious that it should be known. Accordingly, to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. 23

22 Reckless Disregard of Truth Consider AIPLA Amicus Brief Examples: Applicant A carefully reviews the statement and confirms use of mark, but inadvertently overlooks one of the recited goods Applicant B makes no attempt to investigate use of the mark and in fact was not using the mark on most of the goods or never manufactured many of the goods listed Grossly insufficient investigations of use may rise to the level of recklessness, but not honest mistakes, inadvertence 24

23 Duty of Candor and Duty to Investigate TM owner s president and its attorney shared a duty to confirm the accuracy of the statements contained in the application Both responsible for verifying mark in use on all goods Hachette Filipacchi Presse v. Elle Belle LLC (TTAB 2007) 25

24 Avoiding Reckless Disregard of Truth Suggestions for Sharing Duty of Accuracy Review the application with the client Ensure clients thoroughly review recitation of goods Elle Belle applicant said attorney did not personally review application with client [H]ad respondent s counsel ensured that he understood what his client was telling him and reviewed the application with his client prior to obtaining the necessary signed declaration, the situation herein could have been prevented. Especially important to clients new to prosecution process, language difference 26

25 Avoiding Reckless Disregard of Truth Suggestions for Sharing Duty of Accuracy Control the Genesis of the List of Goods/Services Standard Knitting: COO only briefly reviewed list in draft application received from counsel; unknown where counsel got the list Counsel are at arm s length and may not be able to verify that client has adequately reviewed draft goods recitation has taken place Better to err on side of under inclusion 27

26 Avoiding Reckless Disregard of Truth Suggestion for Satisfying Obligation to Inquire Herbaceuticals v. Xel Herbaceuticals: Board stated that counsel for registrant was obligated to inquire as to the goods on which the marks were being used Place the heaviest obligation to inquire where it belongs: on the client Require the client to sign the statement of use 28

27 Don t Stop the Fraudits Look Before You Leap Into an Opposition Audit existing portfolio Retain evidence of use of mark for each good/ service as of each critical filing date in case of later dispute 29

28 Avoiding Reckless Disregard of Truth File amendment to delete goods/services: before publication of application University Games v. 20Q.net (TTAB 2008) before proceeding is commenced against application/registration Zanella Ltd. v. Nordstrom (TTAB 2009) File amendment to correct misstatements found: Mister Leonard v. Jacques Leonard (TTAB 1992) (duty to correct material, false statements made to PTO when falsity becomes known) Space Base v. Stadis (TTAB 1990) (willfully failing to correct a misrepresentation after it is discovered, even if originally innocent, may constitute fraud) 30

29 AIPLA Resolutions: Remaining Issues In 2007, AIPLA Board adopted three resolutions criticizing Medinol Misstatements not made with intent to deceive should not constitute fraud Should allow amendment/deletion of excess goods Erroneous statement of use not material if party was using mark on similar goods and entitled to registration covering them 31

30 AIPLA Amicus Argument Medinol standard missed three of five required elements for common law fraud in Federal Circuit 1. Representation of a material fact 2. Falsity of that representation 3. Intent to deceive or, at least, a state of mind so reckless as to the consequences that it is held to be the equivalent of intent (scienter) 4. Justifiable reliance by the party deceived which induces him to act 5. Injury to the party deceived as a result of his reliance on the misrepresentation 32

31 What About Materiality and Injury? Materiality (first element) Board s reasoning is circular (and sometimes non existent) Errors in statements of use may be immaterial when registration covers highly related goods Injury (fifth element) Cannot be presumed from erroneous inclusion of goods Injury to whom? Purpose of trademark register: provide public notice of marks in use 33

32 Thank You! 34 28