Developments In The Fraud Standard

Two recent Trademark Trial and Appeal Board (“TTAB” or the “Board”) precedential opinions have shed additional light on the fraud standard. See our webpage entitled, Challenging Trademark Applications And Registrations on Fraud and Nonuse Claims, for more general information on this topic. See Illyrian Import, Inc. v. ADOL Sh.p.k ., 2022 USPQ2d 292 (TTAB 2022) [precedential], where the elements of fraud are clearly set forth. Fraud occurs when an applicant for registration or a registrant in a declaration of use or in a renewal application knowingly makes specific false material representations of fact with the intent of obtaining or maintaining a registration to which it is not entitled. See also, In re Bose Corp., 580 F.3d 1240, 91 USPQ2d 1938 (Fed. Cir. 2009). Fraud claims must be proven by clear and convincing evidence.

In Illyrian Import, Inc., opposer failed to prove by clear and convincing evidence that the applicant knew there was a party with superior rights in the subject mark. Opposer argued that the applicant falsely claimed ownership of the subject trademark since applicant knew a third party owned and had a registration for the subject mark in design form that was cancelled several years ago. The Board determined that the applicant did not have this knowledge on the date it filed its trademark application with the USPTO, and that the applicant had a “reasonable belief” it had the right to use the mark in the U.S. The Board stated that even assuming the statements were false, the record didn’t show that the applicant knew it was false. Therefore, the applicant could not have intended to deceive the Trademark Office. The fraud claim was dismissed. This is an important distinction when it comes to proving a fraud claim. The Board will not find fraud if the evidence shows it was made with a reasonable belief to be true.

In another important precedential decision, Chutter, Inc. v. Great Management Group, LLC and Chutter Inc. v. Great Concepts, LLC, 2012 USPQ2d 1001 (TTAB 2021) [precedential], the Board clarified that having a reckless disregard for the truth will fulfill the intent to deceive requirement. Although the Court of Appeals for the Federal Circuit has held that intent to deceive is an indispensable element of the analysis in a fraud case, See In re Bose, 91 USPQ2d at 1941, Chutter Inc., where it was determined that “reckless disregard for the truth” will satisfy this element. The Board stated, “as a matter of law [that] reckless disregard satisfies the requisite intent for fraud on the USPTO in trademark matters.” In Chutter Inc., a Section 15 Affidavit of Incontestability was filed despite two proceedings pending involving the subject trademark. This factual scenario here differs from that in In re Bose, where there was a use in commerce question, and whether that use was sufficient. In addition, the registrant in In Chutter Inc., when presented with the opportunity to correct the false filing, made no remedial steps.

The following definitions are relevant: “Reckless disregard” is defined as the “conscious indifference to the consequences of an act.” See BLACK’S LAW DICTIONARY (11th ed. 2019) under “Disregard.” The Restatement of Torts defines “recklessness” as the “conscious disregard” of a substantial risk of harm. Restatement (Second) Of Torts § 500 (1965). An appropriate inquiry into the accuracy of the statements in a declaration is required. With the Chutter Inc. matter now decided it is still important to remember that the party instituting a fraud claim has a very heavy burden to meet. Any doubt must be resolved in favor of the party being charged with fraud. See Smith Int’l Inc. v. Olin Corp., 209 USPQ 1033 (TTAB 1981). If you have questions on the subject matter, please contact the firm for a courtesy consultation.