Fraudulent Incontestability Declarations: Textual Fidelity vs. Fraud Deterrence

by Dennis Crouch

In the trademark case of Great Concepts, LLC v. Chutter, Inc., No. 2022-1212 (Fed. Cir. Oct. 18, 2023), the Federal Circuit addressed whether fraud in a declaration of incontestability justifies cancelling the underlying trademark registration. Writing for the majority, Judge Stark held the TTAB lacked this authority under the Lanham Act. Stark reversed the TTAB’s cancellation order, finding the statute only permits cancellation for fraudulent acts taken while obtaining the registration, not for establishing incontestability. Dissenting, Judge Reyna argued this improperly restricts the TTAB’s ability to combat fraud before the agency. Their disagreement centers on the scope of “maintaining” a registration and policy concerns over deterring false statements.  Over the past several years, the global trademark systems have faced increasing fraudulent activity and this decision serve as a call for Congressional reforms.

The case also raises important issues associated with our ever-more-powerful administrative state. Although US courts are empowered by equity to counteract fraud on the system, administrative agencies are typically much more limited in their actions.  Of course, this balance of powers question goes far beyond the patent and trademark systems.

Great Concepts applied to register the mark “DANTANNA’S” for restaurant services in 2003.  The company runs restaurants of the same name in the Atlanta area that are described as “upscale” sports bars. I’m sure they are lovely.

The DANTANA’S mark registered in 2005 as Registration No. 2929764. In 2006, Chutter, Inc.’s predecessor Dan Tana petitioned to cancel the registration, alleging a likelihood of confusion with his common law “DAN TANA” restaurant mark.  For the Italian place in Santa Monica. The cancellation proceeding was eventually dismissed in 2010 for failure to prosecute.

Meanwhile in 2010, Great Concepts’ former attorney Frederick Taylor filed a combined declaration with the USPTO seeking to maintain the registration under Section 8 and also to obtain incontestable status under Section 15. The Section 15 declaration falsely stated no proceedings involving the DANTANNA’S mark were pending, when in fact the cancellation proceeding and related litigation were still ongoing.

In 2015, Chutter filed a new petition to cancel the DANTANNA’S registration, alleging Taylor’s Section 15 declaration constituted fraud warranting cancellation under Section 14 of the Lanham Act. The TTAB agreed, finding Taylor knowingly made false statements with intent to deceive the USPTO. It held the fraudulent declaration enabled Great Concepts to obtain new incontestable rights. Great Concepts appealed the cancellation order to the Federal Circuit.

The dispute here involves two adjacent provisions of the Federal Trademark statute known as the Lanham Act of 1946 (as  amended). Lets look at the statute.

Section 15 of the Lanham Act spells out the process of moving a mark to “incontestability” status.  15 U.S.C. § 1065.   Important for the purposes of this case, the process requires the mark owner to file “an affidavit … with the Director” making a variety of required statements. To be effective, the affidavit must include a statement that “there is no proceeding involving said rights pending.”  Id. As mentioned above, Great Concepts made such a statement at a time when a case was still pending.

Section 14 empowers the USPTO to act on a petition to cancel a registered trademark. 15 U.S.C. § 1064(3).  The law provides several reasons why a registration might be cancelled:

  • Mark becomes generic for the goods;
  • Mark is functional;
  • Mark was abandoned;
  • “Registration” was “obtained fraudulently”;
  • etc.

Id.  In considering Section 14, The majority concluded that it does not cover fraudulent Section 15 incontestability declarations.  The closest hook that the majority found was cancelling a mark if the registration was obtained fraudulently, but the majority found that not close enough.  Judge Stark explained “a Section 15 declaration only relates to a mark’s incontestability, not its registration.”  On this point, the court distinguished the case of Torres v. Cantine Torresella S.r.l., 808 F.2d 46 (Fed. Cir. 1986). In Torres, the the focus was on renewal under Section 8 that requires, and the court held that “[f]raud in obtaining renewal of a registration amounts to fraud in obtaining a registration within the meaning of section 14(c) of the Lanham Act.”  Id. But, the majority distinguished Torres as tied to registration because the mark would be lost absent a Section 8 renewal filing; whereas the mark is not lost based upon failure to file Section 15 incontestability docs. Truthfully, I expect that the majority here would have decided Torres differently, but they are bound by the precedent set.  As an aside: Great Lakes had simultaneously filed a Section 8 renewal with its incorrect Section 15 document, but the majority also concluded that the two should be treated as separate acts, and no fraud was found in the Section 8 filings.

The parties also pointed to conflicting statements from treatises and law reviews on the subject:

  • Jerome Gilson & Anne Gilson Lalonde, Trademarks § 9.03 (2022)) (“A fraudulent Section 15 affidavit is grounds for cancellation of the registration under Section 14(3).”).
  • J. Thomas McCarthy, Trademarks and Unfair Competition, § 31.81 (“[F]raud in a Section 15 incontestability affidavit or declaration should serve only to eliminate the incontestable status of the registration and not result in cancellation of the registration itself.”).
  • Theodore H. Davis Jr. & Lauren Brenner, Allegations of Fraudulent Procurement and Maintenance of Federal Registrations Since In re Bose Corp., 104 Trademark Rep. 933, 998-99 (2015) (even if not permitted under the statute, the courts should permit  this extra-statutory basis for cancellation)

Writing in dissent, Judge Reyna argued the majority improperly restricted the TTAB’s ability to combat fraud before the agency. He contended Section 15 declarations allow registrants to maintain their rights, placing such filings under Section 14’s umbrella for fraud in maintaining a registration. Reyna accused the majority of “constructing a milepost” in the trademark process “at which point (Section 15) fraudulent wrongdoing is green-lighted.”

In Reyna’s view, the TTAB has discretion to fashion appropriate remedies for fraud at any stage of the trademark continuum. He saw no principled rationale for the majority’s rule prohibiting cancellation for Section 15 fraud. Reyna also disagreed with imposing an artificially narrow definition of “maintaining” a registration that excludes incontestability declarations. He noted the USPTO itself advises the public that Section 15 is a maintenance filing. Beyond textual disputes, Reyna argued fraud should never be condoned at any point in agency proceedings.

The majority responded to these policy arguments with a statement that “We certainly do not intend by our holding today to encourage fraud – of any type.”  The majority goes on to agree that “some significant sanction” should be available to deter fraud.  The Federal Circuit noted that one such penalty approved in the old CCPA case of Duffy-Mott is to “remove the mark’s incontestability status.”  At least at that point the mark owner “will have a harder time preserving the validity of its registered mark” either in court or via TTAB challenge.   The majority also noted that the TTAB is empowered to “sanction any attorney who commits fraud before it.”  The court noted that such a filing may subject the attorney to a variety of penalties, including criminal prosecution.

Still, the majority concluded that it was bound by the statute — that Congress provided a closed list of reasons for cancelling a mark, and the markholder’s action here does not fit within that list:

Even if it were true that our decision would result in an unwelcome increase in fraud perpetrated against the Board – which, again, we do not believe it will – we would nonetheless adhere to the unambiguous language of the statute. . . . Whether we would prefer a different result be reflected in the statute is irrelevant to our responsibility to decide the case before us based on the law as it exists.

Slip Op. They are just calling balls and strikes.

The philosophical divide between textual fidelity and policy concerns is a recurring tension in administrative law.  The Great Concepts majority’s strict statutory interpretation contrasts Stark-ly with the dissent’s emphasis on the broader implications of fraud within the trademark system. While the court maintains its allegiance to the text of the law, it highlights another area where fraud can pervade.  The case suggests a rethink on whether the existing legal and procedural frameworks are equipped to uphold integrity in the face of evolving challenges, particularly the surge in fraudulent activities within global trademark systems.

11 thoughts on “Fraudulent Incontestability Declarations: Textual Fidelity vs. Fraud Deterrence

  1. 6

    The Federal Circuit noted that one such penalty approved in the old CCPA case of Duffy-Mott is to “remove the mark’s incontestability status.”

    I wouldn’t consider this to be a penalty, but just a natural consequence of the law. The statute itself is clear: incontestability relies on several conditions being met, and if a condition isn’t met, the trademark is not incontestable. The filing of an affidavit is one such condition, but another condition is that the trademark was not subject to ongoing proceedings – a separate condition that doesn’t depend on what the affidavit says. If there were, in fact, proceedings ongoing at the time, then a determination by the USPTO that the incontestability conditions were met is a nullity.

    And if you want penalties, we have 18 USC 1001 for that.

  2. 5

    I concur with Judge Reyna’s dissent because the USPTO is very lax when it comes to discouraging fraud on the patent and trademark system which can have devastating results, i.e. the world financial system collapse in 2008-2009 and LTCM before it. Attorneys know the USPTO is lax in checking and enforcing ethics against attorneys. I repeatedly begged my superiors at the USPTO to file a grievance against attorneys who blatantly acted fraudulently but was consistently told “no” because the system wants the filing fees. (Whenever you see “admission” in the IFW then you know the examiner caught a fraud attempt.) Judge Stark is encouraging this game playing with the truth with his overly narrow interpretation of the Lanham act. Judge Stark clearly is not a profile in courage for the judiciary and Halloween must be a terrifying time for this spineless judge. Booo!!

  3. 4

    Since I knew both Jerry Gilson and Tom McCarthy more than half a century ago, I found it interesting that you noted their respective trademark law treatises disagreeing as to whether or not “A fraudulent Section 15 [incontestability] affidavit is grounds for cancellation of the registration under Section 14(3).”
    I wonder if the Fed. Cir. in adopting Toms’ view on this might be taking into consideration the apparent views of the new conservative Sup. Ct. majority on the statutory scope of administrative agency powers in general, and their apparent acceptances of cases raising the issue?

  4. 3

    As a policy matter, McCarthy’s position seems the soundest. After five years, a TM registrant can file two different applications: renewal under Section 8 and for incontestability under Section 15. They are typically filed together (the PTO even has an online form for such a combined application.) But legally they are two different things, and one can qualify for one but not the other.

    Here, there was no fraud as to the Section 8 renewal, and the registrant was entitled to renewal. The fraud related solely to the Section 15 incontestability. So I think only the latter should be cancelled.

    Also note that the fraud here was about facts that the PTO can easily verify — proceedings pending at the PTO. If you search any TM registration on TESS, there is a button for TTAB proceedings. It’s very easy to ascertain whether there are any proceedings involving that registration at the TTAB and their status, literally in seconds. It’s a monumentally stupid thing to try to defraud the PTO about, Yet here it seems like the PTO was not paying attention to its own docket.

  5. 2

    Are you off your meds again? I thought you had turned the corner with your recent fairly normal posts, but it appears you need to take your lithium again.

    1. 2.1

      Less ‘again’ and more ‘still.’

      His political rants have always shown that inability to control his emotions.

  6. 1

    Congress should jump on this right after they decide if the the House of Representatives should be led by a notorious enabler of sexual harassment who lied to the American people endlessly in support of a coup and who is objectively incompetent when it comes to passing legislation.

    1. 1.1

      Looks like Gym is too scuzzy and venal even for the scuzziest political party of the last 100 years.

      Who will they put up next? Maybe a back bencher who nobody knows about and who is willing to be a combination puppet and punching bag.

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