Once upon a time, and for decades thereafter, trademark fraud claims were highly disfavored. They were criticized as unproductive litigation diversions — “often pled,” but “rarely proven.”

To succeed — during that lengthy period of time — the alleged fraud had to be “proven to the hilt,” with “clear and convincing evidence,” leaving nothing to “speculation, conjecture or surmise.” All doubts had to be resolved against the party making the claim and in favor of the accused. In those days, falsity was not necessarily fraud — fraud was really fraud.

And, given the seriousness of the charge, the focus properly was directed to whether the accused had the requisite subjective intent to deceive the United States Patent and Trademark Office (USPTO), while knowingly making false statements of material fact.

Mere inadvertence, sloppiness, carelessness, ignorance, honest mistakes and misunderstandings, and negligent — even grossly negligent — falsity or omissions were excused because they could not satisfy the very significant and difficult burden of proving fraud to deceive the USPTO.

Then, for a relatively brief period of time, the fraud pendulum swung in the opposite direction — let’s call it the Medinol era — from 2003-2009. During that period, the Trademark Trial and Appeal Board (TTAB) of the USPTO, granted fraud-based trademark oppositions and cancellations at a record pace, even on summary judgment (sometimes even sua sponte, as was the case in Medinol), by employing a much easier-to-prove strict liability or negligence standard, requiring only that the accused “should have known” the material statement was false.

During this period, the focus emphasized the applicant’s duty of candor and the solemnity of sworn statements made to the USPTO. The TTAB adopted a far more black and white analysis of most statements made to the USPTO, with no tolerance or excuse for confusion regarding language barriers, unfamiliarity with U.S. trademark law, or even the pro se status of an applicant.  The “objective manifestation of intent,” replaced or at least colored the subjective intent to deceive the USPTO standard.

Then came Bose in 2009, and the pendulum swung back again: “Subjective intent to deceive, however difficult it may be to prove, is an indispensable element in the [fraud] analysis.” The Federal Circuit refrained from deciding whether reckless disregard for the truth will suffice, since it disagreed with the TTAB that the facts of the Bose case even satisfied the lower recklessness standard of proof.

For the past 5 years, those who closely follow trademark fraud case law might have concluded that no set of facts could meet this stringent standard, but then came Nationstar Mortgage, the first finding of trademark fraud by the TTAB since Bose. Time will tell whether the decision in Nationstar Mortgage encourages more trademark fraud challenges.

Hopefully the TTAB’s focus on “evidence that applicant did not have a good faith reasonable basis for believing that he was using [his] mark in commerce for all the services identified in the application” is not a signal that it believes another swing of the pendulum is appropriate. After all, the Federal Circuit in Bose made perfectly clear: “We do not need to resolve the issue of reasonableness as it is not part of the analysis”. “Unless the challenger can point to evidence to support an inference of deceptive intent, it has failed to satisfy the clear and convincing evidence standard required to establish a fraud claim.”

To the extent you’re interested in learning more about trademark fraud and best practices to avoid the pitfalls of trademark fraud challenges, please join me, the prolific Ted Davis (Kilpatrick & Townsend), and the talented Jennifer Lee Taylor (Morrison & Foerster), in a Strafford live webinar: “Fraud in Trademark Applications and Registrations: Proving or Defeating Allegations,” scheduled for tomorrow Tuesday, January 13, 1:00pm-2:30pm EST.

If you’re one of the first three to post a comment here, you can be my guest to attend for free.

  • Interesting post. Cancellation is a harsh remedy. However, enforcement of a registration for goods listed but not actually used can likewise be harsh on accused infringers. The duty of candor flows from an enumerated purpose of trademark law — protecting the public. For what it’s worth, I think registrants have a duty to make a reasonable investigation into whether the use affidavit is true as to each enumerated good/service. Otherwise, you’re in reckless/willfull blindness territory. To what do you attribute the two policy shifts over the past decade?

  • stevebaird

    The Medinol era probably resulted from concerns over lax respect for the oath and no meaningful threat of the harsh penalty of a successful fraud claim. If the TTAB were a parent, trying to change a child’s behavior, Medinol and its progeny was like grounding a teenager for life with no chance of parole. I suspect there was some buyer’s remorse in making fraud far to easy to prove with a strict liability or mere negligence standard. Bose corrected this mistake, and returned fraud to its original meaning, requiring a subjective intent to deceive the USPTO. Since it has taken the Board five years to find a set of facts that it must believe satisfies Bose, I suspect the TTAB would welcome further guidance from the CAFC on properly applying Bose.

  • artstyle329

    I have to believe that many pro-se trademark filers (small mom
    & pop businesses, the do-it-yourselfers) inadvertently fail to be fully transparent
    in their trademark applications.

  • The facts seem pretty egregious in Nationstar, particularly the applicant lacking the licenses needed to engage in the services he claimed. That being said, are we all the way back to an ineffective deterrent? Either way, it creates uncertainty for litigants to have a shifting standard.

    By the way, I’m enjoying this blog. I had been looking for a Patently-O type trademark blog. Frankly, I find this more interesting because it is more practice-focused than academia-focused.

    • stevebaird

      Welcome, and thanks for sharing your thoughts. I agree the facts were pretty egregious in Nationstar, and it would have been best, in my opinion, for the Board to focus more on the absence of the necessary state license and inability to offer certain services lawfully, and not spend time on the “reasonableness” of the applicant’s belief — that sounds too much like Medinol.

  • Great webinar!