In the wake of B&B Hardware v. Hargis Industries, 13-352
(U.S. Mar. 24, 2015), TTAB practitioners and trademark litigators
need to assess how issue preclusion will factor into litigation
strategy. In B&B Hardware, the Supreme Court ruled in a 7-2
decision that "a court should give preclusive effect to TTAB
decisions if the ordinary elements of issue preclusion are
met." Slip op. at 2. While it may be some time before we see
court decisions relying upon or distinguishing this case, it is
never too early to consider how B&B Hardware can shape strategy
in TTAB proceedings.
At the outset, one should recognize that the universe of cases
proceeding to final judgment before the TTAB is relatively small
compared to the number of proceedings filed. As a rough guide,
according to the USPTO, in 2014, parties filed 5,509 oppositions
and 1,722 cancellations. The TTAB decided only 132 cases (not
necessarily of these cases).1 Assuming this
filings-to-decision ratio is constant, this means the TTAB issues
final judgments in less than one-half of one percent of all
oppositions and cancellations. The number of such cases that are
not stayed during concurrent civil litigation may be similarly
small, possibly approaching zero.
This makes the procedural history of B&B Hardware somewhat
unusual in that the parties did not suspend the TTAB proceeding
pending the outcome of the district court litigation (nor did
Hargis appeal the TTAB's judgment). Suspension is the more
common practice, since, unlike the TTAB, an Article III court is
not limited to ruling on registrability, and can also grant
injunctive relief and damages.
It remains to be seen whether the Board will continue to grant
suspension requests as a matter of course now that B&B Hardware
has altered the calculus. Currently, the Board's practice is to
routinely grant suspensions when they are sought to avoid parallel
Board practice and district court litigation. This practice of
granting suspensions pending the outcome of district court
litigation is motivated in part by comity concerns― that is,
a desire to conserve judicial and agency resources by prioritizing
the court decision on likelihood of confusion. (See Trademark Trial
and Appeal Board Manual of Procedure, §510.02(a): "Most
commonly, a request to suspend pending the outcome of another
proceeding seeks suspension because of a civil action pending
between the parties in a federal district court. To the extent that
a civil action in a federal district court involves issues in
common with those in a proceeding before the Board, the decision of
the federal district court is often binding upon the Board, while
the decision of the Board is not binding upon the court."
(emphasis added).)
This practice of suspending TTAB proceedings made sense because,
prior to B&B Hardware, practitioners and the Board alike
assumed that a court would not be bound by the Board's
determination on likelihood of confusion. However, now that B&B
Hardware establishes the Board as a co-equal arbiter of the
likelihood of confusion question, the Board's presumptive
comity concern is (at least partly) undercut, and its practice of
suspending proceedings as a matter of course may be undercut as
well. This suggests one of two outcomes: a substantial increase in
the scope of TTAB discovery and motions practice, or a strategy
designed to avoid a final decision (likely by settlement but
possibly by abandonment in some cases).
Regardless of the Board's suspension practices, how else will
B&B Hardware come into play?
One likely scenario is one in which a brand is re-launched or
expanded a number of years after a final adverse TTAB judgment.
Perhaps this renewed commercial activity brings two marks, possibly
for the first time, into a true commercial conflict. Envision that
the conflict is with a party that was previously only a concern
from the perspective of policing the USPTO registry, or at best
only a minor player in the field. Now competitors, the parties seek
relief in federal district court, and one may wish to assert issue
preclusion based upon the prior TTAB decision.
For those not familiar with trademark portfolio strategy,
trademark owners often engage in TTAB proceedings (both oppositions
and cancellations) to increase a mark's strength on the
register, even where the third-party marks at issue are not
associated with directly competitive goods or services. This is a
legitimate practice, and is distinguishable from trademark
bullying. It is easy to see that clearing a path on the USPTO
Register—that is, opposing registration and seeking
cancellation of marks that arguably crowd a mark holder's
registration—achieves different business goals versus
pursuing district court litigation. These different options come
with different price tags.
It is possible that a brand re-launch may materially alter the
trademark usage in dispute, rendering B&B Hardware and the
prospect of issue preclusion inapplicable on its face. However,
this question itself means that B&B Hardware opens the door to
time-consuming and costly motions practice and possible
interlocutory appeals to address whether issue preclusion even
applies.
B&B Hardware means that the specter of issue preclusion in
future disputes now looms over all inter partes TTAB
proceedings.
Final TTAB judgments are limited to registrability only. The Board
cannot grant injunctive relief, damages or attorney fees. Given the
limited (although not insignificant) scope of TTAB judgments,
parties understandably are reluctant to expend more resources than
are necessary to present their best case.
Unfortunately, concerns over issue preclusion may encourage
parties to spend more on TTAB litigation (e.g., surveys and expert
witness testimony) than they otherwise would, out of a concern that
the TTAB may be their only bite at the likelihood of confusion
apple. It is ironic that a ruling expanding the applicability of
issue preclusion may have the perverse net effect of increasing
litigation, even though the policy behind issue preclusion is, in
fact, just the opposite.
This leaves us to ponder: How can we prevent a final TTAB
judgment, which is limited solely to registrability, from having
outsized influence on a trademark infringement suit, where
injunctive relief and damages are on the table?
B&B Hardware is a powerful yet narrow decision, according
great weight to final TTAB decisions in limited circumstances.
Notably, the high court ruled that "a court should give
preclusive effect to TTAB decisions if the ordinary elements of
issue preclusion are met" (emphasis added). Slip. op. at 2.
The Court's careful word selection ("should" vs.
"shall") signals that lower courts ultimately have some
discretion to determine whether and when issue preclusion is
warranted.
While this language leaves practitioners with room for maneuvering
in the district court, the time to avoid or minimize issue
preclusion is earlier, during TTAB proceedings. At this stage, we
have no idea how (or how frequently) lower courts will rely upon
B&B Hardware to streamline litigation. Nonetheless, there are
several ways to avoid or minimize the likelihood that issue
preclusion will unexpectedly (or unfavorably) apply in future
disputes.
Talk to your client. Post-B&B Hardware,
practitioners must consider issue preclusion early on in TTAB
proceedings. While ultimately you may adopt a more limited
litigation strategy before the TTAB than in district court, the
risk of issue preclusion should now factor into your larger
litigation strategy.
Contract. Can you contract around the problem? In
a hotly contested proceeding where a final judgment bears on the
registrability of both parties' marks, it is possible to reach
a side agreement where the parties agree that regardless of
outcome, neither party will raise issue preclusion in a future
dispute. An appropriate liquidated damages clause and the ease of
proving a breach should encourage the parties to abide by its
terms. Of course, a court may raise issue preclusion sua sponte,
even if neither party raised the issue. It is also possible that
such a contract could be challenged as against public policy.
Settle smart. The fact that the TTAB's
jurisdiction is limited to registrability doesn't mean a
settlement in a Board proceeding must also be so limited. Build in
appropriate use restrictions and carve-outs to let your
client's mark expand while limiting the risk of a future
dispute.
Appeal. If your client is dissatisfied with the
outcome, especially if you think the Board erred, appeal. "The
fact that the TTAB may have erred . . . does not prevent [issue]
preclusion." Slip op. at 19.
B&B Hardware undeniably enhances the impact of TTAB judgments.
Practitioners must now weave the risks (and rewards) of issue
preclusion into TTAB litigation strategy.
Footnote
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.
