Property, intangible

a blog about ownership of intellectual property rights and its licensing

How Damaging To Your Case is a Cancelled Trademark Registration?

I ran across a point about enforceability of a trademark that I don’t recall seeing before, which is that a trademark for which the registration was procured by fraud is unenforceable. The point is made in Firehouse Restaurant Group, Inc. v. Scurmont LLC, a case in which a jury held, and the court affirmed, that the plaintiff’s trademark was procured by fraud. The fraud was that the plaintiff, as part of its application, swore that “to the best of its knowledge and belief no other person, firm, corporation or association has the right to use the mark in commerce, either in the identical form thereof or in such near resemblance thereto as to be likely, when used on or in commerce with the goods/services of such other person, to cause confusion, or to cause mistake, or to deceive,” when, in fact, the plaintiff had been unsuccessful in procuring a co-existence agreement with a more senior “Firehouse Grill & Pub” before filing its trademark application. The defendant in the case, going by “Calli Baker’s Firehouse Bar & Grill,” was not this senior user, but was instead junior to the plaintiff.

The statement in Firehouse is that “[f]raud in the procurement of a trademark registration is also a defense to a claim of trademark infringement.” The court cited a footnote in Lone Star Steakhouse & Saloon, Inc. v. Alpha of VA, Inc., 43 F.3d 922, 931, n.12 (4th Cir. 1995) in support of its statement. Lone Star says “the Lanham Act provides that trademarks procured by fraud are unenforceable,” citing to 15 U.S.C. §§ 1052 and 1064. What? Neither of those sections says that. Section 1052 mentions a number of bases for refusing registration, but fraud isn’t one of them. Section 1064 gets closer; it provides that a trademark registration may be cancelled if the registration was obtained fraudulently.  But since in the United States trademark rights are based on use, not registration, cancelling a registration shouldn’t mean that the trademark owner has no trademark rights at all; instead it should only mean the trademark owner doesn’t have any of the benefits that a federal registration provides. Nevertheless, the Lone Star court, in dicta, made the leap that a trademark registration procured by fraud means that the common law trademark is also unenforceable.

I don’t have any problem with the Firehouse court finding that fraudulent procurement of a registration is a complete defense to trademark infringement. But what about the next defendant?  Can Firehouse Subs bring suit for likelihood of confusion against new defendants based on its common law rights?  If not, is there any point in time where the trademark rights are free of the prior wrongdoing?

Firehouse Restaurant Group, Inc. v. Scurmont LLC, Civil Action No. 4:09-cv-00618-RBH (D.S.C. Oct. 17, 2011).

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