October 2012 Issue

Civil Cases

Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes & of Malta v. Fla. Priory of the Knights Hospitallers of the Sovereign Order of Saint John of Jerusalem, Knights of Malta, The Ecumenical Order,
2012 U.S. App. LEXIS 19104 (11th Cir. Sept. 11, 2012)
by Naresh Kilaru

CASE SUMMARY

FACTS
Plaintiff Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta, and Defendant Florida Priory of the Knights Hospitallers of the Sovereign Order of Saint John of Jerusalem, Knights of Malta, The Ecumenical Order, were both charitable religious organizations that shared a long history through a common predecessor between the eleventh and eighteenth centuries.  In 1798, the groups diverged and both a Catholic order (Plaintiff) and a non-Catholic order (Defendant) were established.  Plaintiff’s organization began operating in the United States in the 1920s.  Defendant’s U.S. operations began in 1977, although its parent organization began operations in the United States in 1908.

Plaintiff owned four word-mark registrations and one design-mark registration.  When executing the applications for those trademarks, a member of Plaintiff’s organization attested that, to the best of his knowledge, no other entity had the right to use a confusingly similar mark.

Plaintiff filed suit against Defendant, asserting trademark infringement and false advertising under the Lanham Act.   Defendant counterclaimed, alleging that Plaintiff had committed fraud on the PTO by failing to disclose its knowledge of the presence of other organizations using similar marks in commerce.

Following a three-day bench trial during which the vast majority of testimony related to the histories of the organizations involved, the district court cancelled Plaintiff’s four word-mark registrations based on its finding that Plaintiff committed fraud when executing the oath that it was not aware of any other entity’s right to use the marks.  Specifically, the district court found that Plaintiff as an institution had been aware of the domestic presence of Defendant since as early as 1983 (even though the specific person executing the oath had no such awareness), but failed to disclose that fact in its applications.

ANALYSIS
On appeal, the Eleventh Circuit found clear error in the district court’s holding that Plaintiff had committed fraud on the PTO, reversing the cancellation of the four word-mark registrations.  Even if Plaintiff had institutional knowledge of Defendant’s U.S. presence (which the appeals court said was questionable under the facts), the Eleventh Circuit confirmed that fraud required Defendant to establish that the signatory was (1) personally aware of other organizations using the identical or nearly identical mark, and (2) “knew or believed” those organizations had a superior right to use the mark.  Because the declaration merely required a signatory’s good-faith, subjective belief in the truth of its contents, the signatory’s subjective good-faith belief in the applicant’s superior right to use the mark was sufficient to defeat a claim of fraud—even if that subjective good-faith belief was ultimately wrong.  Here, Defendant put forward no evidence to establish that Plaintiff’s signatory knew or believed that Defendant had a superior right to use the marks at issue.  The Eleventh Circuit found this failure of proof “fatal” to Defendant’s fraud claim.

CONCLUSION
This decision affirms that “scienter” or an “intent to deceive” is a necessary element for a claim of fraud on the PTO.  Thus, so long as a declarant subjectively believes that no other entity has a superior right to use the mark (and that belief has some reasonable basis), a fraud claim will not stand.