United States: Supreme Court: TTAB Decisions May Have Preclusive Effect In Litigation

Issuing its second trademark decision in 2015, the Supreme Court of the United States in a 7–2 decision reversed the U.S. Court of Appeals for the Eighth Circuit, concluding that an administrative ruling by the U.S. Patent and Trademark Office (USPTO) Trademark Trial and Appeal Board (TTAB) on the issue of likelihood of confusion can preclude a later ruling by a federal court on the issue of likelihood of confusion in a subsequent trademark infringement if "the usages adjudicated by the TTAB are materially the same as those before a district court," and "so long as the other ordinary elements of issue preclusion are met."  B&B Hardware, Inc. v. Hargis Industries, Inc., et. al.,Case No. 13-352 (Sup. Ct., March 24, 2015) (Alito, Justice).

U.S. Trademark Law

The Lanham Act provides for a party to oppose the registration of a U.S. trademark application at TTAB if that party believes that the USPTO's grant of registration is likely to cause consumer confusion with the opposing party's own trademark rights.  The Lanham Act also provides trademark owners with a federal district court cause of action for trademark infringement.  In registration proceedings before the TTAB and in federal court infringement actions, the tribunal may be called on to analyze particular factors to determine if a "likelihood of confusion" exists between the competing trademarks.  In infringement litigation, a district court will typically consider the full range of a trademark's usage.  However, in TTAB proceedings, the focus is on the precise goods, services, consumers and/or trade channels that are identified in the trademark applications in issue. 

Background

The dispute between B&B Hardware and Hargis Industries arose almost 18 years ago, when B&B filed an opposition with the TTAB to oppose Hargis's trademark application for SEALTITE for use in connection with sheeting screws.  The opposition was based on B&B's prior registration for SEALTIGHT, which is used in connection with seal-fasteners sold to aerospace companies.  While an opposition proceeding was pending before the TTAB to determine whether Hargis's SEALTITE application should register in light of B&B's registration, the parties were also engaged in trademark infringement proceedings in federal court regarding the same marks.  Before the district court ruled on the likelihood of confusion in the infringement case, the TTAB issued its decision denying registration to Hargis's SEALTITE mark, concluding it was likely to cause confusion with B&B's SEALTIGHT registration.  In announcing its decision, the TTAB stated that it had considered the similarity of the marks and the parties' respective goods, which the TTAB found to be the "most critical factors" in its analysis, as well as how the parties' products are used in commerce and whether there was evidence of actual confusion. 

Relying on the TTAB's ruling, B&B argued to the district court that Hargis could not contest the likelihood of confusion issue because of the preclusive effect of the TTAB's decision.  The district court rejected B&B's argument on grounds that the TTAB is not an Article III court.  A jury then returned a verdict in favor of Hargis, finding no likelihood of confusion.  On appeal, the Eighth Circuit affirmed the district court's denial of B&B's preclusion argument, but not on the basis of the Article III court argument.  Rather, it cited three reasons: 

  • The TTAB uses different factors than the Eighth Circuit for its likelihood of confusion analysis.
  • The TTAB placed too much emphasis on the appearance and sound of the two marks.
  • The burden of persuasion was different before the TTAB than it was in the district court.

The Supreme Court granted certiorari.

The Supreme Court on Issue Preclusion

The Supreme Court confirmed that the Eighth Circuit correctly declined to adopt the Article III reasoning of the district court, noting that a long line of cases and the Restatement (Second) of Judgments do not limit issue preclusion to situations in which the same issue is before two courts.  In particular, the Supreme Court cited decisions holding that Congress authorizes agencies to resolve disputes, and that issue preclusion should apply except when a statutory purpose to the contrary is "evident."

Rather, as Justice Alito observed, the Eighth Circuit's objection to issue preclusion was based largely on the premise that the TTAB analyzes different likelihood of confusion factors than those used in the Eighth Circuit's analysis (i.e., the TTAB relies on the DuPont factors, while the Eighth Circuit looks to similar but not identical factors under SquirtCo v. Seven-Up Co.)  However, the Supreme Court disagreed with the Eighth Circuit's conclusion, noting that although the factors under the two tests are not identical, they are "not fundamentally different" either.  Therefore, the Supreme Court concluded that the "likelihood of confusion" standard for registration purposes is essentially the same standard used in infringement litigation.   

The Supreme Court gave some credence to Hargis's arguments that the registration and district court likelihood of confusion standards are actually different, since the TTAB often looks to whether marks "resemble" one another or are similar in appearance, sound and pronunciation, while a district court analysis usually focuses on the marketplace use of the respective trademarks in commerce.  But the Supreme Court explained that even though the TTAB and the district courts do not always consider the same factors, the likelihood of confusion standard is essentially the same.  Specifically, the Supreme Court noted that if a trademark owner uses its mark in materially the same ways as is contemplated in its trademark application or registration, the TTAB is deciding the same likelihood of confusion issue as that presented to a district court.

The Supreme Court acknowledged that issue preclusion will not apply to "a great many" of the TTAB's registration decisions because the "ordinary elements" will not be met, and the Supreme Court expressly stated that "for those registrations, nothing we say today is relevant."  For example, the Supreme Court confirmed that if, in rendering a decision, the TTAB does not consider the marketplace usage of the parties' marks, then that decision should "not have later preclusive effect in a suit where actual usage in the marketplace is the paramount issue."

The Supreme Court further noted that the Eighth Circuit erred in concluding that Hargis bore the burden of persuasion before the TTAB, and cited the TTAB's rules, which state that the party opposing the registration bears the burden.  Finally, the Supreme Court also rejected Hargis's argument that the stakes in a TTAB registration proceeding are "too low" to allow for issue preclusion in a later infringement action.  Instead, citing to the benefits of a federal trademark registration, e.g., the prima facie evidence of the validity of the mark, the ability to achieve "incontestable" status, the Supreme Court observed that there was good reason to think that both sides in a registration dispute will take it seriously when a trademark application is opposed before the TTAB.

Ultimately, the Supreme Court determined that there is no categorical reason why registration decisions can never meet the ordinary elements of issue preclusion, and concluded that TTAB decisions on the issue of likelihood of confusion should be given preclusive effect on a case-by-case basis. 

Concurrence

Justice Ginsburg issued a concurring opinion explaining that she was joining the majority opinion because the Supreme Court properly recognized that preclusion will not apply "for a great many registration decisions," especially in those instances when the TTAB has issued its decision based only on a comparison of the marks instead of a consideration of the marks in their marketplace usage.

Dissent

Justice Thomas authored a dissent, joined by Justice Scalia, in which he challenged the majority's determination that Congress implicitly authorized TTAB decisions to have preclusive effect, stating that the cases on which the Supreme Court based its opinion discussed administrative preclusion only in dictum.  Thomas instead focused on Lanham Act language that he believes is contrary to the majority's decision, and questioned the constitutionality of precluding an Article III court to determine an issue on the basis of an earlier decision on that issue by an executive agency.

Practice Note:  It remains to be seen if this decision will cause TTAB proceedings to become less of a trial balloon and therefore more hard fought and expensive for both sides.  As noted in the Supreme Court's opinion, however, there may be few cases in which preclusion is given effect, especially if the party opposing preclusion can show that the TTAB did not analyze and apply all of the likelihood of confusion factors that a district court would consider. 

Supreme Court: TTAB Decisions May Have Preclusive Effect in Litigation

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