Federal Circuit Limits Fraud-on-the-PTO Claims, But Leaves Chutter Recklessness Standard Intact | Pillsbury – Internet & Social Media Law Blog
On October 18, 2023, the U.S. Court of Appeals for the Federal Circuit reversed and remanded a U.S. Trademark Trial and Appeal Board (TTAB) decision in Great Concepts, LLC v. Chutter, Inc., in which the Board canceled Great Concepts’ trademark registration based on a fraudulent Section 15 declaration of incontestability. In doing so, the Federal Circuit held that the TTAB lacks authority to cancel a registration based on a fraudulent incontestability declaration, closing the door to cancellation claims premised on fraudulent statements on which the USPTO did not rely either to issue or maintain a registration.
Background
Great Concepts operates a Dantanna’s restaurant in Atlanta and secured a U.S. trademark registration for DANTANNA’S for “steak and seafood restaurant.” Chutter, Inc’s predecessor-in-interest, Dan Tanna, petitioned to cancel the DANTANNA’S registration before the TTAB based on a likelihood of confusion with its mark “DAN TANA.” While this proceeding and a related Eleventh Circuit appeal were pending, Great Concepts filed a combined declaration of use and incontestability under sections 8 and 15 of the Lanham Act, respectively, and falsely declared in the Section 15 portion that no such proceedings were pending.
Under Section 8 of the Lanham Act, a registrant must show continued use of a mark to maintain a federal trademark registration. By contrast, Section 15 of the Lanham Act gives a registrant the option to file a declaration of incontestability in order for a registered mark to achieve “incontestable” status. A registered trademark may become “incontestable” after the mark has been in continuous use in commerce for five consecutive years following the date of registration. While incontestability status confers important benefits, e.g., conclusive evidence of the validity of the registered mark, it is not necessary to maintain a registration in force.
In 2015, Chutter Inc. filed a new petition to cancel the DANTANNA’S registration based on Great Concept’s allegedly fraudulent Section 15 declaration. The TTAB cancelled Great Concepts’ trademark registration for fraud on the USPTO, finding that Great Concepts’ attorney signed a false Section 15 declaration of incontestability, which represented that “there is no proceeding involving said rights pending and not disposed of either in the U.S. Patent and Trademark Office or in the courts” when, in truth, a cancellation proceeding and Eleventh Circuit appeal were pending when the declaration was signed. The TTAB also found that the registrant, through its attorney (the signatory), had acted with reckless disregard that rose to the level of an intent to deceive the USPTO.
The Federal Circuit’s Decision in Chutter
Great Concepts appealed the TTAB’s cancellation decision to the Federal Circuit. The issue before the Federal Circuit was whether a fraudulent Section 15 affidavit, filed for the purpose of obtaining incontestable status of an already-registered mark, was a proper basis for cancellation of a registration. The Federal Circuit found it was not.
In so finding, the Court looked to the plain meaning of Section 14, which allows for a third party to file a petition to cancel a registration of a mark if the mark’s “registration was obtained fraudulently” [emphasis added]. The court reasoned that what Great Concepts obtained through fraud was not the mark’s registration, but rather its incontestable status. Because Chutter did not plead, nor did the TTAB find, that Great Concepts registered the mark fraudulently, the Federal Circuit found that Section 14 did not authorize the TTAB to cancel a registration and therefore, reversed the TTAB’s cancellation decision.
Judge Reyna’s dissenting opinion noted Great Concepts’ “cavalier attitude”—indicative of an intent to deceive the TTAB—and reasoned that the majority opinion invites fraud in obtaining incontestability rights and usurps the agency’s power to make discretionary determinations based on its “specialized experience” in regulating and sanctioning conduct before the agency.
Takeaways
The Federal Circuit’s decision highlights that litigants cannot rely on cancellation claims premised on fraudulent statements to the USPTO that do not form a basis for the USPTO to issue or maintain trademark registrations. However, the decision also confirms that fraudulent statements to the USPTO are not without repercussions, as the Court remanded the case to the TTAB to determine whether Great Concepts’ mark should not enjoy incontestable status (and whether other sanctions should be imposed). Ultimately, the necessary steps of signing and filing declarations with the USPTO should still be undertaken with caution.
The Federal Circuit’s decision arguably leaves intact the TTAB’s prior holding in this case that reckless disregard can support fraud on the USPTO, e.g., “willful blindness” to the contents of a declaration. While the Federal Circuit had an opportunity to revisit the TTAB’s decision on that standard, as well as the Court’s own seminal In re Bose Corp. decision, it chose not to do so. In its cancellation decision, the Board reasoned that the In re Bose court had “left open the question whether reckless disregard for the truth or falsity of a material statement made in a filing with the USPTO satisfies the intent to deceive requirement,” and found that it can satisfy that requirement; the Federal Circuit did not address that legal conclusion, or the Board’s interpretation of the Federal Circuit’s In Re Bose decision. As such, we can expect to see more fraud claims based on reckless disregard for the truth of the statements being made, which further highlights the importance of caution—as well as due diligence and investigation—in signing and filing declarations with the USPTO.
The case has been remanded to the TTAB to determine the impact of the fraudulent Section 15 declaration on the incontestability status of Great Concepts’ mark and to evaluate whether other sanctions should be imposed on Great Concepts for its conduct.
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