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Great Concepts, LLC v. Chutter, Inc.: A "Green-Light" for Fraud?

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In 2003, Great Concepts applied to register a trademark for “DANTANNA’S” to be used in restaurant services.  The mark was registered in March 2005.  In 2005, Dan Tana applied to register DAN TANA for restaurant services, but the USPTO refused registration based on the DANTANNA’S registration.

Subsequently, Tana’s successor, Chutter, Inc., petitioned the TTAB to cancel Great Concepts’ registration, arguing likelihood of confusion with Tana’s common law “DAN TANA” mark.  The cancellation proceedings were suspended during the pendency of a civil action, where Tana sued Great Concepts for trademark infringement.  Subsequently, the district court granted Great Concepts motion for summary judgment which was subsequently affirmed by the U.S. Court of Appeals for the Eleventh Circuit in July 2010.  In December 2010, the TTAB dismissed Tana’s cancellation proceeding.

However, in March of 2010, Great Concepts’ attorney filed a combined declaration of use and incontestability in the U.S. Patent and Trademark Office (USPTO), as required by Sections 8 and 15 of the Lanham Act.  In the Section 15 declaration, the attorney falsely declared, “there is no proceeding involving said rights pending and not disposed of either in the U.S. Patent and Trademark Office or in the courts.”  In fact, both the cancellation proceeding in the USPTO and the appeal of the summary judgment to the Eleventh Circuit were pending.

Consequently, in 2015, Chutter petitioned the USPTO for cancellation of Great Concepts’ “DANTANNA’S” trademark based on the  false declaration.  In 2021, the TTAB found that Great Concepts’ attorney signed the Section 15 declaration with reckless disregard for the truth and ruled, for the first time, that “reckless disregard is equivalent to intent to deceive and satisfies the intent to deceive requirement” for fraud.  Accordingly, the TTAB ordered cancellation of Great Concepts' registration for the DANTANNA'S mark.

Great Concepts appealed the USPTO’s cancellation decision to the CAFC where the arguments largely focused on the relation between Sections 15 and 14 of the Lanham Act.  Section 14 gives the USPTO the authority to cancel a registered trademark on a number of bases including whether the “registration was obtained fraudulently.”  As such, the issue on appeal was whether Section 14 gave the USPTO the power to cancel a registration for fraud committed to establish incontestability.  The CAFC held that fraudulent statements under a Section 15 declaration for obtaining incontestability status are not fraud in maintaining or obtaining a registration.  Specifically, the CAFC concluded that, “Section 14, which allows a third party to seek cancellation of registration when the ‘registration was obtained fraudulently,’ does not authorize cancellation of a registration when the incontestability status of that mark is ‘obtained fraudulently.’”  Thus, the USPTO’s ruling was reversed.

The CAFC reasoned that Section 14 of the Lanham Act lists the bases for cancellation of a registration; however, fraud committed in connection with an incontestability declaration is not listed.  In this way, the majority believes that this omission was intentional because Congress had set out a lengthy list of statutory provisions, and therefore, the TTAB is not authorized to cancel a trademark registration based on fraudulently obtained incontestable status.  It should be noted that the CAFC did not reach the issue of whether Great Concepts’ attorney acted fraudulently.

The CAFC noted that the filing contained both a Section 8 declaration of use, which is necessary to maintain a registration, and a Section 15 declaration of incontestability, which is not necessary to maintain a registration.  The court reasoned that the fraudulent statement was made in the Section 15 portion of the declaration.  Thus, the CAFC reasoned that since a Section 15 declaration pertains simply to a registration’s status as incontestable and is not necessary to maintain a registration, fraud was not committed to maintain the registration.

The CAFC also held that fraud committed in connection with obtaining incontestable status is distinct from fraud committed in connection with obtaining the registration itself.  To this end, the fraudulent Section 15 declaration permitted Great Concepts to obtain the registration’s incontestable status, not the registration itself.

CAFC Circuit Judge Reyna disagreed with the other two members of the 3-judge panel.  In a separate dissenting opinion, he cautioned that fraud should not be excused at any stage within an administrative process.  Pointing to the context of patents, Circuit Judge Reyna noted that “inequitable conduct regarding any single claim renders the entire patent unenforceable” and may endanger the patentee’s rights in related patents.  In light of the majority’s holding, Circuit Judge Reyna believes that registrants have been given a “green-light” for inequitable conduct with the promise of great gain and little to no meaningful risk.

As such, Circuit Judge Reyna agrees with Chutter’s argument that if the only consequence for filing a fraudulent affidavit of incontestability is the loss of incontestable status, there is no consequence at all since the mark owner was not entitled to incontestable status in the first place.  Thus, cancelling the trademark registration should be the appropriate sanction for the fraud committed.

In response, the majority opinion asserts that the CAFC does not intend to encourage fraud.  Whether the majority would prefer a different result to be reflected in the statute is noted as irrelevant to their responsibility to decide the case based on the Lanham Act as it exists, as written by the U.S. Congress.  In fact, the majority agrees that intentionally using a false statement to acquire an important right, such as the right of incontestable status, “can scarcely be characterized as mere carelessness or misunderstanding,” and thus, also agrees that some significant sanction is “necessary to deter the further development of such a cavalier attitude toward statements in affidavits under section 15.”

Furthermore, the majority notes that committing fraud in connection with obtaining incontestability is not without any potential cost since the TTAB may remove the registration’s incontestable status and may sanction an attorney who commits fraud.  Section 15 declarations are filed under penalty of perjury; thus, an attorney is vulnerable to penalties which may include referral to the U.S. Department of Justice for criminal prosecution.  As such, the court believes that sufficient mechanisms already exist to adequately deter fraud.

It should be noted that in January 2024, the CAFC modified and reissued its decision following an unopposed petition for rehearing filed by an Intervenor.  Specifically, one sentence of the original opinion was revised.  The revised sentence originally read, “Section 14 lists numerous bases on which a third party may seek Board cancellation of a registered mark, including likelihood of confusion, abandonment, dilution, deceptiveness, and if the mark is merely descriptive or has become generic or functional.”  After revision, the sentence now instead reads, “Section 14(3) lists numerous bases on which a third party may seek Board cancellation of a registered mark at any time, including that the mark has become generic for the goods or services, is functional, has been abandoned, the registration was fraudulently obtained, or the mark is being used to misrepresent the source of the goods.”  That is, the revised sentence focuses on Section 14(3) rather than Section 14 as the registration at issue was more than five years old, and thus, the available grounds for cancellation were limited.  This change did not, however, impact the original decision or its rationale.

Only time will tell whether Congress decides to amend the Lanham Act so as to add fraudulent statements made in Section 15 declarations as grounds for cancellation of a registration.

[1] Great Concepts, LLC v. Chutter, Inc., 84 F.4th 1014 (Fed. Cir. 2023).