Recent TTAB Decisions Highlight Challenges of Pleading and Proving Fraud after <i>Bose</i>

In Enbridge Inc. v. Excelerate Energy Ltd. Partnership , 92 U.S.P.Q.2d 1537 (T.T.A.B. Oct. 6, 2009), the Trademark Trial and Appeal Board (“TTAB”) issued its first precedential ruling following the Federal Circuit's Bose decision on fraud, In re Bose Corp., 91 U.S.P.Q.2d 1938 (Fed. Cir. 2009). Bose reversed a TTAB decision, finding that a trademark is obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly makes a false, material representation with the intent to deceive the U.S. Patent and Trademark Office (“USPTO”).

Using the Bose Standard

Excelerate Energy Limited Partnership (“Excelerate”) filed an application to register the mark ENERGY BRIDGE for “transmission of oil and gas through pipelines and ships” and “production of energy.” Enbridge Inc. (“Enbridge”) filed a notice of opposition, alleging ownership of a registration for the mark ENBRIDGE for a wide variety of goods and services ' ranging from computer software for the maintenance of pipelines to the construction, operation and transportation of gas and oil ' and asserting claims for likelihood of confusion and dilution, among others.

After proceedings commenced, Excelerate filed a consented amendment to delete the “transmission of oil” services and to limit the “production of energy” to the “treatment of natural gas for the production of energy ' (via certain procedures).” This amendment prompted Enbridge to amend its notice of opposition to assert a claim that Excelerate committed fraud on the USPTO because it had never used its mark for, among other services, the “transmission of oil” and the “production of
energy.” Enbridge then filed a motion for summary judgment on its fraud claim. Excelerate also filed a cross-motion for summary judgment on the ground that Enbridge lacked standing to oppose, which was denied by the TTAB.

In support of its motion for summary judgment, Enbridge relied on Excelerate's admission in its answer to the amended notice of opposition that it had not used the ENERGY BRIDGE mark in commerce for “transmission of oil.” Enbridge, 92 U.S.P.Q.2d at 1541. Enbridge also submitted the discovery deposition of Excelerate's CEO, who testified that the company never considered getting into the marine transportation of oil, and that it never produced energy nor planned to do so. Id. at 1540.

In response to the motion, Excelerate admitted that it did not transmit oil as of the critical application filing date, but it characterized the misstatement as “an inadvertent, honest mistake.” Id. at 1541. Excelerate also argued that it corrected the error in good faith by amending the application to delete those services. Further, Excelerate maintained that it is involved in the “production of energy” because it provided services that fall within the technical description [of] that phrase. Id. at 1542. After Bose issued, both parties sought leave to supplement their filings to address the decision. However, the Board denied the requests, stating that the supplemental briefing was unnecessary because it considered the motion under the Bose standard.

Citing Bose, the Board reiterated that fraud requires a knowingly false, material misrepresentation with the intent to deceive the USPTO. Id. at 1540. The Board acknowledged that under Bose, “[t]he standard for finding intent to deceive is stricter than the standard for negligence or gross negligence, and evidence of deceptive intent must be clear and convincing.” Id. Further, the Board stated that it will apply the “rigorous clear and convincing evidence standard” of proof for intent to deceive and fraud. Id. According to the Board, clear and convincing evidence of fraud may be direct and unequivocal evidence of intent to deceive, or it may be inferred from the circumstances. Id. at 1540, n.4. However, “[u]nless a party alleging fraud can point to clear and convincing evidence that supports drawing an inference of deceptive intent, it will not be entitled to judgment on a fraud claim.” Id. at 1540.

Based on the evidence of record and applying the Federal Circuit's Bose fraud standard, the Board denied Enbridge's motion for summary judgment on fraud. Id. at 1541-42. The Board found that genuine issues of material fact exist as to whether Excelerate knowingly made a false representation concerning the “transmission of oil” with the intent to deceive the USPTO. Id. at 1541. Further, because the meaning of “production of energy” was unclear, the Board found “a genuine issue of material fact exists as to the pivotal element of the fraud claim, namely, whether applicant's statement that it was using its mark in connection with 'production of energy' was, in fact, false.” Id. at 1542. The Board also found that Enbridge failed to carry its burden of establishing the absence of a genuine issue that Excelerate had an intent to deceive the USPTO when it stated that it was using its ENERGY BRIDGE mark for “production of energy” as of the filing date of the application. Id.

This is the first TTAB precedential decision denying a motion for summary judgment on the ground of fraud under the Bose standard. The decision signals the end of the TTAB's strict rule of fraud under Medinol Ltd. v. Neuro Vasx Inc. , 67 U.S.P.Q.2d 1205 (T.T.A.B. May 12, 2003), and underscores that post- Bose , a claim of fraud must be proven by the rigorous clear and convincing standard. Medinol held that an applicant or registrant commits fraud before the USPTO when it makes a statement that is: 1) false; 2) material; and 3) made by a person who knew it was false or misleading, or should have known it was false or misleading but acted with “reckless disregard for the truth.” The Enbridge decision indicates that fraud before the USPTO will no longer be found where a party makes a knowingly false statement of a material fact in the absence of clear and convincing evidence of an intent to deceive the USPTO. Moreover, the decision evidences the TTAB's reluctance to grant a motion for summary judgment on issues of intent to deceive and fraud.

Pleading Fraud with Particularity:
Asian & Western Classics B.V. v. Selkow

Less than a month after the Enbridge decision, the Board had the opportunity to decide another motion for summary judgment on a fraud claim under the Bose standard. In Asian & Western Classics B.V. v. Selkow , 92 U.S.P.Q.2d 1478 (T.T.A.B. Oct. 22, 2009), the Board applied the Bose standard, not to the merits of the summary judgment motion, but rather to assess whether Petitioner Asian and Western Classics B.V. (“Classics”) had sufficiently pleaded its fraud claim.

Classics filed a petition to cancel Registrant Lynne Selkow's (“Selkow”) registered “KL and Design” mark for jewelry, namely necklaces, pins, earrings and bracelets. Petition to Cancel, Asian & Western Classics B.V. v. Selkow, Cancellation No. 92048821 (T.T.A.B. Jan. 31, 2008), amended by Amended Petition to Cancel, Cancellation No. 92048821 (T.T.A.B. July 17, 2008). In its amended petition to cancel, Classics alleged that Selkow committed fraud upon the USPTO both when she filed her application for registration, and when she submitted declarations confirming her use of the mark in commerce. Amended Petition to Cancel, Cancellation No. 92048821, at 2. Classics then filed a motion for summary judgment, narrowly arguing for judgment only as to its claim based on the fraudulent declarations. Petitioner's Motion for Summary Judgment, Cancellation No. 92048821 (T.T.A.B. May 15, 2009).

In its motion for summary judgment, Classics argued that Selkow had fraudulently filed a Section 8 Declaration of continued use in commerce and a Section 15 Declaration claiming incontestable rights for Selkow's KL and Design mark. Id. at 2. Specifically, Classics asserted that at the time Selkow filed these declarations swearing both current use and continuous use of the mark for the named goods for the five years prior, she knew or should have known that the mark had not been used for bracelets in commerce in nearly four years. Id.

Without reaching a decision on Classics' summary judgment motion, the Board held that Classics' fraud claim, when reviewed in light of Bose, was insufficiently pled. Asian & Western Classics, 92 U.S.P.Q.2d at 1480. Although filed prior to the Bose decision, the Board considered Classics' motion for summary judgment and the sufficiency of the pleadings in the amended petition to cancel under the Bose standard. Neither party sought to supplement their filings to address the Federal Circuit's Bose decision. The Board examined whether two elements were satisfied in Classics' amended petition to cancel: 1) factual support for the allegation; and 2) an assertion of specific intent. Following Federal Rule of Civil Procedure 9(b), the Board held that Classics' mere recitation of the fraud standard based on Classics' “information and belief” was insufficient because the petition did not provide allegations of specific facts on which Classics' belief was founded. Id. at 1479. Sufficient allegations would include either “known information giving rise to [Classics'] stated belief, or a statement regarding evidence that is likely to be discovered that would support a claim of fraud.” Id. Neither was present in Classics' amended petition to cancel.

The Board held that Classics' fraud claim not only failed to allege specific facts, but also failed to include an allegation of specific intent. Id. While Classics' claim that Selkow “knew or should have known” that her material statements were false inferred the required element of intent, it did not assert that the false statements were made willfully or in bad faith. Therefore, allegations of mere negligence, such as indicated by Classics' language “knew or should have known,” are insufficient. Id. (citing Bose, 91 U.S.P.Q.2d at 1940).

Although the Board did not need to reach a decision on the merits of the summary judgment motion, it nonetheless commented that the motion would have been denied due to genuine issues regarding Selkow's intent to commit fraud on the USPTO. Id. at 1480. As in Enbridge, the Board emphasized the rigorous burdens in asserting a fraud claim, cautioning that fraud “must be 'proven to the hilt' by clear and convincing evidence.” Id. at 1480 (citing Smith Int'l, Inc. v. Olin Corp., 209 U.S.P.Q.1033, 1043-44 (T.T.A.B. 1981)). Closing the substance of its opinion, the Board ends with an ominous caveat for future seekers of summary judgment on fraud claims: “The factual question of intent is particularly unsuited to disposition on summary judgment.” Id.

While the Enbridge decision underscores the impact of Bose on the likelihood of a successful summary judgment motion, Asian & Western Classics introduces a second potential implication. In fact, the Asian & Western Classics decision was immediately invoked by Excelerate in its filing of a motion for judgment on the pleadings on Nov. 11, 2009, a mere 20 days after the Asian & Western Classics decision. Motion for Judgment on the Pleadings on Opposer's Claim of Fraud with Supporting Brief, Enbridge, Inc. v. Excelerate Energy Ltd. Partnership, Opposition No. 91170364 (T.T.A.B. Nov. 11, 2009). In its motion, Excelerate attacked Enbridge's amended notice of opposition on the ground that the pleadings did not include allegations of intent and did not allege specific facts supporting the commission of fraud. Id. at 2-3. Likening the Enbridge opposition to the situation in Asian & Western Classics, Excelerate argued that, despite extensive discovery, Enbridge's allegation of fraud was insufficient to meet the pleading requirements outlined in Bose and Asian & Western Classics. Id. at 3. Notably, unlike Classics, Enbridge had first introduced a fraud claim at the close of its discovery in its amended notice of opposition filed on Dec. 24, 2008. While Enbridge's response to this motion was only due by Dec. 22, 2009, the immediate application of Asian & Western Classics to dispose of pre-Bose fraud pleadings is significant.

Applying Bose in a separate case, the Board has, without prompting by either party, deemed that a party's fraud counterclaim required amendment to be legally sufficient. In Soci't' Cooperative Vigneronne Des Grandes Caves Richon-le-Zion & Jacob Ltd. v. Albrecht-Piazza, L.L.C., Opposition No. 91190040 (T.T.A.B. Sept. 20, 2009), the Board required a party asserting a claim of fraud to amend the claim to be consistent with the standard outlined in Bose, namely that pleadings based on “information and belief” contain a separate indication that the pleader has knowledge of facts supporting its claim and pleadings must contain an assertion of intent beyond mere negligence.

Conclusion

The Board's recent decisions in Enbridge and Asian & Western Classics expose the challenges of pleading and proving fraud post-Bose. Under Enbridge, a registrant's claim of an honest mistake and good faith correction is sufficient to create a genuine issue of material fact on the issue of intent to deceive, and thus defeats a motion for summary judgment on fraud. Further, under Asian & Western Classics, a fraud claim must be stated with particularity, including specific facts supporting allegations of knowledge, intent to deceive, and fraud. Specific facts supporting a pleading of fraud may include known information giving rise to a stated belief, or a statement regarding evidence that is likely to be discovered that will support a fraud claim. Under both of these decisions, it is increasingly difficult for a party asserting fraud to prevail on summary judgment.