The doctrine that a trademark applicant owes a duty of candor to the Patent and Trademark Office (PTO) was recently reaffirmed by the Court of Appeals for the Eighth Circuit in Aromatique Inc. v. Gold Seal Inc. Although the court declined to grant Gold Seal attorneys' fees, this case is nevertheless instructive for its discussion of the circumstances in which attorneys' fees may be awarded, including the nature and scope of the duty of candor owed to the PTO.

In Aromatique, a majority of the court reversed the district court's finding that Gold Seal had infringed Aromatique's trade dress, finding that Aromatique's trade dress, the combination of potpourri packaged in pillow-shaped cellophane bags which are tied at the opening with cord and a tag, was a purely functional trademark and, therefore, not protectible.

The two-member majority held that Section 38 of the Trademark Act, in contrast to Section 35, does not permit an award of attorneys' fees. Section 35 of the Trademark Act permits an award of attorneys' fees in "exceptional cases", whereas Section 38 of the Act mandates that a person who has procured a trademark registration through fraudulent means "shall be liable for any damages sustained in consequence thereof." The majority noted that, if attorneys' fees are deemed to be included under Section 38, courts would be deprived of the discretion to award fees under Section 35. The majority, therefore, held that attorneys' fees should not be included within the definition of damages under Section 38, and that attorneys' fees should be awarded only in "exceptional cases" under Section 35.

The majority, however, was unable to reach a consensus as to whether attorneys' fees should be awarded to Gold Seal under Section 35 and wrote separately on this issue. Gold Seal had sought to recover attorneys' fees on the ground that Aromatique's false statements to the PTO constituted "exceptional" circumstances. In particular, Aromatique submitted affidavits to the PTO alleging long and exclusive use of the subject trademark, knowing this was false. Among other things, it was shown that Aromatique had sent cease and desist letters to various parties, including Gold Seal, asserting that Aromatique's trade dress was federally registered. In fact, Aromatique owned no federal registration, since Aromatique's applications for registration had been rejected on the ground that the marks were not distinctive.

The judge writing for the majority flatly rejected Aromatique's argument that a trademark applicant owed no duty of candor to the PTO. Moreover, fraudulent intent may be inferred where the applicant fails to inform the PTO of claims it knew to have been false. In this case, Aromatique's failure to inform the PTO that it had falsely asserted that its trade dress was federally registered constituted fraud on the PTO justifying an award of attorneys' fees.

However, the second judge, while concurring with his colleague's discussion as to the duty of candor, believed that Gold Seal was not entitled to attorneys' fees for three reasons. First, since Gold Seal sought attorneys' fees in response to Aromatique's infringement action, attorneys' fees should be awarded only if Aromatique's suit was unfounded; this was not the case. Second, the judge noted that Gold Seal sought attorneys' fees for the conduct of Aromatique's attorneys, not its principals, and it would be "unfair" to penalize Aromatique's principals for the conduct of attorneys. Last, the judge questioned whether Aromatique's conduct was an "exceptional" case warranting the award of attorneys' fees, since he was not convinced that Aromatique's attorneys had intended to defraud the PTO.

It will be interesting to see how future cases address the issue of the duty of candor in the trademark context.