On March 24, the US Supreme Court issued a decision that is
likely to raise the stakes of proceedings before the Trademark
Trial and Appeal Board (TTAB). In B&B Hardware, Inc.
v. Hargis Industries, Inc., No. 13-352 (March 24, 2015), the
Supreme Court held that issue preclusion applies to holdings of the
TTAB where the ordinary elements of issue preclusion are
satisfied. The decision is likely to make TTAB proceedings
more litigation-like and expensive, with parties hoping to gain the
benefit of issue preclusion urging more extensive discovery in the
TTAB and seeking to introduce more evidence in order to assure that
the elements for issue preclusion are met. A coordinated
litigation strategy that takes into account both TTAB and district
court proceedings will be more important in the wake of the
decision.
Summary
The case relates to a long-running dispute between B&B
Hardware, Inc., the petitioner, and Hargis Industries, Inc., the
respondent. Both companies manufacture types of
fasteners—B&B for the aerospace industry, and Hargis for
the construction industry. In 1993, B&B registered the
trademark SEALTIGHT with the United States Patent and Trademark
Office (PTO). In 1996, Hargis sought to register the trademark
SEALTITE. B&B opposed the registration on the ground that
SEALTITE was too similar to B&B's SEALTIGHT
mark.
The parties litigated the issue in the PTO and in the federal
courts for many years. B&B argued, among other things,
that the largest distributor of fasteners sold the products of both
companies, and that consumers had in the past called the wrong
company to place orders. Hargis argued, among other things,
that the companies had different products, consumers and channels
of trade.
In 2003, following extensive opposition proceedings, the TTAB found
that SEALTITE should not be registered because there was a
likelihood of confusion between the marks. Hargis did not seek
judicial review of that decision in federal court, and, as a
result, abandoned its attempt to obtain a federal trademark
registration for SEALTIGHT.
After the TTAB finding, in separate infringement proceedings in
federal district court, B&B argued that Hargis could not
contest likelihood of confusion because of the preclusive effect of
the TTAB decision. The district court disagreed, finding that
the TTAB's holding could not have preclusive effect because the
TTAB is not an Article III court. At trial, the jury found for
Hargis, determining that there was no likelihood of
confusion.
On appeal, the Eighth Circuit affirmed on different grounds,
finding that the identical issue was not decided by the TTAB and
the federal court. In particular, the Eighth Circuit found that (1)
the TTAB did not use the same factors that the Eighth Circuit uses
to consider likelihood of confusion; (2) the TTAB put more emphasis
on the appearance and sound of the marks than on marketplace
context, contrary to the analysis applied in an infringement
context; and (3) different parties bore the burden of persuasion in
the two settings. (The Supreme Court subsequently determined that
the Eighth Circuit erred with respect to the third point.)
In a 7-2 opinion authored by Justice Alito, the Supreme Court
reversed and remanded, holding that "[s]o long as the other
ordinary elements of issue preclusion are met, when the usages
adjudicated by the TTAB are materially the
same as those before the district court, issue
preclusion should apply." (Emphasis added.)
The Court rejected the view that an agency decision should never
form the basis for issue preclusion, and concluded that nothing in
the Lanham Act—the primary trademark
statute—presumptively bars application of issue preclusion to
a TTAB holding. The Court also relied on the fact that the
same standard for likelihood of confusion is applied in the TTAB
and in the district court, notwithstanding the use of
"similar, but not identical, factors" used in the two
fora. Thus, although TTAB decisions may in some cases not meet
the ordinary elements of issue preclusion, there is no categorical
reason they would never do so.
The Court made clear that whether issue preclusion applies is a
case-by-case analysis, and that, "for a great many
registration decisions issue preclusion obviously will not apply
because the ordinary elements will not be met." For
example, issue preclusion would not apply if the TTAB did not
decide the same issue being considered by the district
court. Thus, "if the TTAB does not consider the
marketplace usage of the parties' mark, the TTAB's decision
should 'have no later preclusive effect in a suit where actual
usage in the marketplace is the paramount issue.'"
Moreover, while the differences in procedure between the TTAB and
the district court do not necessarily prevent issue preclusion,
issue preclusion may be inappropriate where "the procedures
used in the first proceeding were fundamentally poor, cursory, or
unfair." In addition, issue preclusion may not apply if
the stakes for registration in the TTAB were much lower than for
the infringement determination in the district court, although the
Court made clear that this would not occur as a matter of course,
since "[w]hen registration is opposed, there is good reason to
think that both sides will take the matter seriously."
Justice Ginsburg issued a brief concurrence, emphasizing the
Court's finding that "for a great many registration
decisions issue preclusion obviously will not
apply." Quoting a treatise, Justice Ginsburg noted in
particular that "contested registrations are often decided
upon 'a comparison of the marks in the abstract and apart from
their marketplace usage,'" and that preclusion would not
apply in such cases.
Justice Thomas dissented, joined by Justice Scalia, arguing for a
categorical rule against administrative issue preclusion under the
Lanham Act.
Analysis
For companies engaged in opposition or cancellation proceedings
before the TTAB, B&B Hardware potentially increases
the significance of those administrative proceedings, particularly
for a company's valuable trademarks, since it creates the
possibility that a TTAB decision on the right to register a
trademark will determine a district court's later decision on
the right to use the trademark in the marketplace. While the
Court made clear that issue preclusion would not inevitably
apply—and perhaps often will not—the case-by-case
approach that the Court called for may make the result in a
particular case difficult to predict. The decision is likely
to make TTAB proceedings more litigation-like, requiring more time
and resources. Moreover, while the B&B Hardware
decision dealt with likelihood of confusion, its reasoning appears
applicable to other issues that might arise in the context of an
opposition or cancellation proceeding, such as descriptiveness,
secondary meaning or functionality.
A coordinated TTAB and district court litigation strategy will be
more important following the B&B Hardware
decision. In the TTAB, parties will need to consider the
factors that make issue preclusion more or less likely in a
particular case. Factors often considered in determining
whether issue preclusion applies include: whether the identical
issue was actually litigated previously, whether the party against
whom preclusion would apply had a full and fair opportunity to
litigate the issue, whether the determination of the issue was
necessary to the outcome of the prior proceeding, and whether there
was a final judgment in the prior proceeding. See,
e.g., Pope v. Fed. Home Loan Mortg. Corp., 561
Fed. Appx. 569, 572-573 (8th Cir. 2014); United States v.
Moreland, 570 Fed. Appx. 843, 845 (11th Cir. 2014);
Georgia-Pacific Consumer Prods. LP v. Four-U-Packaging,
Inc., 701 F.3d 1093, 1098 (6th Cir. 2012).
The first factor—whether the identical issue was
litigated—is likely to be most relevant here. The B&B
Hardware Court determined that the standard for likelihood of
confusion is the same for purposes of registration in the TTAB and
for purposes of infringement in the district court, despite the
fact that the tests applied by the TTAB and the Eighth Circuit are
not identical. The Court conceded, however, that where the
TTAB's analysis did not extend to real-world usages of a
trademark—because those usages were not set forth in the
registration application—it would not be appropriate to
conclude that the TTAB had decided the same issue and thus issue
preclusion should not apply. Parties wishing to increase the
likelihood that issue preclusion will apply thus may seek to
introduce evidence in the TTAB of real-world marketplace usages of
a mark (although this may not always be possible due to the
TTAB's limitations on the types of evidence it will
consider).
The second factor—whether the applicant had a full and fair
opportunity to litigate—is also implicated by the Supreme
Court's opinion, which suggests that procedural differences
could in some cases prevent application of issue
preclusion. On this basis, parties seeking issue preclusion
will be interested in urging more extensive discovery and other
litigation-like procedures in the TTAB.
Parties concerned about the limiting effect of TTAB issue
preclusion may choose to skip the TTAB altogether, and sue for
infringement and cancellation of a mark in the district court to
avoid the limiting effect of TTAB issue preclusion. Appeals of
TTAB decisions to the district court may also become more common,
as parties seek to avoid the preclusive effect of the decision
through de novo review.
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.