Proving fraud 'to the hilt'
Since the Federal Circuit re-established the appropriate standard for proving fraud against the US Patent and Trademark Office (USPTO) to be “clear and convincing evidence” of deceptive intent in its August 2009 In Re Bose Corp. decision, subsequent decisions continue to provide further guidance on the application of the standard. In September, the Trademark Trial and Appeal Board (TTAB) offered clarification to the standard as it applies to the sufficiency of evidence in M.C.I. Foods, Inc. v Bunte.
M.C.I. Foods, Inc. (MCI) filed a petition to cancel the registration for mark ‘Cabo Chips’ owned by Brady Bunte (Bunte). MCI alleged prior use and likelihood of confusion in connection with its registrations for the marks ‘Cabo Primo’ and design, ‘Los Cabos’ and design, and ‘Cabo Classics’.
Both the MCI and Bunte marks were for food items in class 30. Bunte denied the allegations and filed a separate petition to cancel MCI’s Cabo Primo and design mark on the ground of fraud. Bunte alleged that the Cabo Primo mark had never been used on ‘tortilla chips’, which were listed in the registered goods. The TTAB proceeding consolidated both cancellation petitions.
In addressing Bunte’s fraud claim, the TTAB reiterated the heavy burden of proving fraud “to the hilt” and that the standard set forth in Bose made clear that the element of deceptive intent is “indispensable”. The TTAB also emphasised that while intent may be inferred from indirect and circumstantial evidence, “such evidence must still be clear and convincing”.
“Thus, this case demonstrates the difficulty of proving the subjective intent element of fraud to the hilt under the Bose standard. It also cautions trademark applicants, registrants and practitioners alike to be wary of reliance on the type of evidence offered in this case.”
In this case, the evidence presented included the testimony of MCI’s president, who revealed that the Cabo Primo mark had only been in use on ‘burritos’, that additional products listed in all three of the MCI registrations were listed in anticipation of future use in connection with those products and that this strategy of registration was “discussed” with MCI’s counsel. Therefore, the TTAB concluded that MCI had made false representations in filing the application for the Cabo Primo and design mark; however, it declined to find intent to deceive.
In making its determination, the TTAB focused on the fact that MCI sought the advice of counsel in connection with its desired list of goods in order to obtain the broadest protection possible for the Cabo Primo mark. The board stated:
“Because MCI filed its application to register the CABO PRIMO and design mark with the advice of counsel, the overly expansive description of goods, while a false statement, falls short of constituting a fraudulent statement which carries with it an actual or implied intent to deceive the USPTO.”
No evidence was presented as to the nature of the advice given or whether the advice was followed. As a result, the board would not draw any inference against MCI “without some factual basis”. The burden of offering direct or indirect evidence to form the factual basis for finding that MCI was advised not to seek registration in this manner but chose to ignore that advice rests with the challenging party.
Thus, this case demonstrates the difficulty of proving the subjective intent element of fraud to the hilt under the Bose standard. It also cautions trademark applicants, registrants and practitioners alike to be wary of reliance on the type of evidence offered in this case.
With regard to trademark practitioners, the TTAB noted simply that had Bunte perhaps “elicited further testimony” in connection with MCI’s discussions with counsel, there may have been sufficient evidence from which to draw an inference of intent. However, the board does not address the obstacles presented by the attorney-client privilege in eliciting evidence of this nature.
On the other hand, the court was careful to warn trademark applicants and registrants against reading this case to encourage the reliance on the “mere assertion that one acted on ‘advice of counsel’” in defence of a claim of fraud. Such evidence alone will not preclude a finding of deceptive intent and may be challenged as “inapplicable or inappropriate” on the facts of a given case.
While the fraud claim was dismissed, MCI’s “false statements” were not without consequences, as the board restricted MCI’s use of the Cabo Primo mark to burritos, deleting the additional goods listed in the registration.
Robert Kenney is a partner at Birch, Stewart, Kolasch & Birch, LLP. He can be contacted at: rjk@bskb.com
Katie Peden is an associate at Birch, Stewart, Kolasch & Birch, LLP. She can be contacted at: katherine.m.peden@bskb.com
