Fraud on the PTO – A Trademark Perspective

by Christina Frangiosa

Last Friday (April 9), during the American Bar Association Intellectual Property Law Section conference, I delivered a presentation on Trademark Prosecution Ethics, and in particular, the history and current status of the fraud in the procurement theory used to cancel registrations (or oppose applications) when material misrepresentations have been made to the Patent & Trademark Office during the application or renewal process.

I plan to upload both my article and my PowerPoint presentation to my firm’s web site as quickly as feasible, and you are welcome to review them there. In sum, however, my conclusions were as follows:

“While the test for determining that an applicant’s or registrant’s conduct in filing an application or maintaining trademark registrations was fraudulent has become more stringent, applicants, registrants and their counsel still face some pitfalls in the process. Indeed, although certain amendments of an inaccurate filing may be accepted (provided that no challenge to the validity of the application or registration has yet been filed), it is clear that both the TTAB and the Federal Circuit discourage carelessness in preparing these filings.

Accordingly, applicants and registrants are strongly encouraged to do at least the following to avoid increasing the risk of claims or counterclaims of fraud on the USPTO, and thus, loss of a pending application or a particular registration:

  • Conduct appropriate due diligence to ensure that the marks sought to be registered (or renewed) qualify as “in use” or validly subject to the “intent to use” process;
  • Ensure that the intended signatory for the declaration has the appropriate level of personal knowledge to support the allegations of use or intent to use, exclusive right to use the mark and other averments of fact;
  • Ensure that any licensees upon whose use the applicant/registrant will rely to maintain the registration properly use the mark in commerce and provide sufficient evidence to the applicant/registrant to support the maintenance filing; and
  • Undertake proper due diligence before filing an Opposition or Cancellation proceeding to ensure that the trademark or service mark forming the basis of a challenge to another application or registration does not have any exposure to a counterclaim for fraud on the USPTO and thus at risk for cancellation during the pendency of the proceeding.

Note that undertaking these preparations cannot completely moot claims of fraud on the USPTO, but they lend support and reasonableness to a potential response that no “intent to deceive” can be demonstrated by clear and convincing evidence. Finally, this entire line of cases confirms that the USPTO, TTAB and Federal Circuit Court of Appeals have strong interests in ensuring that the trademark Register be kept current and accurate, and demonstrates a disfavor of carelessly filed and unreliable factual statements about the use or non-use of trademarks and services marks in active use in U.S. commerce.

I welcome your comments.

UPDATE on 4/20/10: The slides from the presentation can be found on the ABA’s IPL Section site.

UPDATE on 5/7/10: The published article and the accompanying slides are now available on my firm’s web site. The direct links are here: “Ethics in Trademark Application Prosecution: Alleging ‘Fraud in the PTO’ After In re Bose,” ABA Intellectual Property Law Section 25th Annual Conference (April 9, 2010) – (with presentation slides).

SDNY Orders TAVERN ON THE GREEN Service Mark Cancelled for Fraud

by Christina Frangiosa

In a recent decision, the United States District Court for the Southern District of New York granted the City of New York’s motion for summary judgment, thus cancelling the City’s former licensee’s service mark registration for the mark TAVERN ON THE GREEN in connection with restaurant services on the ground that the registration was fraudulently procured. City of New York v. Tavern on the Green, L.P. et al., Nos. 09 Civ. 9224, 09 Civ. 9254, slip op. at 3 (S.D.N.Y. Mar. 10, 2010) (ECF Document No. 40). Access to a valid PACER account may be required to access the court filings cited in this blog entry. Alternatively, see Justia’s docket report – sometimes they make public filings available on their site.

Case Background

In 1934, the City of New York opened a restaurant in Central Park called “Tavern on the Green” and hired various vendors over time to run the restaurant pursuant to operating agreements. Id. at 4. The restaurant closed periodically for renovation and “improvements,” and the City paid substantial portions of the renovation costs. Id. For instance, in 1956, the restaurant closed for a $400,000 renovation project, which enabled the restaurant to expand its inside seating capacity from 300 to 720 and for which the City covered approximately 80% of the cost. Id.

In 1973, the City entered into a license agreement with Warner LeRoy (and thereafter Tavern on the Green, L.P. to whom LeRoy’s interest in the agreement was transferred) to operate “Tavern on the Green” as a restaurant and cabaret. Id. at 5. Several key terms in this first license agreement between these parties were: 1) the licensee’s ability to change the name of the restaurant upon written approval from the City’s representative; 2) the City’s ability to approve (or reject) any manager that the licensee hired to run the restaurant; 3) the requirement that the licensee hire “a sufficient number of trained attendants” (presumably waiters/servers) and 4) the requirement for the attendants to wear “a City-approved uniform.” Id. at 5-6. The parties also agreed that certain renovations were to be completed before the defendant could open the restaurant for business. Id. at 5. The agreement was renewed in 1976 and the restaurant re-opened for business 1978. Id. & n.2.

In 1985, the parties re-negotiated the terms of their agreement to add the following new provisions: 1) that the City could regulate the times and manner of operation; 2) that the City could inspect the facility at any time; 3) that City approval was required for all signs and solicitations for business; and 4) that the food served by LeRoy would be “pure and of good quality.” Id. at 7. Removed from this revised agreement was LeRoy’s ability to change the name of the restaurant, even if he obtained written approval from the City. Id. at 6. After this agreement was executed, the City exercised its rights to govern the hours of operation and the types of events the occurred on the premises several times. Id. at 7.

LeRoy’s Service Mark Application

In 1978, LeRoy filed a trademark application for the mark TAVERN ON THE GREEN in connection with restaurant services on behalf of a joint venture that had been formed to operate the restaurant (“the joint venture”) and claimed a date of first use of August 31, 1976, which corresponded to the date on which the restaurant was re-opened after the 1973 renovations were completed. Id. As part of his application package, he signed a declaration that confirmed that the joint venture had the right to use this mark and “to the best of his knowledge and belief, no other person, firm, corporation or association has the right to use said mark in commerce, either in the identical form or in such near resemblance thereto as to be likely . . . to cause confusion, to cause mistake, or to deceive. . . .” Id. at 8. However, LeRoy did not disclose the 1973 agreement to the USPTO, nor did he inform the City of New York that he had applied for registration of this mark. Id. The application was ultimately approved and registered in 1981 (Reg. No. 1,154,270) without a single opposition. Id.

In 1986, the joint venture filed a Section 15 affidavit, claiming incontestability of the mark based on continued use throughout the preceding five years. The USPTO acknowledged that the affidavit had been filed, and the record was updated to reflect the joint venture’s claim of incontestability pursuant to 15 U.S.C. § 1065. (Once a registrant can demonstrate incontestability of its mark, third parties will be limited in the grounds that they can allege in a petition to cancel the registration.) The City apparently did not become aware of the registration until 2006, and immediately thereafter requested that LeRoy and the joint venture assign all rights in the mark to the City. Id. at 8. LeRoy declined.

In 2007, the joint venture filed a second application for registration of the mark TAVERN ON THE GREEN in connection with “cooking oils, salad dressings and dipping oils.” Although the City requested two extensions of time to oppose this application, registration ultimately issued in September 2008 unopposed (Reg. No. 3,494,658).

The Dispute at Bar

Neither LeRoy nor his estate is individually named as a defendant in this case, but both of his companies are. (Mr. LeRoy apparently passed away in 2001, but his rights in the mark passed to the companies.) The companies (collectively referred to as “Debtors”) sought protection of the bankruptcy court under Section 11 in September 2009, and thereafter initiated an adversary proceeding to obtain a declaration of their exclusive right to use the mark for restaurant services, and to prevent the City from using the name for itself. Id. at 10. In November 2009, the City filed a motion to withdraw the bankruptcy reference, which motion the U.S. District Court for the Southern District of New York granted on December 3, 2009. (ECF Document No. 9).

Both parties filed cross motions for summary judgment. The Debtors sought a declaration that they had the exclusive right to use the mark in connection with restaurant services, and an injunction against the City’s continued use of the mark in commerce. City of New York v. Tavern on the Green, L.P. et al., Nos. 09 Civ. 9224, 09 Civ. 9254, slip op. at 3 (ECF Document No. 40). For its part, the City’s motion for summary judgment sought: 1) a declaration of its prior rights in the mark under New York state law; 2) cancellation of Debtors’ registration based on a “fraud in the procurement” theory; and 3) cancellation of the Debtors’ registration for use of the mark in connection with the various oils. Id.

Cancellation of LeRoy’s Registration in TAVERN ON THE GREEN (Restaurant Services)

Ultimately, the Court granted the City’s motion for summary judgment with respect to the TAVERN ON THE GREEN registration in connection with restaurant services, and ordered that the registration be cancelled based on LeRoy’s commission of fraud in procuring the registration without disclosing the City’s prior rights or the limitations on LeRoy’s own rights as a result of the license agreement. As to the second registration, in connection with various oils, the Court concluded that evidence was not presented sufficient to justify cancellation of this registration, and determined that the motion for summary judgment on this point was “premature.”

In reaching its decision, the Court evaluated the City’s claim of a prior right to the mark TAVERN ON THE GREEN in connection with restaurant services based on New York common law of unfair competition. It explained that “in order to establish a protectable right to a trade name under New York law, the City must proffer undisputed facts that show that the defendants are unfairly attempting to exploit the efforts of another to create goodwill in that trade name.” Id. at 11. The Court concluded that the City indeed had prior rights – predating those of the registrant by 35 years – such that the mark, “‘Tavern on the Green’ was closely associated in the public mind with a building owned by the City and located in New York’s Central Park.” Id. at 13, 14.

The Debtors argued that the repeated closures of the facility for renovation and improvement – particularly the closure in 1973 that coincided with the awarding of the concession lease to LeRoy – constituted a break in the City’s use of the mark, such that it should not be able to claim continuous use since 1934. Id. at 15. The Court disagreed, noting that “[r]enovations usually signify an intention to continue operations, which the 1973 Agreement makes clear by contemplating renovations in the transition from the prior licensee to the Debtors.” Id. Thus, the Debtor’s claim to “incontestibilty” as a result of its 1985 filing with the USPTO was not valid as against the City – because of the City’s prior rights. Id. at 16.

The Court also considered the City’s claim that LeRoy had procured the registration fraudulently when he applied in 1978 for registration of the service mark. After finding that the failure to disclose the license agreement demonstrating that LeRoy’s rights in the mark were limited was a material fact, the Court concluded that “the deliberate omission in a trademark application of information regarding another’s right to use the mark applied for is a material omission justifying cancellation of the mark.” Important to the Court’s consideration was its expectation that trademark applicants owed “uncompromising candor” to the USTPO when they file their applications. Id.

Court’s Dismissal of Debtor’s Laches Defense

In addition to denying the City’s claim for prior rights in the trademark, the Debtors raised a defense of laches, claiming that the City had waited too long to file its claim for cancellation. In dismissing the Debtor’s argument rather summarily, the Court confirmed that the Lanham Act clearly provided for cancellation at any time when the claimant can demonstrate fraudulent procurement. Id. at 20; see 15 U.S.C. § 1064.

Impact on Other Decisions

This opinion serves as a reminder that the declarations required to be signed in connection with trademark applications need to be reviewed carefully before applicants sign them. Not only must an applicant confirm that the descriptions of goods or services associated with the application are accurate (see Medinol and Bose lines of cases, covered in prior blog entries here), but also must confirm that no one else has the right to use the mark in connection with the goods or services identified in the application. Failure to read carefully and affirm the accuracy of the statements made in the application can result in a loss of registration or in a determination that another entity has more senior rights that may override any investment (no matter how significant) the applicant has made in the mark.

Welcome Back

by Christina Frangiosa

As reported in my prior blog entry, I have been involved in writing two fairly comprehensive articles on recent developments in trademark law. Both articles have now been submitted and I am getting back on schedule with posting new articles on Privacy and IP Law.

The articles will ultimately be published as part of course materials in connection with the following conferences: 1) the American Bar Association’s 25th Annual Intellectual Property Law Section Meeting in Washington, D.C. (detailed schedule of events is here); and 2) the Pennsylvania Bar Institute’s Fourth Annual Intellectual Property Institute in Philadelphia (faculty list is here). The links provided here will access to the registration forms for the meetings, as well as brief summaries/listings of the expected presentations.

If you plan to attend these events, please submit a comment below so that I can know to look for you.

Temporary Hiatus

by Christina Frangiosa

Dear Readers:

Over the next few weeks, I will be limited in what I can publish to this blog, but the interruption will only be temporary. I am in the process of writing two articles relating to trademark practice, which are both due at the end of February.

The first (with a working title of “Intent to Defraud: The New Standard for Finding Fraud on the PTO in a Trademark Prosecution Practice”) will be presented during the American Bar Association’s Intellectual Property Law Section Meeting in April, within a larger presentation about ethics in trademark and patent prosecution practices. My co-presenter will focus on the patent prosecution aspects of this analysis. The papers are due, however, in four weeks.

The second (with a working title of “Top 10 Ways to Preserve Your Trademark”) will be prepared jointly with my co-presenter during the Pennsylvania Bar Institute’s 4th Annual IP Institute, also in April. Again, the papers are due at the end of February.

As much as possible, I will try to post about relevant developments in these areas during the coming weeks. If I am silent, however, be sure to check back at least at the end of February, when I should be back to a more active posting schedule.

Best,
Christina Frangiosa
Privacy and IP Law Blog

Netflix Sued for Alleged Privacy Violations

by Christina Frangiosa

Part 2 of the “Two New Privacy Lawsuits Filed” Topic

Also on December 17, 2009, (see prior post about Facebook complaint), a Jane Doe plaintiff and three other individual plaintiffs filed a Class Action Complaint in the Northern District of California against Netflix and John Doe defendants 1-50, alleging violations of the Video Privacy Protection Act (18 U.S.C. § 2710), various California consumer protection statutes and common law claims for unjust enrichment and public disclosure of private facts in connection with Netflix’s “Prize” offered to the computer developer who succeeded in creating computer algorithms that improve Netflix’s recommendations tool by the largest margin. Valdez-Marquez et al. v. Netflix, Inc., et al., Case No. C 09-05903 (N.D. Cal.); see also WSJ Law Blog, “Did Netflix Violate Subscribers’ Privacy? Lawsuit Says Yes,” posted Dec. 18, 2009.

As the company’s web site explained, “The Netflix Prize sought to substantially improve the accuracy of predictions about how much someone is going to enjoy a movie based on their movie preferences.” Netflix Prize (last visited Jan. 14, 2010). The best algorithm would win the $1 million grand prize, and indeed was awarded on September 21, 2009.

A copy of the complaint can be found on the Wall Street Journal’s site, and an article about the complaint (with a separate link to the complaint) was also published on Wired.com’s Threat Level Blog: Ryan Singel, “Netflix Spilled Your Brokeback Mountain Secret, Lawsuit Claims,” Wired.com, Dec. 17, 2009.

Interestingly, a university professor identified a problem with the anonymizing tools Netflix used in 2006 and argued that Netflix should not move forward with its newest contest, “Netflix Prize 2”, which would again release “anonymous” data on which the new algorithms would be based. See Paul Ohm, “Netflix’s Impending (But Still Avoidable) Multi-Million Dollar Privacy Blunder,” posted on Freedom to Tinker (hosted by Princeton University’s Center for Information Technology Policy) on Sept. 21, 2009.

Professor Ohm’s analysis identifying potential risks of data breach was further discussed in an article on Network World. Ian Paul, “Netflix Prize 2: What You Need to Know,” Network World, Sept. 23, 2009.

Apparently, Netflix has not yet rolled out the data associated with Netflix Prize 2 – at least, according to its web site, the details of the contest would be announced “shortly,” and prizes would be awarded for the “best results at 6 months and 18 months” instead of the 3 years associated with the original contest.