Proving Fraud Becomes Increasingly Difficult

USPTO refuses to find fraud where trademark applicant relied on advice of counsel.

This article was published in RatnerPrestia’s Insight Newsletter – Winter 2011.

On September 13, 2010, the U.S. Patent and Trademark Office Trademark Trial and Appeal Board issued a decision further illustrating how difficult it will be to prove fraud on the USPTO subsequent to the Court of Appeals for the Federal Circuit decision in In re Bose which ended the negligence standard for fraud on the PTO and held “a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly made a false, material representation with the intent to deceive the PTO.” In re Bose Corporation, No. 2008-1448 (Fed. Cir. Aug. 31, 2009). In M.C.I. Foods, Inc. v. Brady Bunte, Cancellation No. 92046056 (TTAB Sept. 13, 2010), the Board found that conferring with counsel before including knowingly false information in its application avoided the requisite deceptive intent for fraud.

M.C.I. Foods, Inc. filed a Petition to Cancel Brady Bunte’s U.S. Registration No. 3,086,128 for the mark CABO CHIPS for “processed snack foods formed from corn, namely, chips.” M.C.I. alleged priority of use and likelihood of confusion and asserted its own U.S. Registration Nos. 2,674,112; 2,988,402 and 3,088,995 for CABO PRIMO & Design, LOS CABOS & Design and CABO CLASSICS, all covering food items such as “burritos, enchiladas, tacos” and other Mexican style food products.

Bunte answered by denying M.C.I.’s allegations and also filed a separate Petition to Cancel M.C.I.’s registration for CABO PRIMO & Design on the ground of fraud. Specifically, Bunte asserted that M.C.I. committed fraud on the USPTO because M.C.I. falsely claimed use of the CABO PRIMO & Design mark in connection with goods with which the mark had never been used. M.C.I. answered by denying Bunte’s allegations and the proceedings were consolidated.

Noting the standard established by Bose, the Board explained that there is a difference between false and fraudulent representations. A false representation can result from an innocent misunderstanding or mistake, whereas a fraudulent representation entails a willful intent to deceive. An applicant must make a false, material representation with the intent to deceive in order to fraudulently obtain a trademark registration. The Board then considered the evidence of record, which included testimony from M.C.I.’s president that the CABO PRIMO & Design mark had only been used on burritos, but that M.C.I. directed the use of the broad identification of goods because it wanted to protect the mark for all Mexican food products. Taking note that the list of goods was “discussed with counsel” and there was no evidence of record that M.C.I. had been advised that it should not include goods in the application with which the CABO PRIMO & Design mark was not being used, the Board found that M.C.I.’s representation was false, not fraudulent, and, accordingly, did not have the requisite willful intent to deceive:

Because MCI filed its application to register the CABO PRIMO and design mark with the advice of counsel, the overly expansive description of goods, while a false statement, falls short of constituting a fraudulent statement which carries with it an actual implied intent to deceive the USPTO.

The Board went on to clarify that it would not infer M.C.I. intended to deceive the USPTO without some factual basis for the inference. The burden was on Bunte to establish a factual basis for inferring intent to deceive, possibly, for example, by eliciting testimony regarding the specific advice provided by counsel regarding the broad list of goods. Fraud must be proven “to the hilt” and the absence of even indirect evidence of M.C.I.’s intent to deceive prevented the Board from finding the requisite intent for fraud.

This decision underscores the now high burden of proving a fraudulent, as opposed to false, representation upon the USPTO and also highlights another benefit afforded by consulting with counsel when applying for and registering a trademark. The Board pointed out, however, that the mere assertion of acting in reliance on advice of counsel is not a complete defense to a charge of fraud. The finding in the subject case simply illustrates the burden on the charging party to show that relying on the advice of counsel under the particular circumstances was inappropriate and did not obviate intent to deceive.