United States: Federal Circuit Reverses Medinol Fraud Standard

This article first appeared in World Media Law Report on October 15 2009.

In a highly anticipated decision, the U.S. Court of Appeals for the Federal Circuit overturned the infamous Medinol trademark procurement fraud standard previously adopted by the Trademark Trial and Appeal Board ("TTAB").

In In re: Bose Corp., No. 2008-1448, slip op. (Fed. Cir. August 31, 2009), the Federal Circuit Court expressly overruled the TTAB's fraud standard articulated in Medinol Ltd. v. Neuro Vasx, Inc, 67 U.S.P.Q.2d 1205 (T.T.A.B. 2003). In Medinol, the TTAB had ruled that merely filing a false material statement in connection with the registration or renewal of a trademark constituted fraud on the United States Patent and Trademark Office ("USPTO"), even if such false statement was inadvertent. Id. at 1210. The Federal Circuit in Bose overruled that standard, holding that "a trademark is obtained fraudulently under the Lanham Act only if the applicant both knowingly makes a false material representation and intends to deceive the USPTO by doing so.

The Bose case originated before the TTAB, when Bose opposed Hexawave, Inc.'s application to register HEXAWAVE, on likelihood of confusion grounds. Bose Corp. v. Hexawave, Inc. 88 U.S.P.Q. 2d 1332 (TTAB 2007). Hexawave counterclaimed that Bose's WAVE Registration was fraudulently obtained, because Bose's declaration of use falsely stated that Bose was using its WAVE mark in connection with "audio tape recorders and players". Bose's general counsel explained that he was under the belief that Bose's repair and return of discontinued WAVE products to customers constituted "use in commerce". The TTAB rejected that notion, holding that such belief was not reasonable (Id. at 1338.) and cited its infamous Medinol decision, wherein the TTAB ruled that "proof of specific intent to commit fraud is not required, rather, fraud occurs when an applicant or registrant makes a false material representation that the applicant or registrant knew or should have known was false". Id. at 1334. (emphasis added) The Draconian result was that Bose's WAVE registration was cancelled, notwithstanding its valid and continuous trademark use for other well-known products. Bose appealed the decision before the Federal Circuit Court.

In Medinol Ltd. v. Neuro Vasx, Inc, 67 U.S.P.Q.2d 1205 (T.T.A.B. 2003), the TTAB had earlier ruled that where a statement of use filed by a registrant erroneously stated that all of the recited goods were in use, such a defect constituted fraud. The Board reasoned that "a trademark applicant commits fraud in procuring a registration when it makes material representations of fact in its declaration which it knows or should have known to be false or misleading". (emphasis added) Id. at 1209. The TTAB subsequently applied this fraud standard in numerous other proceedings, including the Bose case.

The Federal Circuit Court's reversal in Bose is noteworthy since the court expressly ruled that by equating "should have known" with a subjective intent to deceive, the TTAB had erroneously lowered the fraud standard to a simple negligence standard. The court also went on to say that in order to prove fraud in the procurement of a registration, one must establish fraud by "clear and convincing evidence".

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