Trademark Trial and Appeal Board
Patent and Trademark Office (P.T.O.)
*1 SPACE BASE, INC.
Opposition No. 76,375
September 11, 1990
Stephen M. Trattner
George A. Loud
Before Sams, Rice and Quinn
By the Board:
An application was filed by Stadis Corporation to register the mark "SPACE BASE" for "computer programs and instruction manuals sold therewith".
Registration was opposed by Space Base Inc., on the ground that applicant's mark "SPACE BASE" as applied to its goods so closely resembles "SPACE BASE", a mark previously used by opposer in connection with "commercial real estate search data and retrieval services", as to be likely to cause confusion, or to cause mistake, or to deceive.
Applicant, in its answer, essentially denied the salient allegations of the opposition.
During the course of this proceeding, the examining attorney in charge of an application that had been filed by opposer after the filing of applicant's application approved opposer's application for registration and opposer was issued a registration for its mark. This registration describes opposer's services more broadly than its pleadings based upon actual use. That is to say, opposer had obtained registration for the mark "SPACE BASE" for "information storage and retrieval services".
Over applicant's objections [FN1], the Board granted a motion filed by opposer for leave to amend its opposition to assert: (1) prior use of Space Base as a trade name and; (2) opposer's ownership of this broader federal registration. In the amended opposition, opposer notably pleaded that the certificate of registration constitutes prima facie evidence of opposer's exclusive right to use the mark "SPACE BASE" in connection with the services specified in the registration certificate and that, upon the basis of the services specified in opposer's federal registration, confusion is inevitable.
Applicant, on June 30, 1989, filed its answer to the amended opposition, together with affirmative defenses, and a counterclaim for cancellation of opposer's pleaded registration.
Applicant, in its answer, admitted opposer's ownership of the pleaded registration, but denied that opposer is the first user. Applicant also specifically denied that opposer's registration is valid, asserting that it was filed well after applicant's application and that therefore opposer's registration should not have been issued as a registration until after the issuance of applicant's application. Both as affirmative defenses and for its counterclaim, applicant alleged, in essence, that opposer is guilty of fraud, unclean hands and/or fraudulent misconduct, inasmuch as opposer alleged, in its application, that opposer had the exclusive right to use the mark "SPACE BASE" in commerce and that no other person had the right to use that mark in commerce, in spite of the fact that opposer knew that applicant "had rights" in the mark "SPACE BASE" and that applicant was the owner of an earlier-filed application. Applicant also alleged that opposer was guilty of fraud, unclean hands and fraudulent misconduct inasmuch as opposer willfully failed to disclose the existence either of the notice of opposition or of applicant's earlier-filed application to the Examining Attorney.
*2 As and for its counterclaim, applicant also pleaded as follows:
32. On information and belief, the actual services of opposer, at the time its U.S. trademark application serial No. 665,803 was filed, were on-line computer storage and retrieval services for brokers in the real estate industry.
33. On information and belief, opposer and its counsel, at the time opposer's recitation of services was amended to read "information storage and retrieval services", knew that such recitation did not accurately describe the actual services of opposer and failed to inform the Trademark Examiner that such recitation did not accurately describe opposer's services.
34. The willful and deliberate failure of opposer and its counsel to inform the Trademark Examiner that the recitation "information storage and retrieval services" did not accurately describe the actual services performed by opposer constitutes fraud and/or fraudulent misconduct which renders opposer's registration No. 1,479,925 invalid and subject to cancellation.
Wherefore, applicant requests that opposer's registration No. 1,479,925 be cancelled and stricken from the Principal Register, or alternatively, that the recitation of services in opposer's registration be amended to accurately describe the services rendered by opposer and to avoid conflict with the goods identified by applicant's mark.
This case now comes up on opposer's motion to dismiss applicant's counterclaim for failure to state a claim upon which relief can be granted and for sanctions. [FN2] We turn first to opposer's motion to dismiss applicant's counterclaim. Opposer, in support of its motion, argues that although the counterclaim is vague, it appears applicant is attempting to plead that opposer is guilty of fraud on four separate and independent grounds, that is:
(1) by failing to inform the Patent and Trademark Office of opposer's knowledge of applicant's earlier-filed application; (2) by failing to inform the Patent and Trademark Office of the filing of opposer's notice of opposition to applicant's earlier-filed application; (3) by asserting in its oath that opposer had the exclusive right to use the mark "SPACE BASE" in commerce when the opposer knew of "applicant's rights" in the mark; and (4) by failing to inform the Patent and Trademark Office that the recitation of services suggested by the Examining Attorney did not accurately describe opposer's services.
Applicant argues, in opposition thereto, that applicant is not alleging that opposer is guilty of fraud on four separate and independent grounds, but rather is alleging that opposer is guilty of fraud on two grounds. These are: (1) that opposer engaged in a pattern of "fraudulent misconduct", such as that exemplified in the case of Smith v. Olin, 209 USPQ 1033 (TTAB 1981), inasmuch as opposer willfully and in bad faith failed to disclose to the Examining Attorney facts which, if disclosed, would have caused her to suspend opposer's application, rather than publish it, and ultimately issue it as a registration, during the pendency of opposer's opposition to applicant's earlier-filed application; and (2) that opposer failed to inform the Examining Attorney that the identification of goods suggested by her was inaccurate. As a consequence of these activities, applicant argues that the resulting registration should be cancelled, or at least partially restricted to the goods upon which opposer actually uses its mark, so that opposer will be precluded from obtaining any unfair benefit from its registration in this proceeding. In support of its pleading that opposer's registration should be restricted, applicant relies on Section 18 of the Lanham Act.
*3 A motion to dismiss is a test solely of the allegations set forth in a pleading. For purposes of such a motion, all well pleaded factual allegations of the "complaint" are accepted as true and the "complaint" is viewed in the light most favorable to the non-moving party. Accordingly, a motion to dismiss will not be granted unless it appears to a certainty that the plaintiff has failed to allege any facts which would support a cause of action under the statute. See, Stanspec Co. v. American Chain & Cable Co., Inc., 531 F.2d 563, 189 USPQ 420 (CCPA 1976).
We agree with opposer that the first three grounds pleaded by applicant do not separately or collectively state grounds upon which relief can be granted inasmuch as there is no fraud on the Office by reason of a failure to disclose information to the Examining Attorney of which the Examining Attorney is aware and, in this case, the Examining Attorney presumably was aware of the existence of applicant's prior pending application and of opposer's opposition thereto at the time the Examining Attorney approved opposer's application for publication. See, SCOA Industries, Inc. v. Kennedy & Cohen, Inc., 188 USPQ 411 (TTAB 1975). Moreover, it is settled that there can be no fraud by reason of a party's failure to disclose the asserted rights of another person, including a prior applicant, unless that person is known to possess a superior or a clearly established right to use, and we see nothing in applicant's counterclaim that indicates that opposer was aware of applicant's superior, if any, or a "clearly established," right to use. [FN3] See, SCOA Industries, Inc. v. Kennedy & Cohen, Inc., 188 USPQ 411 (TTAB 1975) and Rosso and Mastrocco, Inc. v. Giant Food Inc., 219 USPQ 1050, 1052 (Fed.Cir.1983). See also, Bart Schwartz Textiles v. Federal Trade Commission, 129 USPQ 258 (CCPA 1961), wherein the court stated "Any duty owed by an applicant for trademark registration [to the Office] must arise out of the statutory requirements of the Lanham Act ... and the obligation which the ... Act imposes on an applicant is that he will not make knowingly inaccurate or knowingly misleading statements in the verified declaration forming part of the application for registration ... [Section 1(a)(1) ] merely requires that an applicant for registration verify that no other person ... has the right to use such mark in commerce....
Nor are we persuaded of the sufficiency of applicant's pleading of fraud by reason of applicant's interpretation of Smith v. Olin, 209 USPQ 1033 (TTAB 1981). Applicant argues, in essence, that this case stands for the proposition that a party can commit fraud on the Office by willfully retaining a benefit caused by an Office error. We do not agree that this case stands for the proposition cited. The Board, in the case cited, was careful to stress that the error was not on the part of the Office in accepting and acknowledging the affidavit for what it appeared to be in substance, i.e., a combined affidavit under Section 8 & 15, but rather was on the part of the registrant or its counsel in drawing up the document as such and on the part of the affiant signing it. Id at 1047. That is to say, this case stands for the proposition that a person can commit fraud upon the Office by willfully failing to correct his or her own misrepresentation, even if originally innocent, as long as that person subsequently learns of the misrepresentation, and knows that the Office has relied upon that misrepresentation in conferring a substantive benefit upon that person to which the person knows it is not entitled.
*4 In this case, even accepting all well pleaded allegations of the counterclaim as true, it is clear that the circumstances asserted therein are legally insufficient to establish that opposer is guilty of "fraudulent misconduct". There simply is no allegation of misconduct nor allegation of any misrepresentation of fact, by act or by omission, upon which the Office could have relied, as there was in the case cited.
This brings us now to the ground herein numbered 4 and what applicant asserts is the second ground asserted by applicant as grounds for the counterclaim for cancellation. This ground is that opposer committed fraud by accepting an identification of goods that was "inaccurate". In this regard, applicant argues as follows:
... At the time opposer's ... application was filed, its services were "on-line computer storage and retrieval services for brokers in the real estate industry" ... At the time opposer's recitation of services was amended to read "information storage and retrieval services", opposer and its counsel knew that such recitation did not accurately describe the actual services of opposer ... The willful and deliberate failure of opposer to inform the Trademark Examiner of the inaccuracy in the recitation of services constitutes fraud and/or fraudulent misconduct ...
Opposer contends that paragraphs 32-34 fail to state a claim for fraud ... because the Trademark Examiner could not be mislead where he requests an amendment based upon the specimens reflecting the use of opposer's mark. However, ... the Trademark Examiner merely suggested the recitation of information storage and retrieval services, "if accurate". If, as alleged by applicant, this recitation did not accurately describe opposer's services and, if opposer willfully and deliberately failed to inform the Trademark Examiner of such inaccuracy, then applicant should be entitled to the requested relief, either cancellation of opposer's registration or amendment of the registration to avoid conflict with applicant's mark.
... The legislative history of the Trademark law Revision Act of 1988 suggests that the resolution of this opposition by ... (1) amendment of opposer's registration to describe opposer's services in a manner similar or identical to the original description; and (2) amendment of applicant's application to describe applicant's goods ... [as follows]:
computer programs and instruction manuals sold therewith for management of information relating to the sales of advertising space in periodicals and newspapers
Even accepting all well-pleaded factual allegations of the relevant portions of applicant's counterclaim as true, it is apparent from applicant's argument, in its brief, and its pleading that applicant is not using "inaccurate" in the sense that the identification of services set forth in opposer's registration does not encompass the services in connection with which opposer actually uses its mark. Rather, applicant is using the term "inaccurate" in the sense that opposer's identification of services is overbroad, that is to say, it also encompasses services in connection with which opposer does not use its mark.
*5 We believe that there can be no fraud as a matter of law by reason of opposer's use in its identification of the phrase, "information storage and retrieval services", inasmuch as the services upon which opposer is alleged to actually use its mark are encompassed by that description.
However, this does not leave applicant without a ground under the statute.
As correctly pointed out by applicant, Section 18 of the Lanham Act was amended, effective November 16, 1989, by the Trademark Law Revision Act of 1988, Title 1 of Pub 1. 100-667, 102 Stat. 3935), to expressly provide the Trademark Trial And Appeal Board with the authority to limit, or otherwise modify, the goods or services in a registration or application. One purpose behind this authority was to permit the Board to base determinations of likelihood of confusion upon marketplace realities, rather than hypothetical facts.
In this case, it is applicant's position, in essence, that opposer never used its mark in connection with "information storage and retrieval services" in the same field as applicant and that when each party's application and registration is properly restricted, there is no likelihood of confusion. Under circumstances of this nature, the Board has held that restriction of the registration may be obtained on the ground of abandonment by reason of non-use of the mark in connection with the services said to be within the scope of the identification in the pleaded registration. See, U.S. Steel Corp. v. National Copper & Smelting Co., 131 USPQ 397 (TTAB 1961). Cf. Pegasus Petroleum Corp. v. Mobil Oil Corp., 227 USPQ 1040 (TTAB 1985).
Standing to assert such grounds would be demonstrated, in this case, simply by the fact that applicant has had the pleaded registration asserted against applicant in this proceeding. See, Alberto Culver v. F.D.C. Wholesale Corp., slip op., ___ USPQ2d ___ (TTAB July 9, 1990 [FN4]
However, applicant may wish also to include a request to restrict the goods set forth in its own application, if such a restriction would avoid likelihood of confusion. Such a request, in accordance with Section 18, may be made by way of an affirmative pleading in the answer or by way of a motion, under Trademark Rule 2.133, ruling upon which the Board will defer until final decision. Applicant's application will be amended as long as the amendment is supported by or is not inconsistent with evidence adduced at trial.
In view thereof, opposer's motion to dismiss applicant's counterclaim is granted. With respect to applicant's affirmative defenses, which are substantially similar to the grounds set forth in the counterclaim, these affirmative defenses are stricken as redundant and impertinent. Fed.R.Civ.P. 12(f). Applicant is allowed twenty days from the mailing date of this order to file an amended counterclaim for partial cancellation of opposer's pleaded registration consistent with this opinion and to formally request amendment of its own application, if necessary. Any request for relief under Section 18 of the Act, whether by way of an affirmative pleading or by motion, must include at least a general statement of the manner in which the goods or services of the pleaded registration or the involved application should be restricted. [FN5]
*6 This brings us now to opposer's request for Rule 11 sanctions. Opposer's motion has two prongs. First, opposer argues that applicant had no reasonable basis in law upon which to assert that opposer was guilty of fraud. Although applicant's reliance on Smith v. Olin, supra, was, in our opinion, misplaced, it clearly was not without reason. Accordingly, this motion is denied. Secondly, opposer argues that applicant had no reasonable basis in fact upon which to allege that the recitation of services set forth in opposer's pleaded registration was "inaccurate". In support of this aspect of opposer's motion, opposer has attached relevant portions of the deposition of opposer's president. Applicant has filed a brief in reply thereto together with remaining excerpts of that deposition which are proffered to show that opposer's recitation of services is, in essence, overbroad. Although the Advisory Committee Notes to Rule 11 make clear that a court normally will rule on a motion for sanctions which addresses the sufficiency of evidence to support the filing of a claim at the end of litigation or in connection with a potentially dispositive motion only, in this case, opposer's motion for Rule 11 sanctions was precipitated clearly by applicant's misuse, in its pleadings, of the term "inaccurate". We believe it evident that Rule 11 was not designed to punish semantic errors. The evidence and the pleadings on file clearly show that applicant had a reasonable basis to plead that opposer's pleaded registration is overbroad. Accordingly, it is ordered that:
Opposer's motion to dismiss applicant's counterclaim for failure to state a claim is granted. Applicant is allowed twenty days from the mailing date of this order to file a counterclaim consistent with this opinion, failing which the counterclaim shall be stricken. Opposer's motion for Rule 11 sanctions is denied. Opposer is allowed forty-five days from the mailing date of this order to answer, or otherwise respond, to applicant's discovery requests. [FN6]
Except to the extent indicated above, proceedings herein are otherwise suspended.
J. E. Rice
T. J. Quinn
Members, Trademark Trial and Appeal Board
FN1. When, during the course of opposer's testimony period, opposer sought to amend its opposition to plead its ownership of, inter alia, the federal registration, applicant objected on the ground that opposer had delayed unreasonably in asserting its federal registration and that it was highly questionable whether opposer should be entitled to rely on its registration in this proceeding inasmuch as the Examining Attorney had to have committed clear error in approving opposer's application for publication during the pendency of the application involved in this proceeding.
The Board, while recognizing opposer's delay in asserting the amendment, nevertheless granted the motion to amend on the ground that the interests of justice and judicial economy would best be served by permitting all claims, including counterclaims, between the parties to be adjudicated in one proceeding and since any prejudice suffered by applicant could be mitigated by a reopening of discovery solely for applicant's benefit.
FN3. We recognize that in the context of patent cases, it has been held that a party who knowingly takes advantage of an error by the Patent Examiner by failing to disclose to the Examiner that he or she has failed to uncover all prior art, has committed fraud upon the Office. However, this is due to the higher duty of care owed in patent cases. See, Morehouse Manufacturing Corporation v. J. Strickland and Company, 160 USPQ 715 (CCPA 1969).
FN4. As noted by the Board in Alberto-Culver v. F.D.C. Wholesale Corp., slip op., ___ USPQ2d ___ (TTAB July 9, 1990), the language of Section 18 is broad enough to allow the Board to "rectify" the register by deleting from the registration asserted by a plaintiff specific items of goods on which the plaintiff's mark is no longer used or by modifying or restricting an overbroad statement of goods from the plaintiff's registration, even where a deletion, modification, or restriction will not avoid a finding of likelihood of confusion. Thus, it is not necessary, at least in a counterclaim situation such as this, that applicant plead and prove that confusion is not likely in the contemporaneous use of applicant's marks on its services and opposer's mark on those services on which opposer has actually used its mark in order to have standing to maintain a counterclaim for restriction or partial cancellation. See also, General Mills, Inc. v. Nature's Way Products, Inc., 202 USPQ 840 (TTAB 1979).
FN5. We are aware that applicant, in its brief, has set forth a particularized statement of the proposed amendments to opposer's registration and to applicant's application. These particularized amendments may be incorporated into the amended pleadings and applicant's motion to amend its own application, as appropriate.
FN6. The consented motion for an enlargement of time is granted. Moreover, in view of the disposition of the motion to dismiss, opposer's time to respond to applicant's discovery requests is extended to twenty-five days from the due date of applicant's amended counterclaim.