Before 2017

11th Circuit: District Court Erred by Applying Patent Law Concept of "Willful Blindness" to Trademark Fraud Defense

Religious orders both tracing their lineage to the island of Malta, and using “Malta” in their names, are waging a trademark battle that resulted in a September 11, 2012 decision by the U.S. Court of Appeals for the Eleventh Circuit addressing the defense of trademark fraud, the multi-factor nature of a likelihood-of-confusion analysis, and the admissibility of lay testimony on historical events. 
The 11th Circuit revived the plaintiff’s service mark infringement claims, affirmed the judgment for defendant on the plaintiff’s false advertising claim, and sent the remainder of the case back to the district court, where the battle will now focus on whether the defendant is in fact liable for service mark infringement.

The Parties and Asserted Causes of Action
The case began in the U.S. District Court for the Southern District of Florida, with a complaint filed there by the plaintiff, namely, Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta (“Plaintiff Order”).  The complaint asserted claims for service mark infringement under the Lanham Act, related claims for unfair competition under § 43(a) of the Lanham Act and Florida law, and false advertising under the Lanham Act against the defendant, namely, The Florida Priory of the Knights Hospitallers of the Sovereign Order of Saint John of Jerusalem, Knights of Malta, The Ecumenical Order (“The Florida Priory”).  Both parties are religious charitable organizations; however, Plaintiff Order is a religious order of the Catholic Church, whereas The Florida Priory has an ecumenical, rather than Catholic, association.
The Marks
At issue are service marks federally registered by Plaintiff Order, namely: (1) the design mark shown below; and (2) the word marks: (a) Plaintiff Order’s name; (b) KNIGHTS OF MALTA; (c) HOSPITALLERS OF ST . JOHN OF JERUSALEM; and (d) ORDER OF ST. JOHN OF JERUSALEM.  
Plaintiff Order’s registered design mark
The Florida Priory’s accused design mark

A member of the Plaintiff Order, Mr. Dean Francis Pace, signed the required oath for the registration applications for each of Plaintiff Order’s above-identified registered marks.  That oath contained the elements required in all federal trademark applications, namely:
  • The person signing the oath (“the declarant”) is properly authorized to execute this application on behalf of the applicant;
  • The declarant believes the applicant to be the owner of the trademark/service mark sought to be registered (or, if the application is an “intent-to-use” application, the declarant believes applicant to be entitled to use the mark in commerce);
  • To the best of the declarant’s 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 connection with the goods/services of such other person, to cause confusion, or to cause mistake, or to deceive; and
  • That all statements made of the declarant’s own knowledge are true; and that all statements made on information and belief are believed to be true.
District Court Proceedings

In response to claims for infringement of the word marks,[1] The Florida Priory raised the affirmative defense of trademark fraud, specifically, that Plaintiff Order committed fraud in signing the oath to the applications for the word marks, because on the basis of correspondence exchanged between the parties before those applications were filed, Plaintiff Order knew of the existence of The Florida Priory and yet did not disclose that information to the USPTO. 
A successful fraud defense results in cancellation of the affected registration(s).  While such cancellation defeats a claim for infringement of a federally-registered mark, it should not defeat any common law trademark or unfair competition claims.[2]  The Federal Circuit has warned that fraud defenses are not easy to establish:
Indeed, “the very nature of the charge of fraud requires that it be proven ‘to the hilt’ with clear and convincing evidence. There is no room for speculation, inference or surmise and, obviously, any doubt must be resolved against the charging party.”[3]
Following a three-day bench trial, the Southern District of Florida canceled Plaintiff Order’s word mark registrations, sustaining The Florida Priory’s fraud defense.  The court borrowed the patent law concept of “willful blindness” that may serve as proof of knowledge of a patent for purposes of establishing inducement to infringe: “Under this formulation, a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.”[4]  Applying that concept, the court reasoned:
           Here, it is indisputable that [Plaintiff Order] had actual knowledge of the existence of the Ecumenical Order at least as early as 1983, nearly two decades prior to its filing its trademark applications.  [Plaintiff Order] then had Pace, an attorney with no personal knowledge of the Ecumenical Order, execute the trademark applications. To the extent that a willful blindness standard applies here, the Court concludes that [Plaintiff Order]’s failure to inform Pace of the existence of the Ecumenical Order is evidence of willful blindness on [Plaintiff Order]’s part. Even if [Plaintiff Order] disputes actual knowledge, no adequate explanation has been offered for [Plaintiff Order]’s subjective ignorance of the Ecumenical Order and the Florida Priory.[5]
Recognizing that its fraud finding did not dispose of the common law unfair competition claims concerning the word marks, the Southern District of Florida then analyzed the issue of whether there was any likelihood of confusion between Plaintiff Order’s word marks and the accused marks, and concluded that there was no likelihood of confusion.
Regarding Plaintiff Order’s design mark, which was not subject to the fraud defense, the Southern District of Florida analyzed likelihood of confusion as follows:
There exists no likelihood of confusion with regard to [Plaintiff Order]’s registered symbolic mark and the Florida Priory’s unregistered symbolic mark. [Plaintiff Order]’s registered symbolic mark consists of a Maltese cross on a shield.  In contrast, the Florida Priory’s unregistered symbolic mark consists of an ordinary cross on a shield. The shield is superimposed over a Maltese cross. A crown sits atop the Maltese cross. The Florida Priory’s design contains two crosses, whereas [Plaintiff Order]’s registered mark contains only one. [Plaintiff Order]’s mark contains no crown. These marks are easily distinguishable, thus re-moving any possibility for consumer confusion.  [Plaintiff Order]’s claim for infringement of Registration No. 2,799,898 fails.[6]
Plaintiff Order based its false advertising claim on the charge that The Florida Priory has no historical connection to the Order of Malta and that it falsely adopted the pre-1798 lineage claimed by Plaintiff Order, thus deceiving the public when soliciting charitable donations.  At trial, Plaintiff Order put up two witnesses to support its false advertising claim, namely: (1) Geoffrey Gamble, a representative of Plaintiff Order; and (2) Dr. Theresa Vann, an expert historian.  These witnesses essentially testified that the litigants had no historical connection.  The Florida Priory’s witness, who testified to the contrary, was Nicholas Papanicolaou, the Grand Master of The Ecumenical Order (the parent organization of The Florida Priory).  Weighing the conflicting testimony, the Southern District of Florida chose to believe Mr. Papanicolaou’s testimony and entered judgment against Plaintiff Order as to its false advertising claim.
Thus did the district court rule against the Plaintiff Order on all of its claims.
The Eleventh Circuit’s Majority Opinion
The Eleventh Circuit first dealt with The Florida Priory’s fraud defense, covering the general principles listed below.
·      “An applicant commits fraud when he ‘knowingly makes false, material representations of fact in connection with an application for a registered mark.’  Fraud further requires a purpose or intent to deceive the PTO in the application for the mark.”[7]
·     Clear and convincing evidence is required.[8]
·    The text of the oath for trademark registration applications requires only subjective good faith, meaning that “[i]f the declarant subjectively believes the applicant has a superior right to use the mark, there is no fraud, even if the declarant was mistaken.”[9]
·    “[F]raud requires a showing that the applicant’s representative knew that other organizations were using the mark ‘either in an identical form or a near resemblance.’”[10]
·    Claiming that the declarant “should have known” of alleged important information is not enough to prove fraud.  One must show that the declarant had actual knowledge of that information.[11]
Applying these principles, the Eleventh Circuit rejected the reasoning of the district court.  It first observed that Mr. Pace “had no awareness that any other organization was using the marks for which Plaintiff Order sought protection,” adding “[t]his fact alone compels reversal of the fraud finding.”[12]  It then found that the district court erred in its “willful blindness” approach, noting that courts “have been admonished to exercise caution before importing standards of one area of intellectual-property law into another.”[13]  The Eleventh Circuit observed that The Florida Priory did not provide any legal authority or argument to justify use of the patent “willful blindness” standard to assess whether trademark fraud occurred.[14]  Finally, the Eleventh Circuit observed that The Florida Priory did not prove that Mr. Pace or Plaintiff Order “believed that The Ecumenical Order had a right to use the objected-to marks in commerce,” and that “[t]his is fatal to the claim of fraud.”[15]  Consequently, the Eleventh Circuit reversed the cancellation of the four registrations for Plaintiff Order’s word marks.
Turning to the Plaintiff Order’s design mark, the Eleventh Circuit again found fault with the district court’s analysis. The Eleventh Circuit, like other circuits, uses a multi-factor analysis to determine whether a likelihood of confusion exists between an asserted mark and an accused mark.  However, the district court focused on only one factor: visual dissimilarity.  Commenting that “[t]he other factors bearing on the likelihood of confusion are ‘[e]qually as significant as the general appearance of the trademarks,’” the Eleventh Circuit vacated the district court’s finding of lack of likelihood of confusion involving not only the design mark, but also the word marks, and remanded the case back to the district court to conduct the proper multi-factor analysis.[16]  Since the state law unfair competition claims were related to the infringement claim, the Eleventh Circuit vacated the district court’s rulings on those claims and remanded them back, as well.[17]
Finally, the Eleventh Circuit majority upheld the district court’s judgment against Plaintiff Order as to its false advertising claim.  Though acknowledging that Mr. Papanicolaou did not testify as an expert, the majority reasoned that Plaintiff Order had likewise presented a lay witness – Mr. Gamble – to give historical testimony.  The majority held that it was the district court’s prerogative to weigh the evidence and reach its own conclusion as to whom to believe.  Consequently, it affirmed the judgment rejecting the false advertising claim.[18]
Thus, the Eleventh Circuit revived all of Plaintiff Order’s service mark infringement and unfair competition claims, to be considered fully in the district court.  The case, however, will no longer include the false advertising claim.
Judge Pryor’s Dissent
Judge William H. Pryor, Jr. dissented in part from the Eleventh Circuit panel majority with respect to its ruling on the false advertising claim.  He charged that “no competent evidence” supported the finding that the litigants had a shared history.  He reasoned that since Mr. Papanicolaou could not have had personal knowledge of events that occurred from 1798 to the early 20th century, his testimony on such events was governed by expert witness requirements in the Federal Rules of Evidence, yet Mr. Papanicolaou was never qualified as an expert witness.[19]  Faulting the majority for its “two wrongs make a right” reasoning, Judge Pryor then observed that The Florida Priory did not object to Mr. Gamble’s lay testimony, but that Plaintiff Order did object to Mr. Papanicolaou’s testimony for lack of competence.[20]  Finally, Judge Pryor observed that other courts apply the expert witness evidence rules regardless of whether the trial in the district court was a jury trial or a bench trial.[21]  He concluded his opinion by indicating that the Eleventh Circuit should reverse the district court’s finding that Plaintiff Order failed to prove that The Florida Priory engaged in false advertising.
The case is Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta v. The Florida  Priory of Knights Hospitallers of the Sovereign Order of St. John of Jerusalem, Knights of Malta, The Ecumenical Order, No. 11-15101, ___ F.3d ___, 2012 U.S.App.LEXIS 19104 (11th Cir. Sept. 11, 2012).

UPDATE:  The Eleventh Circuit vacated and replaced the above-cited opinion.  The result is the same, but the grounds for affirming the rejection of the false advertising claim are now different from those reflected in the original opinion.  See our December 28 post for details.

[1] The fraud defense was limited to the word marks because The Florida Priory, for reasons not explained in the Eleventh Circuit or district court opinions, did not assert the fraud defense against the registration for Plaintiff Order’s design mark.
[2] Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 996 (9th Cir. 2001) (“Moreover, even if Goldstein knowingly submitted a false declaration such that the appellees’ federal registration should be canceled, the appellees could (and did) still bring suit alleging common law trademark infringement.  See [J. Thomas McCarthy,] McCarthy on Trademarks [and Unfair Competition], § 31:60, at 31-109 (noting that ‘it has been held several times that even if defendant succeeds in proving that the plaintiff’s registration was fraudulently obtained, plaintiff’s common law rights in the mark continue unabated’ even if the registration is canceled).”).
[3] In re Bose Corp., 580 F.3d 1240, 1243 (Fed. Cir. 2009) (quoting Smith Int’l, Inc. v. Olin Corp., 209 USPQ 1033, 1044 (T.T.A.B. 1981)).
[4] Global-Tech Appliances, Inc. v. SEB S.A., ___ U.S. ___, 131 S.Ct. 2060, 2070-71 (2011).
[5] Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta v. The Florida  Priory of Knights Hospitallers of the Sovereign Order of St. John of Jerusalem, Knights of Malta, The Ecumenical Order, 816 F.Supp.2d 1290, 1300 (S.D. Fla. 2011).
[6] Id., 816 F.Supp.2d at 1301.
[7] Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta v. The Florida  Priory of Knights Hospitallers of the Sovereign Order of St. John of Jerusalem, Knights of Malta, The Ecumenical Order, No. 11-15101, ___ F.3d ___, 2012 U.S.App.LEXIS 19104, at *18 (11th Cir. Sept. 11, 2012) (citations omitted).
[8] Id., 2012 U.S.App.LEXIS 19104, at *19.
[9] Id. at *26-*27.
[10]  Id. at *23 n.12 (quoting Angel Flight of Georgia, Inc. v. Angel Flight Am., Inc., 522 F.3d 1200, 1209 (11th Cir. 2008)).
[11] Sovereign Military Hospitaller, 2012 U.S.App.LEXIS 19104, at *26 n.13 (citing Bose, 580 F.3d at 1244).
[12] Sovereign Military Hospitaller, 2012 U.S.App.LEXIS 19104, at *23.
[13] Id. at *25 (citing Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 439 n.19 (1984)).
[14] Sovereign Military Hospitaller, 2012 U.S.App.LEXIS 19104, at *25-*26.
[15] Id. at *28.
[16] Id. at *32-*33.
[17] Id. at *42.
[18] Id. at *39.
[19] Id. at *48-*49 (Pryor, J., dissenting).
[20] Id. at *54-*55 (Pryor, J., dissenting).
[21] Id. at *57 (Pryor, J., dissenting).

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