Fraud in Trademark Prosecution: Should Have Known Standard is Insufficient

In re Bose Corp. (Fed. Cir. 2009)

When renewing its trademark registration for the word-mark WAVE, Bose stated that the mark was still be used in commerce on various goods “including audio tape recorders and players.” By that time (2001), Bose had stopped making and selling audio tape recorders and players. The discrepancy was not picked-up until a few years later when Bose attempted to oppose registration of the HEXAWAVE mark filed by Hexawave, Inc., and Hexawave filed a counterclaim asking the PTO to cancel the registration for WAVE.

Willful Fraud in trademark prosecution is found when an applicant “knowingly makes false, material representations of fact in connection with his application.” The elements of fraud must be proven with clear and convincing evidence. Notably, the “knowingly” requirement excuses false representations if “occasioned by a misunderstanding, an inadvertence, a mere negligent omission, or the like.” Here, the court goes on to hold that it is insufficient to show that an applicant “should have known” that its statements were false.

The TTAB improperly applied a should-have-known-better standard in this case.

By equating “should have known” of the falsity with a subjective intent, the Board erroneously lowered the fraud standard to a simple negligence standard.

Because there was no subjective evidence of willful intent, the Federal Circuit found that the fraud charges could not stick. However, the court authorized the TTAB to limit the coverage the mark based on the fact that it is no longer in use on audio tape recorders and players. “[T]he registration needs to be restricted to reflect commercial reality.”

16 thoughts on “Fraud in Trademark Prosecution: Should Have Known Standard is Insufficient

  1. 16

    Do you represent a company that improperly marks products as patented or patent pending as a matter of policy?

  2. 14

    A quick side note – the present case seems to miss a critical fact from the write-up concerning the (admittedly weak) argument concerning repair. It was the belief in the repair doctrine that provided the plausibility required to defeat intent. See page 9, footnote 2 “…neither the PTO nor any court had interpreted “use in commerce” to exclude the repairing and shipping repaired goods.”

    I see that a correlation of the present case to the arena of IC has been put forth, and this is an easy avenue to take as the court does reference IC in patent matters.

    Can this take a different path to patent marking? Since patent marking also deals with “should-have-knowns”, albeit in a slightly different manner, does the rationale fit with the defense of leaving the marks on products “in error”? There were recent colorful discussions at:

    link to ,
    link to , and especially
    link to

    The discussions in part seem to indicate that the “should have known” factor was NOT a valid excuse.

    The cases are slightly different and possibly affect the intent prong differently. The present case deals with an applicant/holder renewing information before the government body, while in the marking scenario, the applicant/holder is providing information/warning to the general public. Each does have elements of intent that must be shown.

    However, the section at page 4 ““a material legal distinction between a ‘false’ representation and a ‘fraudulent’ one,” Kemin Indus., Inc. v. Watkins Prods., Inc., 192 USPQ 327, 329 (T.T.A.B. 1976) coupled with the emphasis on “knowingly” makes one pause to think. The court discusses the difficulty in divining subjective intent and the reliance on objective manifestations, and this still holds – page 5 “We agree”.

    A possible key difference, as NAL points out is that marking IS the status of the product, and patenting, by its nature is only for a limited time. Do these facts create the responsibility that if you chose to mark (you may chose NOT to mark), that your choice carries with it an affirmative duty to unmark at the appropriate time?

    Does the limitation on “should-have-known” from this case extend to the intent prong in the legal arguments for marking?

  3. 12

    “Or was this Bose vexatiously trying to stop use by another of a conflicting mark”

    The TTAB found that HEXAWAVE conflicted with Bose’s common law mark rights even after cancelling Bose’s registration. So nothing really vexatious happened here. Part canceling at the outset would not have helped Bose avoid cancelation due to fraud. I think Bose was had no choice but to pursue things to the bitter end.

  4. 11

    OK, but it isn’t so easy to prove that a proprietor has stopped using the mark on particular goods, is it? And why didn’t Bose at the outset of the dispute voluntarily part-cancel its own registered specification of goods? Why wait till ordered to delete the no longer used goods. Was it cheaper to wait and be told rather than just quietly part cancelling at the outset. Or was this Bose vexatiously trying to stop use by another of a conflicting mark, on the basis of registration rights it knew did not cover the goods in view? Or a case of the Bose left hand (legal) not knowing (and not asking) what the Bose right hand (sales) was no longer doing?

  5. 10

    Max, how about a cancellation action in respect of the goods for which the mark is no longer in use? That’s not as draconian as fraud, since it doesn’t get the mark thrown out for those goods for which it’s still in use; and for the party moving to cancel, the burden of proof is much lower than proving fraud, you just need to prove the mark is no longer is use with respect to those goods. Here, where the assertion was fraud, the court said there wasn’t fraud, but nevertheless told the PTO to modify the description so that the mark doesn’t protect the goods that Bose no longer sells.

  6. 9

    Marks on the Register but no longer in use on the goods specified are abandoned vessels in the shipping lanes of trade (Robin Jacob). The PTO is right to do what it can to clear them away. If inequitable conduct isn’t the way, and the renewal fee system doesn’t achieve the desired effect, can readers suggest a better way?

  7. 8

    Now if they would just impose this high a standard of proof for inequitable conduct in patent cases…

  8. 7

    Cancelling a trademark registration can lead to public consumer confusion consequences, unlike holding a patent unenforceable, which to my mind makes this kind of [reversed] TTAB decision even worse.

  9. 6

    Ken, the Federal Circuit didn’t say whether it was okay or wasn’t okay, they just said it wasn’t fraud and all that that would entail. Fraud isn’t negligence and it sure isn’t betting wrong on a legal analysis.

    This is just another case of an anti-customer USPTO finally getting reined in.

  10. 4

    Ok this whole inequitable fraud thing is looking like the whole presidential impeachment issue. President Clinton lies to a grand jury (probably the most important check on Federal abuse of process) concerning an inconsequential matter of infidelity and he gets acquitted. President Nixon bombs the crap outta Cambodia to protect our troops in Vietnam and he get raked over the coals with the threat of impeachment.
    Now McKesson, the patent prosecutors makes a tough call based upon a thorough analysis of the prior art and gets hammerred for inequitable conduct.
    In the instant matter a clearly verifible fact that is grossly ignored and the Federal Circuit says that Ok. I simply don’t get it. This all seems backwards.

    Can someone please explain it to me.

  11. 2

    The PTO was not a party. Hexawave was the other party. Not sure why the CAFC captioned this decision “In re Bose.”

  12. 1

    Has the CAFC ever made the PTO pay costs?

    Page 11:
    For these reasons, the Board’s decision is reversed and remanded.

    Each party shall bear its own costs.


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