Schaden-Fraud?

John Welch has once again updated his Fraud-O-Meter!

Behind this clever Infographic-type thingy is a report of a meaningful legal development concerning the concept of fraud on the PTO.  As John explains:

Three years have passed since the CAFC’s decision in In re Bose raised the bar for proof of fraud at the TTAB. The appellate court jettisoned the “knew or should have known” standard, but left open the question of whether something less than proof of deceptive intent – say, reckless disregard for the truth – would suffice to establish fraud. The Board has yet to answer that question. In fact, it has not sustained a single claim of fraud since Bose. In a December 2011 article [TTABlogged here], TTAB Judge Lorelei Ritchie suggested that the concept of “willful blindness” might be borrowed from patent law and applied in the trademark [registration] context. The “willful blindness” standard requires less than proof of willful intent, but more than recklessness.

Earlier this year, I offered a beta version of a revised FRAUD-O-METER that included a “willful blindness” wedge, inspired by Judge Ritchie’s article and by a decision by the U.S. District Court for the Southern District of Florida …

On September 11, 2012, however, the U.S. Court of Appeals for the Eleventh Circuit reversed the district court decision. Emphasizing the subjectivity of the attorney’s declaration, the appellate court ruled that, because the attorney had “no awareness that any other organization was using the marks for which Plaintiff Order sought federal protection,” that fact alone compelled reversal of the fraud finding, “as [the attorney] could not have intended to deceive the PTO in attesting to an oath that he believed was entirely accurate.”Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta v. Florida Priory of the Knights Hospitallers of the Sovereign Order of Saint John of Jerusalem, Appeal No. 11-15101 (11th Cir. Sept. 11, 2012).

In other words, willful blindness?  Not so much.  Said the Eleventh Circuit:

We have been admonished to exercise caution before importing standards from one area of intellectual-property law into another. . . The Florida Priory has not pointed to any authority to establish the sort of ‘historic kinship’ that may justify translation of a patent infringement standard into the mark-application context.

Ah:  A mark-application context!  That, indeed, is why I added the brackets in the first quoted passage, to the words “applied in the trademark [registration] context” — because willful blindness is no stranger to trademark law, as we all know from the secondary trademark infringement context.  There, willful blindness is one of the elements of secondary liability under the standard of Inwood Laboratories Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 853-854 (1982).  At least that’s how we understand it around my house.

But secondary infringement of a trademark a long way —  in terms of both doctrine and practice — from the standard governing a lawyer’s duty, or lack of one, to inquire about the bona fides of a client’s goods-and-services claim when preparing a trademark registration application.  And to that, John wisely wonders, “does this case provide an easy way to avoid fraud – keep your attorney in the dark?”

It seems that it does.  The next level, presumably, is: What if the lawyer not only takes the “ask him no questions, he’ll tell you no lies” approach, but affirmatively tells the client that he’s going to do so?  “What I don’t know can’t hurt you,” he says.  Is that — “willful blind-me-ness”? perhaps — still too removed from the really fraudulent fraud the courts seem to be looking for now?

Taken at their words, and based on the latest reading of the Fraud-O-Meter, yes, it is.  Which seems to make this system kind of willfully blind in its own right, no?

Not to say “fraudulent,” of course.

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Author:Ron Coleman

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