Great Concepts vs. Chutter is a case from the Federal Circuit that addressed the extent to which fraud at the Trademark Office can be punished in connection with a particular kind of application. The Federal Circuit ultimately reviewed and reversed the Trademark Trial and Appeal Board’s long-standing practice of canceling trademarks when a renewal application contains fraudulent representations.
In this case, Great Concepts brought a cancellation proceeding in the TTAB against Chutter to get Chutter’s trademark canceled because Chutter’s attorney had fraudulently filed a Section 8 declaration. A section 8 declaration says that the trademark is incontestable because it’s been in use for five years or more — and importantly, there must be no lawsuits, or any other proceedings, that might subject the trademark to cancellation, or being owned by someone else.
Often, a Section 8 is filed at the same time as a Section 15 declaration. Section 15 simply says, “We are continuing to use the trademark now in the fifth year” (and subsequently, as renewed in the 10th, 20th, etc. years). Often, Sections 8 and 15 are filed together.
In this case, Chutter actually was in litigation over its trademark while it was applying for Section 8 incontestability status. Chutter’s attorney knew they were in litigation, but falsely and knowingly (and therefore fraudulently) filed the section 8 declaration of incontestability.
Great Concepts said that the Trademark Office should, therefore, cancel Chutter’s trademark, and the TTAB agreed. (The TTAB has historically said this kind of fraud should be punished with canceling the trademark.)
However, Chutter appealed the TTAB decision to the Federal Circuit, where it found a more sympathetic ear. The TTAB was reversed after the court determined that the TTAB has limited jurisdiction as to what it can do for cancellation. The TTAB can cancel only (a) in connection with fraud regarding the registration or (b) in connection with fraud over whether the trademark is subject to renewal. Just because the Trademark Office lets people file sections 8 and 15 at the same time — that is, incontestability and a declaration of continued use — it doesn’t mean that they’re the same thing. In this case, no one suggested that Chutter renewed the mark based on fraud; the mark was clearly in use at the time of filing to maintain the registration. So, the only fraud was that the mark was contested (the subject of litigation) rather than incontestable.
The Federal Circuit said the statute does not provide for cancellation under such circumstances. Looking at other cases they’ve decided, all that they should lose for fraudulently saying they’re incontestable is their incontestable status.
The petitioner and the director of trademarks at the USPTO said that was inadequate and “doesn’t do anything.” However, the Federal Circuit said taking away incontestability had significant consequences. It means that the trademark doesn’t have a presumption of validity. So, the owner of the registered trademark may have to demonstrate that its trademark is valid and exclusive. Those are big steps to take long after having filed a registration.
The petitioner, PTO director, and the Federal Circuit’s dissent all argued that people will engage in more fraud without there being a consequence because Chutter’s trademark is intact. The Federal Circuit majority said that’s not so; there are penalties from fraud. Filing a declaration under penalty of perjury means to hold the party, and perhaps its attorney, liable for engaging in perjurious conduct. They may be fined, they may be held in contempt, but the trademark can’t be canceled.
The court remanded the case in order to determine whether there should be any consequences for the attorney who made the false statement in connection with this fraud. So, the parties are going to go forward with their cancellation proceeding without the registrant’s evidentiary advantage of having a trademark being incontestable.
There’s been a lot of good commentary from trademark practitioners, essentially asking, “Does this mean that the TTAB can’t cancel a trademark?” Clearly, that’s not the case. All it means is that you can’t cancel a trademark for fraud in connection with an incontestability declaration. The consequences to this ruling will be enormous, as the TTAB has to come up with a new way of doing things — and deal with the fallout from years of acting on a custom that is now deemed improper.
