In Re Bose Corp.
91 U.S.P.Q. 2d (BNA) 1938, 580 F.3d 1240, 2009 U.S. App. LEXIS 19658 (2009)
Rule of Law:
Fraud in procuring a trademark registration or renewal under the Lanham Act requires a showing that the applicant or registrant knowingly made a false, material representation with the intent to deceive the United States Patent and Trademark Office (PTO); a mere negligence or 'should have known' standard is insufficient to establish intent to deceive.
Facts:
- Bose Corporation (Bose) held a registered trademark for WAVE, which included goods such as audio tape recorders and players.
- Bose stopped manufacturing and selling audio tape recorders and players sometime between 1996 and 1997.
- On January 8, 2001, Bose's general counsel, Mark E. Sullivan, signed and filed a Section 8/9 renewal application for the WAVE mark.
- The renewal application stated that the WAVE mark was still in use in commerce on various goods, including audio tape recorders and players.
- At the time Mr. Sullivan signed the renewal, Bose continued to repair previously sold WAVE audio tape recorders and players and transport them back to customers.
- Mr. Sullivan testified that he believed these repair and transportation activities constituted 'use in commerce' for the purpose of maintaining the trademark registration.
Procedural Posture:
- Bose Corporation initiated an opposition against Hexawave, Inc.'s HEXAWAVE trademark application.
- Hexawave, Inc. counterclaimed for cancellation of Bose's WAVE mark registration, asserting fraud in its renewal application.
- The Trademark Trial and Appeal Board (TTAB) found that Bose committed fraud on the United States Patent and Trademark Office (PTO) in renewing Registration No. 1,633,789 for the trademark WAVE.
- The TTAB ordered the cancellation of Bose's WAVE mark registration in its entirety.
- The same TTAB panel denied Bose's Request for Reconsideration.
- Bose appealed the TTAB's decision to the United States Court of Appeals for the Federal Circuit.
- The original appellee, Hexawave, Inc., did not appear in the appeal, and the Director of the United States Patent and Trademark Office was granted leave by the court to participate as the appellee.
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Issue:
Does a trademark registrant commit fraud on the PTO by renewing a registration with a false statement of continued use if the registrant's counsel held an honest, though ultimately unreasonable, belief that the mark was still in use on all listed goods?
Opinions:
Majority - Michel, Chief Judge
No, a trademark registrant does not commit fraud on the PTO by renewing a registration with a false statement of continued use if the registrant's counsel held an honest belief, albeit an unreasonable one, that the mark was still in use on all listed goods, because fraud requires intent to deceive. The court reversed the Trademark Trial and Appeal Board's (TTAB) finding of fraud, holding that fraud under the Lanham Act occurs only when an applicant or registrant knowingly makes a false, material representation with the specific intent to deceive the PTO. The Federal Circuit found that the TTAB erroneously lowered the fraud standard by equating a 'should have known' of falsity with subjective intent, effectively applying a negligence standard, which contradicts established precedent. While Mr. Sullivan's statement that the WAVE mark was in use on audio tape recorders and players was false and material, his sworn testimony indicated a genuine, albeit mistaken, belief that Bose's repair and return of these products constituted 'use in commerce.' The court noted that prior to Mr. Sullivan's declaration in 2001, neither the PTO nor any court had interpreted 'use in commerce' to exclude the repairing and shipping of repaired goods. Without clear and convincing evidence to support an inference of deceptive intent, the claim of fraud cannot be sustained. However, the court agreed that the registration must be restricted to reflect that the mark is no longer in use on audio tape recorders and players and remanded the case for such proceedings.
Analysis:
This case significantly clarifies the high burden of proof required to establish fraud on the PTO in trademark cases. By rejecting the 'should have known' standard, the Federal Circuit reinforces that subjective intent to deceive is an indispensable element, protecting trademark owners from cancellation due to honest mistakes or misunderstandings of legal definitions. The decision aligns trademark fraud standards with the strict scienter requirements found in patent inequitable conduct cases, ensuring that the severe consequence of registration cancellation is reserved for deliberate acts of deception. This ruling may make it more challenging for challengers to prove fraud, emphasizing the need for direct or clear circumstantial evidence of intent rather than relying on inferences from negligence.
