Federal Circuit Clarifies Fraud Standard in PTO Applications

31 08 2009

Today, August 31, 2009, the Federal Circuit determined that the Medinol standard regarding fraudulent statements in trademark applications is wrong.  Under Medinol v. Neuro Vasx, 67 USPQ2d 1205 (TTAB 2003), the Board indicated that fraud was committed in a PTO application when an applicant made material representations it knew or should have known to be false or misleading. 

In Medinol, a Statement of Use stated that the Registrant had used its mark for stents and catheters, but later evidence showed that the mark was not actually used in connection wtih stents.  For that reason, the TTAB stated that even though the Applicant indicated it had made an honest mistake, objectively, that misrepresentation was material and false, and therefore, fraudulent.  The result was cancellation of the registration based on fraud.

After Medinol, trademark applicants and practitioners had to become much more aware of the goods and services identified in their applcations, because under the Medinol standard, there was no room for error.  The TTAB had ruled that a registration could be cancelled for honest misrepresentations if the Applicant/Registrant should have known that these statements were false.

Under today’s ruling in In re Bose Corporation, the Federal Circuit stated that the Trademark Trial and Appeal Board lessened the standard for fraud to be simple or gross negligence, where there should be a heavy burden to show fraud in a cancellation proceeding with no room for speculation.  As clearly as it could say it,  the Court stated that “the Board erroneously lowered the fraud standard to a simple negligence standard.”

http://www.cafc.uscourts.gov/opinions/06-1173.pdf

What does this mean?

Essentially, Medinol was a wake up call to applicants who used a laundry list of goods and/or services in their description of goods with little intent to check whether those products or services will actually be available.  Under Medinol,  it would have been possible to cancel a registration where one of those products was not actually available, even after a mark had become incontestable (That was the beauty of Medinol for petitioners — an incontestable mark is generally immune from challenge, except for some limited grounds, one of which is fraud.  With a negligence standard for fraud, it was much easier to attempt to cancel registrations, or at least threaten to cancel).

Now, although it is advisable to make sure a trademark application is as accurate as possible, it would appear that challengers will no longer be able to cancel a viable registration under negligent mistakes made during the application process. 

Of course, the Board will rule on a post Bose fraud case in the near future, but it is more than likely that there will be some clarification of the fraud standard in a future Trademark Manual of Examining Procedure and PTO policy going forward.