Bose Corporation - “wilful intent to deceive” required to claim fraud

On 31st August 2009, in its much-anticipated decision in In Re Bose Corporation, the Court of Appeals for the Federal Circuit (CAFC) ruled that “a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly makes a false material representation with intent to deceive" the Patent and Trademark Office. The court thus overturned the Trademark Trial and Appeal Board’s (TTAB) finding of fraud against trademark owner Bose Corporation. 

The TTAB found that Bose committed fraud in its Section 8 renewal of the mark WAVE for a variety of goods, including “audio tape recorders and players”. At the time the renewal was signed, Bose continued to repair (and ship back) the previously sold audio tape recorders and players to its customers, and believed this qualified as use. However, the TTAB held that this did not qualify as use in connection with the specified goods, and that the mis-statement in the renewal was not reasonable. The TTAB therefore ordered the cancellation of the WAVE registration.

Medinol standard rejected
Prior to this decision, the case of Medinol v Neuro Vasx, Inc 67 USPQ2d 1205 (TTAB 2003) set the standard in the TTAB for fraud analysis, applying what the CAFC deemed was a simple negligence standard for fraud.

Under Medinol, any material mis-statements made to the PTO during the trademark prosecution or renewal process, regardless of intent, constituted fraud and rendered the registration subject to cancellation, because the party “should have known” such statements to be false or misleading.

Bose fraud standard presents higher burden of proof
The CAFC clarified that the standard for fraud requires a “willful intent to deceive” on the part of the applicant or registrant. Proof of subjective intent to deceive is an indispensible element in the analysis which must be established by clear and convincing evidence.

Impact
This ruling will have a significant impact on the future of fraud claims in the TTAB. Since the TTAB's decision in Medinol and the application of the “should have known” standard, there was a proliferation of fraud claims for cancellation of registrations based on a party’s mis-statements regarding the use of its mark in commerce. These fraud claims were often used defensively in trademark disputes. The CAFC’s establishment of the more stringent “willful intent” standard is likely to have an impact on the success of fraud claims and perhaps the frequency of their use in TTAB proceedings.

Nevertheless, in prosecution and maintenance practice, great care should still be taken in asserting the use of a mark in commerce.