CAFC Derails the Medinol Fraud Train: Applicant Must Have Intent to Deceive, Proved by Clear & Convincing Evidence
By: DEAN R. KARAU
October 2009
The Court of Appeals for the Federal Circuit (“CAFC”) has reversed the landmark 2003 “strict liability” fraud standard established by the Trademark Trial and Appeal Board (“TTAB”). The 2003 standard resulted in dozens of registrations being cancelled while striking fear in the hearts of all trademark owners that they could lose an entire registration due to an innocent mistake.
Trademark owners now can relax a little, knowing that their registrations are safe, unless they knowingly acted to deceive the United States Patent and Trademark Office (“USPTO”).
Prior to 2003, an applicant/registrant committed fraud only if it knowingly made a false representation with an intent to deceive.
In Medinol v. Neuro Vasx, Inc., 67 U.S.P.Q.2d 1205 (TTAB 2003), the TTAB changed that standard. In Medinol, the TTAB held that an applicant/registrant committed fraud when it made a material representation of fact which it knew or should have known to be false or misleading. Instead of requiring direct evidence of an intent to deceive, intent could be inferred if the applicant/registrant should have known its statement was inaccurate.
In virtually every case brought to the TTAB after its 2003 ruling, fraud was found in the face of every conceivable excuse for the false statement – mistake, inadvertence, language barriers or mistranslations, to name a few.
That meant that even an innocent mistake in communications – a shipping manager telling the boss that she labeled and shipped 20 products when in fact only 19 were shipped due to another’s clerical error – could result in an entire registration being cancelled.
But on August 31, 2009, in In re Bose Corporation, 91 USPQ2d 1938 (Fed. Cir. 2009), the CAFC found that the TTAB’s Medinol decision was wrong. The CAFC, the U.S. circuit court whose decisions are binding on the TTAB, rejected the TTAB’s reliance on the “should have known” standard.
In Bose, the CAFC made it clear that a trademark registration is obtained fraudulently only when the applicant knowingly makes a statement that is (1) false, (2) material, and (3) with the intent to deceive the USPTO.
The CAFC went further, saying that the evidence of fraud must be “clear and convincing” without resorting to speculation and inference.
The Medinol fraud doctrine had been particularly troublesome for companies outside of the U.S., who are conditioned to include a broad array of goods and services in their trademark applications, even if they are not using or intending to use the mark with all of those goods and services in the applications.
No longer will a mere mistake or misunderstanding be deemed fraud and subject a registration to cancellation. If someone alleges that an applicant/registrant committed fraud, they must prove, by clear and convincing evidence, that the applicant/registrant knowingly made a false with the intent to deceive the USPTO.
The new standard does not absolve applicants/registrants of the need to be careful when submitting declarations to the USPTO. While not a true fraud case, in Montblanc-Simplo GmbH v. United Brands International, Inc., Opposition No. 91185637 (September 29, 2009), the TTAB held that the applicant lacked a bona fide intention to use the mark for the 132 goods in the application and, therefore, sustained an opposition to the registration of the mark. The TTAB found unpersuasive the applicant’s subjective statements of intent because they were unsupported by any documentary evidence or other objective proof.
Applicants and registrants still need to be careful about what they represent to the USPTO. But the shadow of draconian consequences for true mistakes has been lifted.