The Trademark Trial and Appeal Board’s (Board) precedential decision in Chutter, Inc. v. Great Management Group L.L.C. (TTAB 2021) opened the door for cancellation actions and defenses based on a lowered intent requirement. Following the Federal Circuit’s 2009 In re Bose Corp. decision, fraud on the USPTO was curtailed to instances with substantial evidence of intent to deceive. The Board’s Chutter decision expanded specific intent to include reckless disregard for the truth or falsity of a material statement and applied it to a false Section 15 declaration that the submitting attorney did not bother to read.
The Federal Circuit in Chutter reversed the Board and remanded without reaching the merits of the Board’s reckless disregard determination, leaving in limbo whether the door has slammed shut once again on broader claims of fraud on the USPTO.
The grounds on which the Federal Circuit reversed arise from its construction of the statute’s unambiguous language, which provides only that the Board has authority to cancel registrations under Section 14 of the Lanham Act, 15 U.S.C. § 1064(3), when the “registration was obtained fraudulently.” The registrant’s declaration accused of being false in Chutter was a combined declaration of use, pursuant to Section 8 of the Lanham Act, and declaration of incontestability, pursuant to Section 15 of the same Act. See 15 U.S.C. §§ 1058, 1065. In filing the Section 15 declaration, the registrant’s counsel attested that no litigation or proceedings involving the registration were pending, which was incorrect (or, as the Board held, fraudulent). Because the consequence of a Section 15 declaration is incontestable status and it “is in no way necessary to maintaining registration of a mark,” it does not fall within Section 14’s authority to cancel the registration. Nor, as the dissent urged, were the Section 8 and Section 15 declarations a single declaration, allowing fraud in connection with the Section 15 declaration to impact continued registration under Section 8, despite being filed as a joint form.
By removing fraudulent Section 15 declarations from the scope of Section 14’s cancellation authority, the Federal Circuit overruled the Board’s long-standing practice of exercising its authority in those circumstances. The Federal Circuit announced that reversal based on its statutory interpretation was within its discretion “for the additional reason that it presents a question of exceeding importance: whether an agency, which is a creature of statute, has been acting ultra vires for years.”
Notably, the unavailability of a Section 14 cancellation proceeding in cases of fraudulent Section 15 declarations does not impact the availability of those grounds as an affirmative defense under Section 33(b), 15 U.S.C. § 1115(b)(1), which allows an accused infringer to prove in an infringement action that “the incontestable right to use the mark was obtained fraudulently” by the mark owner, thus removing said incontestable status. Further, given the equitable nature of Lanham Act remedies, it may be that fraudulent acts in connection with Section 15 declarations can still vest the registrant with unclean hands, precluding the registrant’s ability to rely on the registration in a particular proceeding.
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