The importance of due diligence
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In recent years, a new standard for fraud has emerged from the Trademark Trial and Appeal Board (TTAB). Armed with this new standard, the TTAB has become increasingly willing to cancel entire federal trademark registrations for containing material errors. Because cancellation is such a harsh penalty, it is essential for trademark owners to be aware of the new standard and the best practices for preventing potential problems down the road.
What are “material representations” that could give rise to a fraud claim?
Typically, the errors flagged in successful fraud claims are misstatements found in the descriptions of goods and services and in the dates of first use. For example, if a trademark owner lists multiple goods and services in its application, but never uses the mark in connection with one of the listed items, or discontinues use of an item without amending the application, the entire registration becomes subject to cancellation based on fraud. The same is true where a date of first use is listed for all of the goods and services, but some goods and services were not actually used until a later date.
Another hotbed for potential fraud claims is in statement of use filings with intent to use applications. If an applicant files a statement of use but has only begun using the mark on some of the goods and services listed, rather than all goods and services listed, fraud becomes a potential issue.
The New Strict Liability Standard
What is the new standard applied?
Gone are the days wherein a fraud claim required a showing of a subjective intent to deceive. Since the Medinol case in 2003, the TTAB now recognizes an objective showing of intent. Medinol Ltd.V. Neuro Vasx, Inc., 47 USPQ2d 1205 (TTAB 2003). Specifically, the new rule is that “proof of specific intent is not required, rather, fraud occurs when an applicant or registrant makes a false material representation that the applicant or registrant knew or should have known was false.” Id. (emphasis added). This is in essence a strict liability standard. Either the information provided in the filing is correct, or a fraud has been committed. Unfortunately, claiming an error was unintentional or inadvertent will not remedy the underlying fraud.
The impetus behind this new trend appears to be the TTAB’s growing intolerance for mistakes in applications and maintenance filings. According to the TTAB, trademark owners have a duty to know how their marks are used and to accurately convey those uses to the Patent and Trademark Office (PTO). The trademark filings are simple documents and are always filed with a declaration, wherein trademark owners declare, under oath, that all material information contained in the filing is correct. The TTAB takes that oath quite seriously and is more than willing to find fraud where the oath is signed, but the filing contains material errors because the trademark owner failed to take due diligence.
Unfortunately, the TTAB has also held that amending the registration at a later date will not remedy any underlying fraud. The only clear time that the TTAB will accept an amendment is prior to the mark being published during the application process.
The Federal Circuit has remained silent on the TTAB’s new stance, so it is unknown what will come of this new standard. What is certain at this time is that it is of utmost importance to have accurate information in all trademark filings.
What does this all mean for trademark owners?
This shift in the interpretation of fraud is important for trademark owners to recognize in order to effectively protect, maintain and enforce trademark rights.
First and foremost, details, due diligence and effective communication with legal counsel are key when applying for, maintaining and enforcing trademark rights. In addition, there are specific considerations for different circumstances trademark owners encounter.
1. The Application Process
During the application process, it is essential to ensure that the mark is in fact used on each and every good and service listed. In addition, it is equally important to ensure the dates of first use are correct for every good and service listed.
If possible, characterize the goods and services as accurately and broadly as possible to anticipate change in use of the mark down the road. For example, claiming use in connection with “wine” is much safer than claiming “wine, namely sparkling wines, white wines, red wines and vermouth.” If the mark is not actually ever used with red wine, despite any initial intentions, the registration contains fraud.
Filing multi-class applications is also fraught with potential problems. For example, if an error exists in regard to one class of goods or services, the entire registration could be subject to cancellation based on fraud. A better practice is to file separate trademark applications for each class of goods and services. The filing fee remains the same, and any errors or discontinuation of uses of one class will not affect the registration of the mark in other classes.
In intent to use applications, it is essential at the time of filing the statement of use to confirm the goods and services are accurate and that the mark is indeed in use with every good and service named on the date listed for the date of first use.
Finally, it is important to ensure any and all specimens of use accurately reflect the use of the mark.
Once a registration is obtained, it is still important that the registration remains correct and that all maintenance filings are accurate.
Between the 5th and 6th year of registration, Section 8 and 15 filings are made. At that time, a careful review of the registration must be made to determine whether the mark is indeed still in use with each and every good and service listed.
It is also a good idea to conduct periodic audits of trademark portfolios to make sure the registrations are accurate. If use is discontinued for a specific good or service and the trademark owners act promptly to amend a registration, it is unlikely to cause any problems. In contrast, if the mark is not used with a named good or service for a prolonged period of time without action, the mark very well may be subject to cancellation. For registrations that are clearly out of date or inaccurate, it may be wise to file a new, correct application.
3. Opposition / Cancellation Proceedings
The issue of fraud is also relevant in cancellation and opposition proceedings before the TTAB. During inter partes proceedings, fraud may be a strong weapon. It is important to carefully review the opposing party’s registrations for any errors or misstatements. If any are found, a whole new line of attack may be available, even against incontestable marks.
If possible, it is equally important to review registrations prior to becoming a party to a TTAB proceeding to identify any potential problems before they may come under attack.
Given the TTAB’s shifting view toward fraud during the past several years, it is up to trademark owners to actively engage in due diligence in connection with federal trademark filings and ongoing trademark usage. At the end of the day, due diligence will ensure solid trademark rights.