Federal Circuit’s Determination on Whether Fraudulent Conduct in Obtaining Incontestable Status Warrants the Mark’s Cancellation | Sheppard Mullin Richter & Hampton LLP
In Great Concepts, LLC, v. Chutter, Inc., the Federal Circuit decided on whether the Trademark Trial and Appeal Board can cancel a trademark based on the inclusion of false statements in a declaration to obtain an incontestable status for the trademark.
Background
Great Concepts applied for and received trademark registration for DANTANNA’S, Registration No. 2929764 (the “’764 Mark”), for a restaurant. In 2006, Chutter, Inc.’s (“Chutter”) predecessor-in-interest, Dan Tana, petitioned the Trademark Trial and Appeal Board to cancel the ’764 Mark based on an alleged likelihood of confusion with Tana’s common law “DAN TANA” mark for restaurant services. The cancellation proceeding was suspended during the pendency of a trademark infringement lawsuit that Tana filed against Great Concepts. In that litigation, the district court granted summary judgment of non-infringement in favor of Great Concepts, which the Eleventh Circuit affirmed on July 15, 2010. The Board then dismissed the cancellation action in December 2010 based on Tana’s failure to respond to its order to show cause. While the two forementioned proceedings were pending, in March 2010, Great Concepts’ former attorney filed with the USPTO a single document containing a portion for a Section 8 declaration of use and another portion for a Section 15 declaration of incontestability of the ’764 Mark, which included the following statement: “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.” In July 2015, Chutter again petitioned for cancellation of the ’764 Mark, this time based on the attorney’s declaration containing false statements. In this proceeding, the Board held that the Section 15 declaration was fraudulent and cancelled the ’764 Mark. Great Concepts appealed.
Issue(s)
Whether Section 14 of the Lanham Act permits the Board to cancel a trademark’s registration due to the owner’s filing of a fraudulent Section 15 declaration to acquire incontestability for its mark.
Holding(s)
Section 14 of the Lanham does not permit the Board to cancel a trademark based on the owner’s fraudulent Section 15 declaration.
Majority’s Reasoning
The Federal Circuit Majority (Judges Stark and Dyk) held that making fraudulent statements on a Section 15 declaration for obtaining incontestability status is not committing fraud in maintaining or obtaining a registration, which are both actionable in a Section 14 cancellation proceeding.
First, the majority held that a Section 15 declaration is not necessary to maintain a trademark registration because it simply relates to the trademark’s status as incontestable. Furthermore, the fact that the single filing contained both a Section 8 declaration of use, which is necessary to maintain a trademark, and a Section 15 declaration of incontestability, which is not, does not transform the purpose of the entire document to maintaining a registration. Instead, the fraudulent statement was specifically in the Section 15 portion of the declaration, and so the fraud was not committed to maintain the trademark. .
Next, the Majority held that fraud in making the Section 15 declaration does not result in the trademark being “obtained fraudulently.” Based on plain meaning, “obtain” is synonymous with “acquire” or “gain possession of.” Although the Section 15 declaration allows Great Concepts to obtain something, what was obtained was the mark’s incontestable status and not a new registration, which are different rights. Therefore, fraud committed in connection with obtaining an incontestable status is distinctly not fraud committed in connection with obtaining the registration itself.
Furthermore, Section 14 lists the bases for canceling a registered mark, and fraud committed in connection with an incontestability declaration is not among the listed bases. The Majority found that this omission was intentional and cancelling a mark based on false statements in the Section 15 declaration cannot be an inferred basis because Congress considered this very situation in Section 33(b), which allows the accused infringer to challenge the incontestability of a mark by asserting that the incontestable status was fraudulently obtained. The remedy for such an event is the loss of the incontestable status, not the cancellation of the mark. Because Congress expressly contemplated this circumstance and omitted fraud in connection with obtaining an incontestable status from the Section 14 bases, Congress’s omission was intentional and the Board is not authorized to cancel a trademark registration based on fraudulently obtained incontestable status. Based on the above, the Majority found the Board is not authorized to cancel a mark based on a fraudulent Section 15 declaration and, therefore, reversed the Board’s cancellation of the ’764 Mark.
Dissenting Opinion (Reyna)
The Dissent’s main disagreement with the Majority is that the Majority’s holding prevents defrauders from ultimately being punished for their actions. The Dissent opined that losing incontestable status is not a real loss because the registrant is left with what it originally had before committing fraud. The Dissent opined that it did not matter whether the registrant committed fraud in the Section 15 portion of the declaration and not in the Section 8 portion because both portions made up a single declaration, and the Section 8 portion was necessary to maintain the registration. Therefore, the argument that fraud was committed only in the Section 15 portion is unconvincing because the fraud was committed in the declaration and the declaration as a whole was necessary to maintain the registration. Whether the act was intentional or not, the Dissent argued the registrant’s false testimony was made at least with reckless disregard, which implies the intent to deceive necessary to prove fraud. Because fraud was committed in the declaration, according to the Dissent the Section 14 cancellation was appropriate.
