The Fraud Standard – In re Bose Corp.

Bose isn’t a newly issued case, but I just went to a seminar on it and the fraud standards in trademark and patent matters, so I thought I’d report on it here.

Bose opposed the registration of HEXAWAVE, and Hexawave counterclaimed by calling for the cancellation of WAVE based on fraud.  Hexawave claimed that Bose had renewed the WAVE registration on all listed goods even when it knew it had stopped making and selling some of those goods.  Bose filed a renewal application on the WAVE mark for use on many goods, including audio tape recorders and players.  However, Bose had stopped making and selling tape recorders and players, and the attorney who had signed the renewal application knew this.

The attorney claimed that he had signed it because Bose continued to repair the recorders and players, after which it had to transport them back to customers, actions which he felt satisfied the use-in-commerce requirement.  The TTAB disagreed, found his belief unreasonable, and found the statement in the renewal concerning use was material.  It therefore found fraud on Bose’s part and canceled the entire WAVE registration.

The Federal Circuit reversed.  It noted that the TTAB had been applying essentially a negligence standard to the fraud question – whether the party in question knew or should have known that their statements were misleading.  Instead, the court held that fraud is a false and material representation made willfully for the purpose of deceiving the PTO, and that that intent must be shown with clear and convincing evidence.  A ” false misrepresentation[] occasioned by an honest misunderstanding or inadvertence without a willful intent to deceive” is not fraud.  On this basis, the court reversed and remanded for the TTAB to remove the problematic goods from the WAVE registration.

Clearly, this standard is more favorable for applicants, registrants, and their attorneys.  At the seminar, one attorney recommended that we no longer ask questions regarding use, in order to avoid having actual knowledge.  I was a little taken aback at the question.  While I know that putting on blinders is certainly something some lawyers do, I never considered it a morally acceptable practice, regardless of the question of whether it was ethically acceptable.  Without doing much research on it, I would strive to parallel patent law’s requirement of candor and good faith to the PTO.

Turning a blind eye may seem to some to help a client initially, but I believe the behavior is one that is self-destructive for a practitioner in the long term and thus must be avoided at all times.