US Court of Appeals for the Federal Circuit Rules the Trademark Board Erroneously Lowered the Fraud Standard in Trademark Cases to Simple Negligence

On August 31, 2009 the US Court of Appeals for the Federal Circuit (“CAFC”) ruled in In Re Bose Corporation, 2008-1448 (CAFC) that “a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the PTO [US Patent and Trademark Office].”

During the opposition that was tried by the Trademark Trial and Appeal Board (“TTAB”), which was filed by Bose, for its mark WAVE (TM Reg. No. 1,633,789) against the mark HEXAWAVE, the owner of HEXAWAVE counterclaimed that Bose had committed fraud in the renewal registration Under Sections 8 & 9 because the mark had not been used on all of the goods in the WAVE registration. The general counsel for Bose included the goods audio tape recorders and players, even though those goods were not being sold in commerce. However, the goods were being repaired and the general counsel believed that transporting repaired goods having the WAVE trademark constituted use in commerce. The TTAB held that the general counsel’s belief was not reasonable, and that the use statement in Section 8/9 renewal was material. Therefore, the TTAB concluded that the general counsel had committed fraud on the US Patent and Trademark Office (“PTO”) and cancelled the entire WAVE trademark.

The CAFC found that the TTAB had “consistently and correctly acknowledged that there is ‘a material legal distinction between a ‘false’ representation and a ‘fraudulent’ one, the latter involving an intent to deceive, whereas the former may be occasioned by a misunderstanding, an inadvertence, a mere negligent omission, or the like.” Kemin Indus., Inc. v. Watkins Prods., Inc., 192 USPQ 327, 329 (T.T.A.B. 1976). In other words, deception must be willful to constitute fraud. Smith Int’l, 209 USPQ at 1043.
Ultimately, the CAFC concluded that by equating “should have known” of the falsity with a subjective intent, the TTAB erroneously lowered the fraud standard to a simple negligence standard. In re Bose Corporation, 2008-1448 at 6.