United States: B&B Hardware Inc. v. Hargis Indus., Inc.
2013 WL 1810614 (8th Cir. May 1, 2013)

This article previously appeared in Incontestable Trademark Newsletter - June 2013.

CASE SUMMARY

Facts

Plaintiff B&B Hardware Inc. ("B&B") has produced industrial fasteners for the aerospace industry under the mark SEALTIGHT since 1990. B&B's SEALTIGHT mark was registered with the PTO in 1993. Subsequently, Hargis Industries, Inc. ("Hargis") adopted the mark SEALTITE for its self-drilling, self-taping screws for use in the metal-building industry. Hargis applied to register SEALTITE with the PTO in 1996, but its application was initially refused due to the B&B registration. In response, Hargis petitioned to cancel the B&B registration in the TTAB on the ground that the B&B mark had been abandoned. The TTAB cancellation action was suspended before a final decision because B&B sued Hargis in the U.S. District Court for the District of Arkansas, alleging infringement of its registered SEALTIGHT trademark. After trial, the jury found that the B&B mark was descriptive without secondary meaning and thus could not be infringed by the Hargis mark ("Arkansas Decision 1"). However, Hargis failed to timely amend its cancellation petition to substitute the claim that B&B's mark was merely descriptive and lacked secondary meaning in place of its original abandonment claim. Therefore, the TTAB dismissed the cancellation action ("TTAB Decision 1").

In 2003, the Hargis application for SEALTITE was published and opposed by B&B on the ground that it was likely to be confused with B&B's registered SEALTIGHT mark. Hargis argued that the opposition was collaterally estopped based on Arkansas Decision 1's finding that the B&B mark was descriptive and lacked secondary meaning. The TTAB rejected the collateral-estoppel argument on the grounds that (1) B&B's SEALTIGHT mark had become incontestable due to five years of continuous usage; and (2) Arkansas Decision 1 did not address likelihood of confusion. Ultimately, in 2007, the TTAB found that Hargis's SEALTITE mark was confusingly similar to B&B's SEALTIGHT mark and sustained B&B's opposition ("TTAB Decision 2").

Meanwhile, in 2006, before the issuance of TTAB Decision 2, B&B again sued Hargis in the U.S. District Court for the District of Arkansas, alleging that the Hargis mark infringed the B&B mark. Initially, the district court dismissed B&B's claim, citing issue preclusion based on Arkansas Decision 1. B&B was successful in overturning the dismissal on appeal, given the changed incontestability status of the B&B registration. The appellate court remanded the case for consideration of the issue of likelihood of confusion between the marks.

By the time the district court commenced the jury trial, the TTAB had issued TTAB Decision 2. Consequently, B&B argued that TTAB Decision 2 should have preclusive effect on the issue of likelihood of confusion or, at the very least, should be accorded deference and submitted as part of the evidence that the jury would consider. The district court rejected both arguments and submitted the case to the jury without reference to TTAB Decision 2. The jury returned a verdict in favor of Hargis, specifically finding that confusion between the SEALTIGHT and SEALTITE marks was unlikely ("Arkansas Decision 2"). B&B appealed the district court's handling of the TTAB Decision 2 precedent.

Analysis

B&B's appeal to the Eighth Circuit addressed the following three questions: (1) whether TTAB Decision 2 was entitled to preclusive effect; (2) whether TTAB Decision 2 was entitled to deference by the trial court; and (3) whether the trial court should have withheld TTAB Decision 2 from the jury.

First, the district court refused to give TTAB preclusive effect because the TTAB is merely an administrative body and not an Article III court. The Eighth Circuit held that the district court erred on this point because Supreme Court precedent clearly states that an administrative agency decision is entitled to preclusive effect when it is acting in a judicial capacity, as the TTAB does in opposition proceedings. Univ. of Tenn. v. Elliott, 478 U.S. 788 (1986). However, the Eighth Circuit further stated that whenever a court is deciding whether any prior decision should be accorded preclusive effect, it must consider the five factors articulated by Robinette v. Jones, 476 F.3d 585, 589 (8th Cir. 2007): (1) the party sought to be precluded in the second suit must have been a party to the original lawsuit; (2) the issues sought to be precluded must be the same issues involved in the original lawsuit; (3) the issues must have been actually litigated in the original lawsuit; (4) the issues must have been determined by a final judgment in the original lawsuit; and (5) the issues must have been essential to the original judgment.

In this case, the Eighth Circuit determined that TTAB Decision 2 was not entitled to preclusive effect under factor (2) because the issues in TTAB Decision 2 differed from the issues in Arkansas Decision 2. Although both TTAB Decision 2 and Arkansas Decision 2 nominally addressed "likelihood of confusion," the actual tests and analyses applied by the two adjudicative bodies were different. Specifically, the TTAB used a thirteen-factor test articulated by In re E.I. DuPont DeNemours & Co., 476 F.2d 1357 (CCPA 1973), to determine whether the Hargis trademark was entitled to registration with the PTO. In contrast, the district court used the six-factor test articulated in SquirtCo. v. Seven-Up Co., 628 F.2d 1086 (8th Cir. 1980), to determine whether the Hargis mark infringed B&B's trademark rights. While acknowledging that there is some overlap in the two "likelihood of confusion" tests, the Eighth Circuit treated them as if they were entirely separate tests—one for registration and one for infringement. Accordingly, because the registration/infringement likelihood-of-confusion analyses were not identical, the district court was correct in refusing to give preclusive effect to TTAB Decision 2.

Second, the Eighth Circuit determined that TTAB Decision 2 was not entitled to deference by the district court. While a TTAB decision may be entitled to deference on the issue of whether a trademark registration was properly granted, as was the case in Noah's Inc. v. Nark, Inc., 560 F. Supp. 1253 (E.D. Mo. 1983), a TTAB decision is not entitled to deference on the issue of trademark infringement. As Arkansas Decision 2 did not challenge the TTAB's decision to deny the Hargis trademark application, there was no reason for the district court to grant deference to TTAB Decision 2.

Third, the Eighth Circuit held that the district court did not abuse its discretion in refusing to admit TTAB Decision 2 into evidence. Under Fed. R. Evid. 403, evidence may be excluded if it is confusing, is misleading to the jury, or its probative value is substantially outweighed by a danger of unfair prejudice. Because TTAB Decision 2 applied a different likelihood-of-confusion test than the one that the jury was supposed to apply, admission of TTAB Decision 2 into evidence could confuse or mislead the jury. Further, the Eighth Circuit found that since TTAB Decision 2 summarized much of the same evidence presented independently to the jury, its probative value was minimal.

Thus, the Eighth Circuit affirmed Arkansas Decision 2 in all respects.

Judge Colloton presented a dissent on the issue of preclusive effect, noting that the differences in the two likelihood-of-confusion tests were minimal and thus should not justify dispensing with traditional issue preclusion. Noting that there are also differences in the likelihood-of-confusion tests administered by the various federal circuits, Judge Colloton argued that it would be absurd to allow the losing party in an infringement action to relitigate the issue by simply moving to a district court in a different circuit.

In addition, the dissent argued that the majority's distinction between "likelihood of confusion for registration" versus "likelihood of confusion for infringement" essentially means that the TTAB's decisions will never be given preclusive effect in federal-court infringement cases. The dissent argued that the majority made a distinction between the allegedly different tests because it disagreed with the balancing of the likelihood-of-confusion factors by the TTAB. However, mere disagreement with the TTAB's balancing is insufficient ground to deny preclusive effect.

Conclusion

This decision brings to an end fifteen years of protracted litigation that included two TTAB proceedings, two jury trials, and three trips to the Eighth Circuit. While this most recent appellate decision will likely be cited by anyone wanting to relitigate an adverse TTAB ruling in federal court, another appeals court could just as easily follow the analysis presented by the dissent and grant a TTAB decision preclusive effect. Given the potential for continued uncertainty and divergent decisions on issue preclusion and TTAB decisions, this topic may be ripe for an appeal to the Supreme Court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.