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The Tavern on the Green dispute came to a swift end, for the time being. U.S. District Court Judge Miriam Cedarbaum granted summary judgment in favor of the City of New York, ordering cancellation of LeRoy’s federal trademark registration for the TAVERN ON THE GREEN mark in connection with restaurant services on the basis of fraud. (See opinion here.)  On May 6, 2010, LeRoy filed an appeal.  For a detailed background on this case, see my prior blog posts here and here. 

By way of brief background from the opinion, the Tavern on the Green restaurant opened in 1934.  In 1973, LeRoy Adventures entered into a license agreement with the City of New York to operate the Tavern on the Green restaurant in Central Park.  After losing a bid to renew the restaurant lease to another party last year, LeRoy and the City of New York were disputing ownership of the valuable TAVERN ON THE GREEN trademark. 

The license agreement between LeRoy and the City provided for certain approval and oversight by the City and included a provision wherein the licensee could change the name of the restaurant upon written approval. The agreement was later revised, giving more control to the City and removing the name change provision. 

In 1978, LeRoy filed a federal trademark application for the TAVERN ON THE GREEN mark in connection with restaurant services claiming a date of first use of August 31, 1976 – the date LeRoy reopened the restaurant after renovations were complete.  As part of the application, LeRoy signed a declaration of exclusive ownership of the mark (noting that to the best of his knowledge and belief, no other party had a right to use the mark).  The City’s fraud claim is based on the fact that  LeRoy signed the declaration and did not disclose the license agreement with the City or acknowledge his status as a licensee. 

The City claimed it was not aware of the federal registration until 2006, at which time it requested that LeRoy assign all rights to the City. LeRoy declined, disputing the City’s claim of ownership of the mark. LeRoy filed a second federal trademark application for the TAVERN ON THE GREEN mark in 2007 in connection with “cooking oils, salad dressing and dipping oils.”  While the City filed two extensions of time to oppose the application, it did not oppose and the application registered in 2008. 

The City prevailed in its fraud claim.  The Court ordered cancellation of the registration after finding that LeRoy’s failure to disclose the license agreement was a deliberate and material omission regarding another’s right to use the mark, justifying cancellation.  The Court noted that LeRoy “adduced no facts which would permit a reasonable fact finder to conclude that LeRoy’s conduct was anything but a deliberate attempt to mislead the PTO.”  The Court held that by entering into the agreement, LeRoy acknowledged the City’s right to the trade name “Tavern on the Green” and, accordingly, found that the undisputed facts established that LeRoy deliberately attempted to mislead the PTO about his status as a licensee. 

Without knowing the facts apart from those in the opinion, I was left with some questions as the finding of fraud in this situation. 

Last year, the Federal Circuit held that fraud in procuring a trademark registration occurs when an applicant knowingly makes a false, material representation of fact in connection with his application.” (See In re Bose available here.)  An “intent to deceive, however difficult to prove, is an indispensable element in the analysis” which must be proven by clear and convincing evidence by the party claiming fraud. (Id.) 

The Court appears to place the burden of proving intent on the registrant, LeRoy, rather than the party seeking cancellation.  The opinion does not discuss any evidence as to an intent to deceive, but rather the absence of any evidence to the contrary submitted by LeRoy.  The opinion also suggests that LeRoy did not believe that the agreement dealt with trademark rights in the name (suggesting an argument made by LeRoy that the license agreement was not a “trademark license agreement”).  Thus, it appears LeRoy argued that he believed he was the owner of the mark at the time the application was filed (no intent to deceive the PTO).  In addition, the fact that LeRoy made similar claims of ownership in 2006 when the City sent him a letter requesting the assignment of the registration supports the notion that he believed he owned the mark. 

As noted, Leroy has filed an appeal and, once again, we will have to wait and see what happens. 

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A recent domain name decision under ICANN's Uniform Domain-Name Dispute-Resolution Policy (UDRP Policy), captioned Bin Shabib & Associates (BSA) LLP v. Hebei IT Shanghai ltd c/o Domain Administrator, found reverse domain name hijacking, under some rather interesting, if not questionable circumstances. The Rules that govern the UDRP Policy define Reverse Domain Name HiJacking as "using the Policy in bad faith to attempt to deprive a registered domain-name holder of a domain name." 

What caught my eye was the three-member panel's use of the ill-fated "knew or should have known" phrase in finding the requisite "bad faith" for hijacking; a phrase well-known to those who follow the trademark fraud case law and appreciate that recently this same "should have known" standard was flatly rejected by the Court of Appeals for the Federal Circuit (CAFC) in In re Bose, as being nothing more than a test for simple negligence. For more on the In re Bose decision, see here and here.

The Bin Shabib & Associates three-member panel, assigned by NAF, was unpersuaded that complainant had proven common law trademark rights in the acronym BSA (under the first UDRP element), so it declined -- as unnecessary -- to make any findings on the second and third elements under the UDRP, namely, the "lack of legitimate interest" and "bad faith" elements. Despite making no findings on either of these two key elements, the panel held as follows:

Also, the Panel finds that Complainant knew or should have known that it was unable to prove that Respondent lacks rights or legitimate interests in the disputed domain name or that Respondent registered and is using the disputed domain name in bad faith. Based on the foregoing, the panel finds that reverse domain name hijacking has occurred. See NetDepositVerkaik v. Crownonlinemedia.com, D2001-1502 (WIPO Mar. 19, 2002) (“To establish reverse domain name hijacking, Respondent must show knowledge on the part of the complainant of the Respondent’s right or legitimate interest in the Domain Name and evidence of harassment or similar conduct by the Complainant in the fact of such knowledge.”); see also Labrada Bodybuilding Nutrition, Inc. v. Glisson, FA 250232 (Nat. Arb. Forum May 28, 2004) (finding that complainant engaged in reverse domain name hijacking where it used “the Policy as a tool to simply wrest the disputed domain name in spite of its knowledge that the Complainant was not entitled to that name and hence had no colorable claim under the Policy”) (emphasis added).

A couple of curious points are worth discussion. First, putting aside for a moment the dubious "should have known" standard of bad faith, how can complainant be guilty of "bad faith" -- sufficient for hijacking -- in failing to appreciate that it had no chance of proving the very two elements for which the panel made no findings? Second, neither of the quoted parentheticals go far enough to support the quoted  "should have known" standard; instead, both speak only of actual knowledge.

As it turns out, however, there is some prior WIPO panel support for the "should have known" standard in finding "bad faith" sufficient for reverse domain name hijacking. Nevertheless, in each of these decisions, the panels made findings on all three UDRP elements before finding "bad faith" and ruling in favor of a claim for reverse domain name hijacking, see here, here, and here.

So, what do you think? Is the "should have known" standard defensible in reverse domain name hijacking decisions? If not, what about gross negligence? How about reckless disregard? What is the appropriate level of culpability? Does it even matter, or is a hijacking finding "of little import" to most complainants?

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