A good faith defense is used against legal charges that involve intentional fraud. This type of defense won't include an intention or willingness to defraud since those are essential to the filed charges.

Using the Good Faith Defense

The burden of proof isn't on defendants to prove their good faith. Instead, the state has to prove beyond a reasonable doubt that defendants acted with the specific intention to defraud another party. In essence, they didn't act in good faith.

Someone who expresses an honest opinion or a belief she honestly entertains can't be charged with fraud, although her opinion may be erroneous or the belief is mistaken. Other factors that don't establish fraudulent intent include the following:

  • Making an error in management
  • Making a mistake in judgment
  • Acting in a careless manner

However, if someone honestly believes his business venture is sound and will succeed, this doesn't constitute good faith if his actions in the course of running the business include false or fraudulent representations in order to deceive others.

Good Faith and Trademark Infringement

In trademark infringement cases, good faith may be used as a defense. When a defendant claims using a plaintiff's mark is defensible under fair use, the deciding factor will be whether the defendant acted in good faith. In this case, good faith means the defendant didn't use the mark as a way to use the plaintiff's hard work in creating goodwill with its customers.

If the defendant used the mark in order to describe the underlying services or products, it's likely the defendant will be found to have had good faith when using the mark.

Plaintiffs often seek injunctive relief in trademark lawsuits, which is an equitable remedy that requires balancing harms. Whether the defendant exercised good faith or bad faith will greatly impact how the court finds.

Certain statutes contain provisions that can relieve purchasers from liability if they deliver commerce goods that were acquired in good faith and without notice of any violations.

The definition of good faith is often applied when a court has to decide if a party intentionally meant to defraud another. Just because someone is careless or holds mistaken beliefs doesn't signal ill intent. However, any attempts to deceive or defraud others can fall under the definition of bad faith.

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