finance-3It is not easy to cancel a federal trademark by way of a fraud claim. Investment services firm Navigator Investments (“NI”) found this out recently when the Rhode Island district court dismissed its fraudulent procurement counterclaim against trademark plaintiff Clark Capital Management. NI’s counterclaim had asked for cancellation of Clark’s federally-registered, “NAVIGATOR”  trademark, because of Clark’s attorney’s alleged fraud in the trademark application process. The court concluded that that NI had not pled enough facts to allege fraud, and so dismissed the case at the outset, preventing the fraud case from proceeding to discovery and trial.

Clark sued NI in April 2014, alleging that NI’s “Navigator Investments” designation and related domain name infringed Clark’s family of trademarks for investment advisory services and other financial services. NI subsequently sought to cancel one of Clark’s registrations, No. 3,970,349, on the basis that the attorney who filed the corresponding trademark application committed fraud when she signed the accompanying declaration. The declaration included a statement that, to the best of the signer’s knowledge and belief, no other entity, “has the right to use the mark in commerce …as to be likely, when used on or in connection with the goods/services of such other [entity], to cause confusion, or to cause mistake, or to deceive…”

NI alleged that, when Clark’s attorney filed the trademark application in October 2010, she knew NI had been using its “Navigator Investments” designation for financial portfolio solutions and investment advisory services since at least 2000 — earlier than Clark’s 2002 priority date for its application.  Therefore, NI claimed, the attorney’s declaration was false, material, and relied on by the Patent and Trademark Office in granting the trademark registration.

This was not enough to support the fraud in the procurement of trademark registration counterclaim. The court reasoned that NI, “must also show that [Clark’s attorney] had a subjective belief that her statement was false.”  The court found that NI’s counterclaim, “provides only conclusory allegations concerning [the attorney’s] subjective knowledge or belief of [NI’s] use of the mark prior to April 1, 2002.”  Therefore, “the Court cannot say that there is a reasonable basis to believe that [the attorney] knew that her declaration was false when she made it in October 2010.”

The opinion by Judge Mary M. Lisi highlights the importance of investigating a fraud in the procurement of registration claim thoroughly.  To survive a motion to dismiss, at least in the Rhode Island district court, it appears that the claimant must unearth enough facts to show that the person making the false statement actually knew that the statement was indeed false.  And once established – such facts showing the subjective belief must be carefully plead to survive a motion to dismiss.

The case is Clark Capital Management v. Navigator Investments, LLC, 14-cv-00182-ML (D.R.I.), in the U.S. District Court for the District of Rhode Island. The Court’s opinion can be found here.