Trademark Fraud – Not (Quite) Dead

Under the Lanham act, trademarks that have been fraudulently registered can be canceled, and their challengers may be entitled to both damages and attorney’s fees. This can be a potent tool, if your business is being threatened by a trademark holder. Yet relatively few cases alleging trademark fraud are brought in court.

Trademark fraud has had a turbulent history. Proving fraudulent registration of a trademark was close to impossible before 2002. In 2003, the trend reversed. In the case of Medinol Ltd. v. Neuro Vasx Inc (1), Neuro Vasx’s trademark was declared invalid for fraud. At the time of registration, Neuro Vasx stated that it was using its trademark on catheters and stents, but it was later proven that the mark was being used only on catheters. Medinol argued that the mistake tainted the entire trademark registration, and TTAB agreed. For the next seven years, a myriad of trademarks fell to fraud allegations.

In Bose Corp. v. Hexawave (2), the federal circuit reversed the TTAB, stating that the fraud standard had erroneously been lowered “to a simple negligence standard.” In order to prove fraud, a petitioner now had to prove four elements: that the applicant made a false representation to the USPTO, that the false representation was material to the registration of the mark, that the applicant knew the representation was false, and that the applicant had the intent to deceive the USPTO.

But even with the bar for fraud thus raised, Melodrama Publishing LLC v. Santiago (3) proves that it is still possible for a court to find fraudulent registration. Melodrama and Santiago signed an agreement providing for Santiago to write two novels under the pen name “Nisa Santiago.” Importantly, the contract provided that nothing therein “shall give [Santiago] any right in or to any trademark, trade name, logo, imprint […] nor shall [Santiago] use any such identification during the term of this agreement or thereafter.”

Santiago failed to deliver the manuscripts by the agreed date, or any time thereafter, though she did send in several draft chapters. Melodrama terminated the agreement, and published other novels under the Nisa Santiago pen name. In 2011, Santiago brought an action against Melodrama, alleging copyright infringement. She also filed an application with the USPTO for a trademark on the pen name “Nisa Santiago.”

The application identified Santiago as the owner of the mark, and claimed that she had been using the mark in commerce as early as 2009. Santiago included the cover designs of Melodrama’s books with her application. Once the trademark was registered, Santiago accused Melodrama of trademark infringement, claiming that the registration was evidence of Santiago’s “exclusive right to use the mark.” Santiago additionally contacted at least one of Melodrama’s book distributors, threatening a lawsuit if they continued to sell Melodrama’s titles.

In court, Santiago repeatedly admitted that she had in fact never used the pen name “Nisa Santiago” in commerce, and admitted that Melodrama had been using the mark since 2007. But in support of her trademark ownership, Santiago claimed that she had used the mark during the negotiations for the original two books, and on the draft chapters. Unfortunately for her, her negotiations, contracts, draft chapters and synopses were not sent to anyone but Melodrama, and thus never reached the public. Additionally, she never mentioned her theory of ownership to the trademark office when seeking registration of the mark.

Melodrama sought the cancellation of Santiago’s trademark registration on four grounds: lack of use in commerce, lack of ownership, likelihood of confusion with a previously used mark, and fraud. Although Melodrama would have prevailed if it established even one of these grounds for cancellation, the court was persuaded that Melodrama had established all four.

Accordingly, the court held that Santiago had perpetrated a fraud against the USPTO. It ordered her registration canceled, and remanded the case to determine damages. The court further held that because she had perpetrated fraud against the USPTO, Santiago’s conduct entitled Melodrama to attorney’s fees.

Trademark fraud as a cause of action may not quite be dead, but absent extraordinary facts such as these, it is an uphill battle.

 

(1) 67 USPQ2d 1205 (TTAB 2003)
(2) 88 USPQ2d 1332 (TTAB 2007)
(3) Melodrama Publishing LLC v. Danielle Santiago, 2013 U.S. Dist. LEXIS 56988 (SDNY)