Articles

Client Alert - Standard of Fraud in the U.S. Trademark Office--Relaxed?

By Baila H. Celedonia & Sujata Chaudhri

Jul. 20, 2009

In its ruling in Medinol Ltd. v. Neuro Vasx, Inc., 67 U.S.P.Q. 2d 1205 (T.T.A.B. 2003), and numerous cases that followed, the Trademark Trial and Appeal Board (the “Board”) of the U.S. Patent and Trademark Office (“USPTO”) has consistently held that it is fraud on the USPTO to claim that a mark is in use in commerce on each and every good or service listed in a required statement of use made under penalty of perjury when such is not the case.  The Board rejected Neuro Vasx’s motion to amend its application to delete the goods incorrectly included and held that the fraud invalidated the entire registration.
 
The Medinol line of cases left counsel in a quandary as to whether it was possible to correct an inadvertent error once made in a Statement of Use.
 
We have now received some comforting guidance from the Board in Zanella Ltd. v. Nordstrom, Inc., 90 U.S.P.Q. 2d 1758 (T.T.A.B. 2008).
 
Background.  When the Board initially decided Zanella, the decision was designated as non-precedential.   However, nearly six months later, in an unusual move, the Board redesignated its formerly non-precedential decision as precedential.¹   Clearly, the Board was of the opinion that the Zanella decision (discussed in detail below) was important.
 
The Decision.  Nordstrom, Inc. (“Nordstrom”) filed an intent-to-use application to register the mark ZELLA for various items of women’s and girl’s athletic sportswear and active apparel.  Zanella Ltd. (“Zanella”) filed an opposition against Nordstrom’s application on the basis of likelihood of confusion with Zanella’s registered mark ZANELLA.  In the Notice of Opposition, Zanella pleaded five incontestable registrations for the mark ZANELLA for a variety of men’s and women’s clothing.
 
Nordstrom timely filed an answer to the Notice of Opposition.  After filing its answer, Nordstrom, through discovery, learned that Zanella had not used the ZANELLA mark on several goods covered by the pleaded registrations.  Consequently, Nordstrom filed motions (i) to amend its answer to include a counterclaim to cancel all five pleaded registrations on the ground of fraud, and (ii) for summary judgment based on its fraud counterclaim.
 
The Board granted Nordstrom’s motion to amend its answer,  and also granted Nordstrom’s summary judgment motion with respect to one of the pleaded registrations, ordering its cancellation.  With respect to this registration, the Board found that there was no dispute that Zanella had not used its ZANELLA mark in connection all of the goods covered by that registration either at the time of filing of its application or when it filed its fifth-year Declaration of Use and Incontestability under Sections 8 and 15 of the Trademark Law.  Citing Medinol, the Board ordered cancellation of the entire registration because “the registration would not have issued nor the combined Sections 8 and 15 affidavit accepted and acknowledged but for the material representation.”²
 
With respect to the remaining four pleaded registrations, the Board denied Nordstrom’s summary judgment motion, holding that there was a genuine issue of material fact as to whether Zanella had the intent to commit fraud on the USPTO.  The factual difference between the cancelled registration and these remaining four registrations was that Zanella had affirmatively deleted those goods on which it was not using the ZANELLA mark.  For three of them, Zanella made the deletion at the time of filing Sections 8 and 15 declarations.  With respect to the last remaining registration, it had voluntarily requested the USPTO delete the goods on which it had not used the mark much after it filed a Sections 8 and 15 declaration.  These deletions all occurred prior to Zanella’s attempt to enforce these registrations against Nordstrom’s application.
 
The Board found that Zanella’s “timely proactive . . . action . . . in correcting any false statements prior to any actual or threatened challenge to the registrations creates a rebuttable presumption” that Zanella “did not intend to deceive” the USPTO.³   The Board held that the evidence submitted by Nordstrom in support of its summary judgment motion, namely, Zanella’s discovery responses, admitting non-use and the file histories of the registrations alone, “failed to rebut the presumption of no intent to commit fraud” on the USPTO^.4
  
Significance of the Decision.  A successful fraud challenge can effectively limit a registrant’s ability to enforce its rights in a registration.  This decision is significant because it allows registrants to take proactive and timely steps to correct a registration by deleting those goods and services inadvertently included in any statement of use.  As a result of this decision, if such proactive steps are timely taken, challenges to registrations on fraud grounds are now likely to be significantly harder to establish.
 
A word of caution!  Such corrections will not preclude a successful fraud allegation.  Rather, such corrections will only create a rebuttable presumption that there was no intention to commit fraud.  However, we believe that by redesignating its non-precedential decision to precedential, the Board intended to signal that it has softened the fraud standard set forth in Medinol and its progeny, and to encourage registrants to correct errors which might exist. 

Practice Tips.  Now may be a good time to contact your trademark counsel to discuss a portfolio audit.  Such audit can determine whether amendments need to be made to the descriptions of goods and/or services covered by your registrations.  If maintenance deadlines on any of these registrations are coming due,⁵  appropriate amendments must be made to the descriptions of goods and services by affirmatively deleting all goods or services not in use at the time of filing.  However, even if there are no close maintenance deadlines, you should consider amending any registrations in which goods or services are incorrectly included or have been left in the description.  These amendments can be made fairly easily and cheaply.  These proactive steps should be considered sooner rather than later.  Otherwise, when you seek to enforce a registration with an inadvertent error, it will be too late to make that correction.
 
For more information about the review of a trademark portfolio, please feel free to contact us.  Our contact information is:

Baila H. Celedonia	bhc@cll.com	(212) 790-9203
Sujata Chaudhri	szc@cll.com	(212) 790-9236

Endnotes
¹  All final Board decisions are designated either as precedential or non-precedential. a precidential decision is binding on the Board. A non-precidential decision is not binding upon the Board, but may be cited for whatever persuasive value it may have.

²  Zanella at 1760, citing Medinol at 1208.

³ Zanella at 1761, 1762.

⁴ Id. at 1762.

⁵ At each maintenence deadline, a registrant must submit a statement of use, a declaration sworn to under penalty of perjury that the mark continues to be used on each and every one of the listed goods or services except for those affirmatively omitted.

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