October 28, 2021

TTAB Declares that Reckless Disregard For The Truth = Fraud

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In a momentous decision, the Trademark Trial and Appeal Board has officially concluded that "reckless disregard satisfies the requisite intent for fraud on the USPTO in trademark matters."  In Chutter, Inc. v. Great Management Group, LLC, 2021 U.S.P.Q.2d 1001 (T.T.A.B. 2021), a consolidated Cancellation and Opposition proceeding, the Board granted a petition of cancellation by Plaintiff Chutter, Inc. ("Chutter") filed against Defendant Great Concepts, LLC's ("Great Concepts") registration for the mark DANTANNA'S in Class 43 for "steak and seafood restaurant," based on a finding of fraud. Plaintiff's pleaded fraud claim, and the Board's finding of fraud came as a result of an admittedly false statement made by counsel in Great Concepts' Section 8&15 Declaration filed in 2010.

In particular, counsel submitted the sworn declaration asserting, among other things, that "there is no proceeding involving said rights pending in the United States Patent and Trademark Office or in a court and not finally disposed of." 15 U.S.C. § 1065. This statement was decidedly, and admittedly, false, as, at the time, there was both a pending cancellation proceeding and a federal litigation regarding Great Concepts' right to register and use the mark DANTANNA'S. As a result, the Board answered the question that the Federal Circuit left unanswered in In re Bose Corp., 580 F.3d 1240 (Fed. Cir. 2009) - whether reckless disregard for the truth or falsity of a material statement made in a filing with the USPTO satisfies the intent to deceive requirement.

In Bose, the declarant included a false statement regarding use of a mark in commerce in a maintenance filing. The Court held that "fraud in procuring or maintaining a trademark registration occurs when an applicant for registration, or a registrant in a post registration setting, knowingly makes a false, material representation of fact in connection with an application to register, or a post registration document, with the intent of obtaining or maintaining a registration to which it is otherwise not entitled." Further, that "a party alleging fraud in the procurement or maintenance of a registration bears the heavy burden of proving fraud with clear and convincing evidence" and that "the Board will not find fraud if the evidence shows that a false statement was made with a reasonably and honest belief that it was true, rather than an intent to mislead the USPTO into issuing a registration to which the applicant was not otherwise entitled."

Because of this strict standard set by requiring "an intent to mislead," the Federal Circuit in Bose declined to find fraud, and many parties since have had an equally difficult time reaching this high bar for fraud. In the wake of Bose, many stakeholders have relied upon void ab initio claims as an alternative to fraud claims (i.e. the mark was not in use at the time a statement of use was filed). However, the Chutter decision sets a more reasonable standard that should be possible to meet in many instances of fraud in USPTO cases.

The Board found that Great Concepts' counsel "disregarded the contents of the Combined Declaration he attested to under 18 U.S.C. Section 1001," and "by failing to ascertain and understand the import of the document he was singing…[he] acted in reckless disregard for the truth."  Noting that the Federal Circuit has held that the intent to deceive must be willful, the Board cited the Supreme Court's findings that "the ‘standard civil usage' of ‘willful' includes reckless behavior," as well as numerous other circuit's views on "reckless disregard," and found that Great Concepts, in intending to file the Combined Declaration, regardless of accuracy, had the specific intent to deceive the USPTO. Thus, a finding of fraud was found and the Board granted Chutter's Petition to Cancel Registration No. 2929764 for the mark DANTANNA'S for "steak and seafood restaurant" on the ground of fraud.

This decision should be welcomed by stakeholders.  For the over a decade, a fraud on the USPTO claim was nearly impossible to establish because the proof of "intent to mislead the USPTO" is an undoubtedly tough standard to meet. "Reckless disregard" is still a challenging standard, but the type of evidence needed to establish the proper record is more feasible to procure in an opposition or cancellation proceeding.  It will be interesting to see whether the Federal Circuit further tweaks the standard set by the Board or if it decides to maintain the higher standard set by Bose with more clarity for stakeholders.  In the meantime, the door is now open for stakeholders to assert a viable fraud on the USPTO claim.

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