Nationstar Mortgage v Ahmad: fraud on the USPTO is alive again

In 2009 the US Court of Appeals for the Federal Circuit significantly restrained the ability to attack a trademark application or registration on the basis of fraud. For the first time since that decision, the Trademark Trial and Appeal Board (TTAB), in a precedential decision in Nationstar Mortgage LLC v Ahmad (Opposition No 91177036, September 30 2014), finally sustained a claim of fraud and clarified the standard of proof for such claims.

Fraud in procuring a trademark registration occurs when an applicant knowingly makes false, material representations of fact in connection with its application with intent to deceive the United States Patent and Trademark Office (USPTO) in granting registration. This can happen usually when applicants furnish use information and specimens to support registration of their trademarks. The party alleging fraud has the heavy burden of proving it with clear and convincing evidence. As the TTAB specifically noted in this case, “the law does not require 'smoking gun' evidence of deceptive intent, but instead… deceptive intent may be inferred from the surrounding facts and circumstances”. If a false statement is made with a reasonable and honest belief that it was true, rather than intent to mislead, the board will not find fraud.

In this case, the applicant, Mujahid Ahmad, filed a use-based application for NATIONSTAR on April 20 2006, alleging use of the mark in commerce since April 4 2005, in connection with all of the following services in Class 36 of the Nice Classification:

“real estate brokerage; rental of real estate; real estate management services, namely, management of commercial and residential properties; real estate investment; residential and commercial property and insurance brokerage; mortgage brokerage; and business finance procurement services.”

The opponent, Nationstar Mortgage LLC, filed two applications for NATIONSTAR MORTGAGE for identical services on April 28 2006. The applicant’s earlier application was cited against the opponent’s applications as a potential bar. The opponent then filed an opposition against the applicant’s application alleging, among other things, fraud because the applicant did not use its mark in relation to any of the identified services on or prior to the filing date of his application, as he stated in his application.

During the course of the opposition, the applicant amended his application from a Section 1(a) use basis to a Section 1(b) intent-to-use basis; however, the TTAB emphasised that, while amending the basis was acceptable during the opposition period, doing so does not protect the application from the fraud claim.

The evidence and testimony of record reflected that Ahmad was a licensed real estate agent and did not become licensed as a real estate broker until October 2006. He had registered the domains 'nationstarmortgage.com' and 'nationstarmortgage.net' on April 4 2005, and after declining to sell them to Nationstar Mortgage LLC, he filed an application for NATIONSTAR on April 20 2006 based on a claim of actual use. The applicant testified that he was conducting business as NationStar Mortgage Inc as early as January 2005; however, he did not incorporate until May 2006. Although he maintained that he used the name NATIONSTAR in real estate transactions, he testified that he had no documentary evidence showing that NATIONSTAR was used in any transactions. He could not offer any evidence of use on business documents, physical office space, directories or advertising and, according to the TTAB decision, there were many obvious discrepancies in his testimony to the contrary. 

The TTAB based its decision on the above, finding that the applicant knew and understood at the time of the filing date that he was not using the mark for the applied-for services and made false statements with the intent to deceive the USPTO into granting registration. The TTAB ultimately decided on his subjective intent to deceive the USPTO based on his unwillingness to cooperate, his “evasiveness and his failure to respond”, his “dodging” of simple 'yes' or 'no' questions, and his inability and unwillingness to identify corroborating evidence. The TTAB determined that the applicant’s testimony lacked “any and all credibility”.

The TTAB also stated that the applicant’s choice to file the application himself did not grant him a “free pass to disregard the straightforward requirements of a use-based application…” and that use of a mark in commerce must be lawful. The TTAB noted that the applicant was well aware of the licence requirements and that he was not licensed as a “real estate broker” at the time of filing and “real estate agency services” were not covered by the application.

While there is a heavy burden in proving the necessary intent to deceive in a claim of fraud on the USPTO, this decision demonstrates that culpable intent can be found where the accused’s testimony is so lacking in credibility that it supports the inference that the party’s statements to the USPTO are also not credible. The case also illustrates the importance of accurately and not over-expansively describing the goods and services offered under a mark in a US trademark application based solely on a claim of actual use.

Dennis S Prahl and Mannu Harnal, Ladas & Parry LLP, New York