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The Second Kind of Sin: Making the Case for a Duty to Disclose Facts Related to Genericism and Functionality in the Trademark Office

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The Second Kind of Sin: Making the Case for a Duty to Disclose Facts Related to Genericism and Functionality in the Trademark Office The Second Kind of Sin: Making the Case for a Duty to Disclose Facts Related to Genericism and Functionality in the Trademark Office Susan M. Richey∗ Abstract Fraud jurisprudence in the federal Trademark Office encourages trademark holders to remain ignorant—or worse, silent—regarding facts that may reveal the generic or functional nature of their marks. If that failure to investigate or to voluntarily disclose relevant information results in the award or maintenance of a federal trademark registration for invalid subject matter, the public suffers an injury. The injury is particularly acute because numerous amendments to the 1946 Lanham Act in the decades since its passage have substantially increased the evidentiary utility and power of a federal registration. Although procedures exist to allow a challenger to oppose or cancel an improvidently granted registration, unless and until a successful challenge is mounted, the registration effectively cordons off matter as proprietary that properly should inhabit the public domain. This Article urges imposition of a duty of disclosure in the Trademark Office which could be enforced upon a showing that the applicant or registrant failed to conduct a reasonable investigation for facts related to genericism or functionality and to disclose the same to the Trademark Office. The proposed duty would require amendment of the Lanham Act as it would shift the burdens of production and proof on the issues of genericism and functionality from the Trademark Office to the applicant; it would persist throughout the life of any resulting registration requiring correction of the record should facts related to ∗ Associate Dean and Professor of Law, Franklin Pierce Law Center. I am indebted to David Kera, Of Counsel to Oblon Spivak, and former Administrative Judge of the Trademark Trial and Appeal Board, and to Mary LaFrance, William S. Boyd Professor of Law, William S. Boyd School of Law, University of Nevada Las Vegas, for their valuable comments on this Article, and I emphasize that any and all opinions, mistakes, and oversights are mine alone. I also thank Jessica Avery for her able research assistance. 137 138 67 WASH. & LEE L. REV. 137 (2010) those issues arise. The remedy for failure to comply with an affirmative duty of disclosure would be a refusal to issue a registration or cancellation of the relevant part of any existing registration. The move away from a fraud standard toward an affirmative duty of disclosure in the Trademark Office would promote fair dealing with a government agency, would not burden holders of valid trademark rights unduly, and would preserve the public domain. Table of Contents I. Introduction .................................................................................. 139 II. Current Law of Fraud in the Trademark Office ............................ 144 A. Subjective Nature of the Oath or Declaration ........................ 146 B. Knowing Misstatement of Material Fact in a Verified Submission ............................................................................ 148 C. Knowing Misstatement of Material Fact in Response to a Specific Inquiry .............................................. 154 D. Knowing Failure to Correct the Record ................................. 155 E. Knowing Failure to Disclose Clearly Established Rights ...... 158 F. Remedy in Fraud Cases ......................................................... 159 III. Opposing or Canceling Registrations of Generic or Functional Subject Matter on the Ground of Fraud ........................................ 160 A. Generic and Functional Subject Matter ................................. 161 B. Fraudulent Failure to Disclose Material Facts Related to Genericism or Functionality ................................. 164 C. Nonfraudulent Failure to Disclose Material Facts Related to Genericism or Functionality ................................. 170 IV. Power of a Federal Trademark Registration ................................. 173 A. Trademark Selection and Registration Proceedings ............... 175 B. Trademark Enforcement ........................................................ 178 V. Current Status of Disclosure Obligation in the USPTO................ 184 A. The Patent Office ................................................................... 185 B. The Trademark Office ........................................................... 187 C. Reasons for Difference in Approach Between the Two Offices ........................................................................... 190 VI. Proposed Duty of Disclosure in the Trademark Office ................. 195 A. Reasonable Preapplication Investigation ............................... 195 THE SECOND KIND OF SIN 139 B. Amendment of Section 2 of the Lanham Act to Shift Burden of Proof ..................................................................... 197 C. Evidence Relevant to Prove Genericism and Functionality .......................................................................... 197 1. Facts Related to Issue of Genericism .............................. 198 2. Facts Related to Issue of Functionality ............................ 202 D. Ongoing Duty of Disclosure .................................................. 205 E. Enforcement of the Duty of Disclosure ................................. 206 VII. Conclusion .................................................................................... 207 "It is the sin of omission, the second kind of sin, That lays eggs under your skin."1 I. Introduction Almost half a century ago, the Court of Customs and Patent Appeals (C.C.P.A.) decided Bart Schwartz International Textiles, Ltd. v. FTC2 and determined that applicants for federal trademark registration have no affirmative duty to disclose facts material to registration proceedings before the United States Patent and Trademark Office (USPTO).3 The Court pointed out 1. OGDEN NASH, MANY LONG YEARS AGO 31 (Little, Brown & Co. 1945) (1931). 2. See Bart Schwartz Int’l Textiles, Ltd. v. FTC, 289 F.2d 665, 671–72 (C.C.P.A. 1961) (agreeing with the lower court that the trademark registration of the petitioner was obtained fraudulently within the meaning of the Lanham Act, and, therefore, had to be canceled). Prior to October 1, 1982, appeals from the Trademark Trial and Appeal Board lay before the Court of Customs and Patent Appeals, which was subsequently merged into the Court of Appeals for the Federal Circuit. See S. Corp. v. United States, 690 F.2d 1368, 1370–71 (Fed. Cir. 1982) (en banc) (discussing the merger of the Court of Customs and Patent Appeals into the Court of Appeals for the Federal Circuit). Decisions of the C.C.P.A. are binding on the Federal Circuit. See id. at 1369 ("We hold that the holding of our predecessor courts . before the close of business September 30, 1982, shall be binding precedent in this court."). 3. See Schwartz, 289 F.2d at 669 (stating that the Lanham Act does not require an applicant to volunteer to the Patent Office the fact that its purported mark has a specific meaning in another language). Federal trademark registration was administered by the United States Patent Office until the name of the agency was changed to the United States Patent and Trademark Office (USPTO) in 1975. United States Patent and Trademark Office, General Information Concerning Patents (Jan. 2005), http://www.uspto.gov/go/pac/doc/general/ (last visited Feb. 23, 2010) (on file with the Washington and Lee Law Review). Within the USPTO, the Commissioner of Patents handles applications for patents and related matters and the Commissioner of Trademarks has similar responsibility for trademark registration applications. Id. For ease of reference, "the Trademark Office" and "the Patent Office" will be used 140 67 WASH. & LEE L. REV. 137 (2010) that the sole source of such an obligation would be the Lanham Act, and the Act is silent in this regard.4 Moreover, Section 2 of the Lanham Act places the burden of proof on the Trademark Office to show that a requested registration falls within one of the bars referenced in that section and, therefore, should not be issued.5 Applicants, then, are free to stand mute and rely on the statutory burden of proof to avoid one of the bars to registration. When the purported mark is a generic term or symbol, or functional trade dress, rewarding the failure to disclose with a federally issued registration not only subverts notions of fair dealing with a government agency but also impedes fair competition that flows from free access to public domain terms, symbols, and design features. Since Schwartz, the Trademark Trial and Appeal Board6 (the T.T.A.B. or the Board) has voided registrations for fraud in the Trademark Office, but, in so doing, the Board generally relies upon intentional misstatements of material fact and rarely invokes intentional omissions of material fact, presumably, because the applicant has no affirmative duty to disclose.7 In Schwartz itself, the C.C.P.A. declared the registration void for fraud based not on applicant’s failure to disclose unprompted what it knew about the generic nature of its mark, but on the form oath accompanying the application verifying that no other individual or entity had a right to use the mark in commerce.8 Because throughout to distinguish between the two administrative schemes. 4. See Schwartz, 289 F.2d at 669 (noting that any duty to disclose would need to arise out of Section 1(a) of the Lanham Act, in particular, and that provision only requires that the applicant refrain from
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