The Federal Circuit Hears Oral Argument on Bose v. Hexawave, and the TTAB Carves Out Some Exceptions to Medinol

In Bose Corp. v. Hexawave, Inc., 2007 TTAB LEXIS 91 (Trademark Trial & App. Bd. Nov. 6, 2007), the TTAB (Trademark Trial and Appeal Board) cancelled Bose's registration for WAVE for fraud, holding that the mark had not been used on all of the goods in Bose’s renewal registration. In cancelling the registration, the Board cited the standard from Medinol v. Neuro Vasx, Inc., 67 U.S.P.Q.2d 1205 (T.T.A.B. 2003). The Board found that Bose had stopped selling audio tape recorders, (the goods as to which Hexawave alleged fraud) and that Bose’s continuous repair of recorders (which were transported to and from Bose) did not fall within the definition of use in Section 1127 of the Lanham Act. The Board also held that Bose knowingly made the fraudulent statement because it was unreasonable for Bose to believe that its transportation of goods constituted use sufficient to maintain a registration for goods. In this Commentary, Janet Marvel, Joseph N. Welch, and David C. Hilliard discuss Bose and the subsequent appeal, which is being watched closely for its impact on the U.S. Patent and Trademark Office (PTO) standard for finding fraud based on false claims of use. They write:
     In its appellate briefs, Bose argued that its repair of audio tape recorders constituted use in commerce and that Hexawave offered no evidence of fraud. AIPLA [American Intellectual Property Law Association] attacked the Board's standard for fraud, stating that the Board misapplied the "knew or should have known" language from the Federal Circuit's Torres [v. Cantine Torresella S.r.l., 808 F.2d 46 (Fed. Cir. 1986)] holding to find fraud on strict liability or negligence, when fraud actually requires intentional deception or at the least reckless conduct. It also argued that the Board's test for materiality (essentially that all use statements in Section 8/9 renewals are material) was wrong. The PTO disputed Bose's use claims and AIPLA's argument regarding the fraud standard.
     During the oral argument, the Court made several comments indicating that it may agree with the amicus that the Board has applied an insufficiently rigorous test to find fraud. Several times, the Court was quite critical of what it described as the TTAB's application of negligence standards to a fraud finding. For example, one judge stated "It seems to me that the PTO has crossed a very fundamental line in using negligence phraseology [i.e. "should have known" or "reasonable'] . . . in a regime that all will have to agree involves civil fraud."