Great Concepts; Not So Great Reasoning

In October of 2023, a divided panel of the U.S. Court of Appeals for the Federal Circuit ruled in Great Concepts, LLC v. Chutter, Inc., 84 F. 4^th 1014 (Fed. Cir. 2023) that a fraudulent filing for incontestability under Section 15 of the Lanham Act is not a proper ground for the Trademark Trial and Appeal Board (TTAB) to cancel a registration under Section 14 of the Act. In so holding, it endorsed prior rulings to the effect that fraud in filing a Section 8 affidavit of continuing use, or a renewal application under Section 9—acts of “maintaining” a registration—constitutes “obtaining” a registration within the meaning of Section 14, while rejecting earlier TTAB decisions that had treated Section 15 affidavits the same way.

In this author’s view, Great Concepts has brought into sharp relief the mischief that has resulted from earlier decisions of the TTAB and the Federal Circuit, which equated maintaining a registration with obtaining one. They are different concepts. So while the majority in Great Concepts correctly ruled that a Section 15 incontestability filing cannot be a basis for cancellation under Section 14, the Federal Circuit (en banc, if necessary) or the Supreme Court should correct the anomaly left by Great Concepts and construe all acts of maintenance under Sections 8, 9 and 15—or none of them—as acts of “obtaining” a registration. Better yet, Congress should clarify whether fraud in any act of maintaining a registration is a basis for cancellation, or a civil action under Section 38 of the Lanham Act.

The Statutes at Issue

Section 14 of the Lanham Act, 15 U.S.C. §1063, authorizes the filing of petitions to cancel at any time if the registration “(3)…was obtained fraudulently….” (Emphasis added.) Section 33(b), 15 U.S.C. §1115(b), discusses how a registration which has become incontestable constitutes conclusive evidence of the right to use the registered mark, subject to several “defenses and defects,” one of which is “That the registration or the incontestable right to use the mark was obtained fraudulently….”

In addition, while not at issue in Great Concepts, Section 38 of the Act, 15 U.S.C. §1120, is entitled “Civil Liability for False or Fraudulent Registration,” and reads as follows:

“Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence thereof.”

(Emphasis added.)

Crown Wallcovering and Torres

In Crown Wallcovering Corp. v. The Wall Paper Manufacturers Ltd., 188 U.S.P.Q 141, 1975 WL 20837 (T.T.A.B. 1975), the Board noted that, in the past, it had held that the words “obtained fraudulently” in Section 14 “comprehend not only the initial securance of a registration, but also the maintenance thereof, i.e. the securance of continuing rights of registration, by fraud.” 1975 WL 20837 at *3 (citations omitted). It acknowledged that a Section 15 affidavit is not required for the maintenance of a registration, and that a filing of a fraudulent Section 15 affidavit would enable a registrant to “obtain a new right,” i.e. incontestability. Id. at *3-4. On that basis, it held that a fraudulent Section 15 affidavit also comes within the purview of Section 14. Id. at *4

A decade later, in Torres v. Cantine Torresella S.r.l., 808 F. 2d 46 (Fed. Cir. 1986), the Federal Circuit held that “fraud in obtaining renewal of a registration amounts to fraud in obtaining a registration” within Section 14. Id. at 48, citing, inter alia, Crown Wallcovering.

Great Concepts and the Demise of Crown Wallcovering

In Great Concepts, the registrant had filed a combined affidavit under Sections 8 and 15, but the fraud in question was specific to Section 15: a false statement that there was no pending legal proceeding involving the registrant’s trademark rights. The TTAB had cancelled the registration in light of its own precedent, i. e. Crown Wallcoverings.

The Federal Circuit reversed. It acknowledged uncritically its Torres holding that fraud in connection with maintaining a registration (viz., through renewal) was actionable under Section 14. Then, in undertaking statutory construction of “obtaining,” it cited dictionary definitions such as “gain possession” or “procure.”

Great Concepts, 84 F. 4th at 1021. It acknowledged that Great Concepts had obtained “something” with its fraudulent Section 15 filing, namely incontestability, but declared that “registration and incontestability are different rights.” Id.

In what was perhaps the least persuasive aspect of its analysis, the court asserted that the Section 15 filing in no way caused or even contributed to obtaining the registration in the first instance, as the Section 15 filing occurred years later than the issuance of the registration. Id. Of course, the same could be said about the renewal application at issue in Torres.

The panel’s most persuasive basis for ruling as it did invoked Section 33(b), which explicitly addresses the circumstance wherein “the incontestable right to use the mark was obtained fraudulently.” The Great Concepts majority reasoned:

“Given that Congress, in Section 33(b), expressly contemplated our very circumstances—an incontestable registered mark, where incontestable status was obtained by fraud—and provided that the remedy for it was loss of incontestable status, we are unpersuaded that Congress also, in Section 14, silently authorized the PTO to impose a different, more severe remedy, cancellation of registration, for this same offense.”

Id. In other words, when Congress wanted to address the issue of fraud in a Section 15 incontestability filing, it knew exactly how to do so.

Speaking of Severe Remedies

As long as we are considering references to fraud in the Lanham Act, for completeness, let us now throw into the mix Section 38 of the Act, which begins “Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation….”  “Procure”? Seriously? Does the Lanham Act really need another verb that may or may not mean “obtain”?

In any event, in 1980 I found myself representing Ralph Lauren’s company, Polo Fashions, at the tail end of the first successful enforcement of Polo’s trademarks. Polo Fashions, Inc. v. Extra Special Products, Inc., 208 U.S.P.Q. 421, 1980 WL 30287 (S.D.N.Y. 1980).  The defendants were a colorful gentleman named Louis Marks and his company, Lomar. In an effort to manufacture a priority defense, they had made filings seeking to maintain a registration for MARCO POLO for decades after the mark had last been used.

In awarding damages under Section 38, the district court acknowledged that the original MARCO POLO registration may have been legitimately procured. But it added, “it is well established that merely maintaining a registration through the filing of false and fraudulent documents constitutes fraudulent ‘obtaining’ or ‘procurement’ within the meaning of various sections of the Trademark Act.” 1980 WL 30287 at *8, citing cases including Crown Wallcovering.

Recall the concern expressed in Great Concepts about cancellation of a registration being an especially “severe” remedy. Section 38 takes severity to a whole ‘nother level. A trademark owner which loses its registration may still have a salvageable common law claim. But a trademark owner which loses a Section 38 claim can be socked with significant consequential damages.

All or Nothing?

In full effect, the Federal Circuit has concluded that filings made to maintain a registration without seeking incontestability, but which provide the huge benefit of extending the term of a registration, fall comfortably within the scope of “obtaining” as used in Section 14. But a filing which seeks to enhance the benefits of registration does not.

I respectfully disagree. To be clear, I agree that the fraudulent Section 15 filing in Great Concepts should not have been a basis for cancellation. But in my view, no acts of maintenance should be held to constitute “obtaining” a registration, because maintaining something is different from obtaining that same something.

The majority in Great Concepts cited dictionary definitions of “obtain.” 84 F. 4^th at 1020. Yet it accepted the holding in Torres that simply equated the maintenance act of renewal with obtaining without examining what it means to “maintain” something. The first two definitions of “maintain” in Dictionary.com are “to keep in existence or continuance; preserve; retain” and “to keep in an appropriate condition, operation, or force; keep unimpaired.” I suspect that if you asked anyone who drives a car, they would say you “obtain” a car when you buy or lease one, and you “maintain” a car when you change the oil or rotate the tires.

I am certainly not suggesting that I look kindly on fraud. But a system which invites too many allegations of fraud leaves much to be desired too. We know that, in federal courts, fraud must be pleaded “with particularity.” Fed. R. Civ. P. 9(b). And when the Federal Circuit wears its patent hat, it castigates claims of inequitable conduct (f/k/a “fraud on the Patent Office”) as an “absolute plague.” See, e.g., Burlington Indus., Inc. v. Dayco Corp., 849 F. 2d 1418, 1422 (Fed. Cir. 1988), where it added:

“Reputable lawyers seem to feel compelled to make the charge against other reputable lawyers on the slenderest grounds, to represent their client’s interests adequately, perhaps. They get anywhere with the accusation in but a small percentage of the cases, but such charges are not inconsequential on that account. They destroy the respect for one another’s integrity, for being fellow members of an honorable profession, that used to make the bar a valuable help to the courts in making a sound disposition of their cases, and to sustain the good name of the bar itself.”

Id.

Yes, there would be costs if no maintenance filings could be subject to fraud claims, but those costs might be mitigated. In the Polo case, for example, the damages assessed against the defendants were simply Polo’s legal fees, and the court had ruled that Polo could also recover fees on an “exceptional case” basis under 15 U.S.C. §1117. In Great Concepts, while the registration was not cancelled, the incontestability could be largely neutralized under Section 33(b) in a civil infringement action. In Torres, where the registrant had filed for renewal and had been using only a materially altered version of the registered mark for five years, the petitioner might well have sought cancellation based on abandonment of the registered mark. So too in Crown Wallcovering, where allegations of use were alleged to be false and the petitioner had actually pled abandonment as another basis for cancellation.

For now, trademark practitioners need to remember that filings under Sections 8, 9 and 15 are not ministerial or pro forma acts. They can obtain serious benefits for our clients, but if hard questions are not asked and answered, they can create serious hot water for all concerned.

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Author: stuartmiles
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