U.S. Bose Decision – Effects on Madrid System Users

In this article Linda K. McLeod and Jonathan M. Gelchinsky, Partners, and Katherine L. Staba, Attorney at Law, at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, explore the possible implications, for users of the Madrid system for the international registration of marks, of recent legal decisions in the U.S. that have redefined standards in determining whether a trademark applicant has committed fraud before the U.S. Patent and Trademark Office (USPTO). Before joining Finnegan in 2002, Ms. McLeod gained significant trademark expertise as an Administrative Trademark Judge at the Trademark Trial and Appeal Board and at the USPTO.

Fraud and lack of bona fide intent to use: Potential USPTO challenges to extensions of protection into the U.S. under the Madrid Protocol

The USPTO’s Trademark Trial and Appeal Board (TTAB) has recently issued a series of decisions addressing claims of fraud and lack of bona fide intent to use a mark in U.S. commerce. Although none of the cases specifically involve Madrid Protocol filings, such claims are nonetheless potential grounds for opposition against applications for extension of protection into the U.S. under the Protocol, and cancellation of any resulting registration.

Fraud before the USPTO post-Bose: “Reckless disregard for the truth” and duty to investigate when filing a declaration of use

The ruling of the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) in In re Bose Corp., 91 U.S.P.Q.2d 1938 (Fed. Cir. 2009) dramatically changed the landscape of fraud claims before the USPTO. Prior to Bose, fraud was often found on grounds of misstatements concerning use of a mark in U.S. commerce that were arguably due to negligence or a justifiable mistake. In Bose, however, the Federal Circuit held that mere negligence is not sufficient to infer intent to deceive and fraud, and gross negligence may not itself justify an inference of intent to deceive. Instead, the court held that, under the Lanham Act, a trademark is considered to have been obtained fraudulently only if there is clear and convincing evidence that an applicant or registrant knowingly made a false, material representation with the intent to deceive the USPTO.

Following Bose, the TTAB now requires a pleading of specific facts supporting allegations of knowledge, intent to deceive and fraud, and clear and convincing evidence to prove such claims¹. Although an allegation of fraud before the USPTO has become more difficult to plead and prove, a claim of fraud may nevertheless be upheld where there is a “reckless disregard for the truth.”²  No cases have so far defined what would constitute “reckless disregard for the truth” in relation to fraud claims. Some commentators have suggested, however, that failure to read a filing or investigate the accuracy of declarations claiming use of a mark in U.S. commerce may constitute a “reckless disregard for the truth” and fraud before the USPTO.³

For non-U.S. applicants requesting an extension of protection into the U.S. through the Madrid Protocol, potential fraud issues are most likely to arise, if at all, in connection with declarations of continued use of the mark that are filed after issuance of the U.S. registration. Under Section 71 of the Trademark Act, 15 U.S.C. § 1141k, the owner of a registered extension of protection to the U.S. must file declarations of continued use of the mark in U.S. commerce by the sixth and tenth anniversaries of registration (and every 10 years thereafter). If registrants do not read such declarations carefully before signing them or do not take them seriously, or if they fail to take steps to investigate and confirm use of the mark for each of the goods and/or services listed, the registrations may be vulnerable to cancellation on grounds of fraud before the USPTO.

Bose Case – Background

When Bose renewed its Wave trademark at the USPTO in 2001, it listed tape recorders and players among the goods covered by the mark, although the company had discontinued sale of the machines in 1997. Hexawave challenged the renewal arguing that, as including tape recorders and players in the list was not completely accurate, Bose could be found to have committed fraud when renewing the trademark which could, therefore, be cancelled. Bose countered that it still serviced the devices and so was still in the business. The USPTO’s Trademark Trial and Appeal Board did not agree.

Bose challenged that decision in the Court of Appeals for the Federal Circuit (CAFC). In a ruling on August 31, 2009, that favored Bose, the CAFC stated that “mere negligence is not sufficient to infer fraud.” The Court 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.”

Objective documentary evidence establishing bona fide intent to use a mark in U.S. commerce

Applicants requesting extension of protection to the U.S. for international registrations under the Madrid Protocol must declare their bona fide intention to use the mark in U.S. commerce on all the goods and services listed at the time of filing.⁴  Viewed merely as a formality by some, making these declarations without careful consideration can have serious consequences. An applicant’s statement of bona fide intent to use its mark in U.S. commerce, if challenged, can lead to a finding that the application or any resulting registration is void in whole or in part as to the goods and services that the applicant is not able to prove it had a bona fide intent to use. The issue is of particular importance to non-U.S. applicants who frequently seek registration under the Madrid Protocol based on an international registration covering a long list of seemingly unrelated goods and services.

The TTAB has determined that a solely subjective and unsubstantiated intent to use the mark on the identified goods or services will not support a claim of bona fide intent to use the mark in U.S. commerce. If challenged, therefore, an applicant may be required to produce objective documentary evidence demonstrating that it had a bona fide intent to use the mark in U.S. commerce on all of the goods and services applied for at the time of filing and continuing to the date of actual use of the mark in U.S. commerce.⁵  The TTAB has held that simply filing and prosecuting an application does not itself constitute evidence of intent to use the mark.⁶  Thus, sufficient documentary evidence may include such items as business plans, product design or manufacturing efforts, correspondence with prospective licensees, records of ongoing business discussions, or promotional activities related to using the proposed mark in the U.S. Without such documentary evidence or other evidence establishing the requisite bona fide intent to use the mark in U.S. commerce, the application or any resulting registration may be deemed void, or at least void with regard to the goods and services that the applicant is not able to prove it had a bona fide intent to use.

Therefore, at the time of filing a request for extension of protection into the U.S., it is important that Madrid Protocol filers consider whether they can substantiate their claims of bona fide intent to use the mark in U.S. commerce, especially where the international registration covers a lengthy list of goods and services. Applicants have the option, under the Madrid Protocol, to limit the list of goods and services for which registration is sought in the U.S.⁷ Given the consequences of failing to establish, if challenged, bona fide intent to use a mark on all the goods and services listed, non-U.S. applicants should consider paring down their lists to include only those for which they can show documentary evidence – or provide a convincing explanation for not having such evidence – of bona fide intent to use the mark.

Challenges to “basic” applications and registrations in the U.S. and the effect on international registrations

The above discussion on fraud and challenges based on a lack of bona fide intent to use is also relevant for U.S. trademark owners who file outside the U.S. using the Madrid Protocol.⁸ Specifically, if the “basic” U.S. application or registration is challenged for fraud or for lack of a bona fide intent to use, and is refused or cancelled in whole or in part within five years after the international registration date, that international registration and all designations there from are similarly restricted or cancelled.

Conclusion

While it is more difficult in the post-Bose era to plead and prove fraud before the USPTO, that does not necessarily mean that a misstatement before the USPTO can never amount to fraud. Whether a “reckless disregard for the truth” can constitute fraud is still an open question. Thus, to avoid a possible fraud challenge, an applicant or registrant who files an application under the Madrid Protocol should carefully read all papers and investigate the truth and accuracy of statements made in an application or declaration before signing and filing papers with the USPTO.

Further, in an increasing number of cases, the TTAB has found that an applicant lacked bona fide intent to use a mark in U.S. commerce, thereby rendering the application void in whole or in part. To steer clear of such claims, trademark applicants should preserve documentary evidence that substantiates their bona fide intent to use the mark in U.S. commerce. Moreover, applicants requesting extension of protection into the U.S. through the Madrid Protocol should consider limiting the identification of goods and services by completing Item 10(b) in the international application or Item 5(b) in a subsequent designation, listing only those goods and services for which they can establish a bona fide intent to use, or show actual use of, the mark in U.S. commerce.

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1 See Asian & Western Classics B.V. v. Selkow, 92 U.S.P.Q.2d 1478 (T.T.A.B. 2009); Enbridge Inc. v. Excelerate Energy LP, 92 U.S.P.Q.2d 1537 (T.T.A.B. 2009).
2 See DaimlerChrysler Corp. v. Am. Motors Corp., Canc. No. 92045099 (T.T.A.B. Jan. 14, 2010).
3 See Brief of Amicus Curiae American Intellectual Property Law Assoc. in Support of Bose Corp. and Reversal at 12-14, Bose, 91 U.S.P.Q.2d 1938 (“AIPLA Br.”); see also 37 C.F.R. § 11.18(2)(iii) (imposing a duty to make a reasonable inquiry to confirm accuracy of factual statements made to the USPTO).
4 See WIPO Form MM18(E).
5 See, for example, Honda Motor Co. v. Winkelmann, 90 U.S.P.Q.2d 1660 (T.T.A.B. 2009).
6 See Research in Motion Ltd. v. NBOR Corp., 92 U.S.P.Q.2d 1926, 1931 (T.T.A.B. 2009).
7 See WIPO Forms MM1(E) and MM2(E), Item 10(b) and WIPO Form MM4(E), Item 5(b).
8 Pursuant to Section 61 of the Trademark Act, 15 U.S.C. § 1114a