Trademark Disclosure and Fraud, Part II – Legal Framework
Disclosure by a trademark applicant
In Part I of this 2-part series, I pointed out that the Trademark Law (Lanham Act) requires a trademark (including service mark) registration applicant to provide the following specific info to USPTO (US Patent & Trademark Office) in the registration application:
- Applicant’s domicile & citizenship;
- The date of applicant’s first use of the mark;
- The date of the applicant’s first use of the mark in commerce;
- The goods / services in connection with which the mark is used;
- A drawing of the mark;
- One or more specimens of the mark as used.
Additionally, the Lanham Act also requires the applicant to submit a verified statement, certifying, among others, that he/she is entitled to use the mark, that he/she has a bona fide intention to use the mark, that (to his/her best knowledge and belief) the facts recited in the application are accurate, and that (to his/her best knowledge and belief) no other person has the right to use the mark without causing confusion or mistake, or to deceive. In the USPTO trademark application form, the pre-prepared texts of the verified statement specifically warns that “willful false statements and the like are punishable by fine or imprisonment, or both, under 18 U.S.C. § 1001, and that such willful false statements and the like may jeopardize the validity of the application or submission or any registration resulting therefrom”.
The required verified statement makes it plenty clear that submitting “willful false statements” is prohibited by the Lanham Act (besides constituting a federal criminal offense under 18 USC 1001). Many questions, however, remain. – What actions constitute a “willful false statement”? What if the applicant makes a mistake, or omits to submit certain info. Does the applicant have an affirmative duty to provide certain info, even if not specifically required to register a mark? What may be the punishments?
Statutory prohibitions – Lanham Act
The Lanham Act sets forth the specific statutory language that defines prohibited violations of the disclosure requirements with respect to a USPTO trademark application, and the respective punishments. Specifically, it prescribes 3 types of punishments: Cancellation of registration; denial of incontestability; and civil action liabilities. Below is the language adopted in the Lanham Act prescribing such prohibitions.
- Cancellation of registration (15 USC 1064(3)): “A petition to cancel a registration of a mark […] may […] be filed […] [a]t any time if […] its registration was obtained fraudulently”. (Emphasis added.)
- Denial of incontestability (15 USC 1115(b)(1)): “To the extent that the right to use the registered mark has become incontestable […], the registration shall be [incontestable,] subject to the [defense or defects] [t]hat the registration or the incontestable right to use the mark was obtained fraudulently”. (Emphasis added.)
- Civil damages (15 USC 1120): “Any person who shall procure registration […] of a mark by a false or fraudulent declaration or representation […] or by any false means, shall be liable in a civil action […] for any damages sustained thereof”. (Emphasis added.)
Under the Lanham Act, therefore, a trademark registration “obtained” or “procured” “falsely” or “fraudulently” may be subject to punishments. The law, however, does not define these terms. It is then up to the USPTO or courts to define them, and thus to define the scope of trademark disclosure required of a trademark applicant before USPTO.
Scope of prohibition – “Fraudulently”
It is beyond the scope of this writing to extensively discuss the court and USPTO cases addressing the definition of the term “fraudulently”. I will only summarize the following 2 holdings.
- No affirmative duty to disclose. In the 1961 case, Bart Schwartz v. FTC, the Court of Customs & Patent Appeals held that a trademark applicant has no affirmative duty to disclose unrequired info to USPTO, and that “[t]he mere withholding of information” does not constitute a fraudulent act punishable under the Lanham Act. Rather, the Court determined that the Lanham Act only requires that an applicant “will not make knowingly inaccurate or knowingly misleading statements”. (Emphasis original.) There, the Court held that the mere withholding of the meaning of the mark (FIOCCO) in a foreign language (Italian) was not a fraudulent withholding of info, without more.
- Willful intent to deceive required. Addressing the question of whether a trademark registration was obtained fraudulently, the Court of Appeals for the Federal Circuit pronounced in 2009 in the seminal case, In re Bose, 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 USPTO. (Emphasis added.) Particularly, the Court held that “the standard for finding intent to deceive is stricter than the standard for negligence or gross negligence”, and that “[t]here is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive”. In the case, the counsel of the registrant (Bose) represented to USPTO that the mark (WAVE) was in use in commerce for audio tape recorders and players, even though Bose had stopped manufacturing and selling audio tape recorders and players prior to the time of the counsel’s representation. The Bose counsel testified that Bose had continued to repair previously sold recorders & players and that in his belief such repairing activities constituted valid use of the trademark in commerce. The Court held that the Bose counsel’s statement was false but not fraudulent, because it was “not uttered with the intent to mislead” the USPTO. As a result, the WAVE mark avoided the fate of cancellation and remains registered.
In summary, a trademark owner does not have an affirmative duty to disclose unrequired information to USPTO and may be held to have obtained / procured a trademark registration “fraudulently” only if he/she has the intent to deceive the USPTO.
Of course, we are now left wondering what constitutes an “intent to deceive”. But that will wait for another day and another write-up!
Scope of prohibition – “Falsely”
As discussed previously, pursuant to the Lanham Act (15 USC 1120), if a trademark registration is obtained “falsely” (as a separate cause of action from “fraudulently”), the trademark owner may be liable to other persons in a civil lawsuit. (See Footnote 4.)
Therefore, even an honest mistake, a misunderstanding, or a careless omission in communications with USPTO may subject a trademark registrant to civil liabilities, even if it is not considered “fraudulent”. Such undesirable civil liabilities have prompted the courts to hold that “[a]n applicant for registration of a trademark is required to exercise uncompromising candor in his communications with the United States Patent and Trademark Office, lest any registration he obtains will be invalid and/or unenforceable. He must not only refrain from making false representations to the United States Patent and Trademark Office, but must make full disclosure of all facts to his knowledge which might bear in any way on the Office’s decision to grant the registration sought.” (Emphasis added.)
Conclusion – Uncompromising candor
In Daesang Corp. v. Rhee Bros, the trademark owner did not inform the USPTO that the English translation of the registered mark, “Soon Chang”, was the name of a Korean province famous for producing the goods (Korean hot bean paste) associated with the mark. Did the non-disclosure of the association constitute a fraud on USPTO? Did the registrant have an affirmative duty to disclose the association? What knowledge must the registrant have possessed about the association for the non-disclosure to constitute intent to deceive? What knowledge must the registrant have possessed about the application requirements?
A trademark applicant or registrant pondering over these questions is best to heed the advise of the court to “exercise uncompromising candor” and “make full disclosure of all facts to his knowledge which might bear in any way on the Office’s decision to grant the registration sought.”
 15 USC 1052(a)(1) & (2).
 15 USC 1051(a)(3). The verified statement described in this paragraph is for an in-use application (under 1051(a)), which is slightly different from that for an intent-to-use application (under 1051(b)).
 Pursuant to the US criminal code under 18 USC 1001(a), it is a federal criminal offense to provide a “willful false statement” to any US government branch or agency, including USPTO. (“[W]hoever, in any matter [before the Federal government], knowingly and willfully — (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title, imprisoned not more than 5 years or […].”) (Emphasis added.)
 The phrase “false or fraudulent” has been interpreted by some courts to provide for 2 separate causes of action. See, eg, Citibank N.A. v. Citibanc Group, 215 USPQ 884 (ND Ala 1982) (“’[F]alse’ and ‘fraudulent’ as used in 15 USC §1120 are not synonymous, and that damages are recoverable thereunder where the registration is procured either by a declaration which was incorrect or by a declaration which was a willful attempt to mislead and injury has resulted as a consequence thereof.”), aff’d 724 F.2d 1540 (11th Cir 1984); In re Bose Corporation, 580 F.3d 1240 (Fed Cir 2009) (“the latter involv[es] an intent to deceive, whereas the former may be occasioned by a misunderstanding, an inadvertence, a mere negligent omission, or the like.”)
 For more in-depth discussions, see, eg, here.
 Bart Schwartz v. FTC, 289 F.2d 665 (CCPA 1961).
 The court of Customs & Patent Appeals was the predecessor the Court of Appeals for the Federal Circuit, which was established in 1982 and has nationwide jurisdiction over trademark cases, among others.
 In re Bose Corporation, 580 F.3d 1240 (Fed Cir 2009).
 T.A.D. Avanti, Inc. v. Phone-Mate, Inc., 199 USPQ. 648 (CD Cal 1978).
 Daesang Corp. v. Rhee Bros., 77 USPQ.2d 1753 (D Md 2005).