United States: SCOTUS: Preclusive Effect Should Be Given To TTAB Decisions When The Other Elements Of Issue Preclusion Are Met

In an opinion written by Justice Alito, the Supreme Court recently held that preclusive effect should be given to Trademark Trial and Appeal Board administrative decisions if the other elements of issue preclusion are met. B&B Hardware, Inc. v. Hargis Industries, Inc. dba Sealtite Building Fasteners et al., No. 13-352, 575 U.S. ___ (March 24, 2015). Although administrative proceedings before the TTAB are certainly different from those in district court, the Court noted that there is no reason to categorically doubt the quality of those proceedings. When an agency has acted in its judicial capacity to resolve disputed issues and providing adequate opportunity to litigate and when the same legal standard is applied to decide the same issues, preclusion applies in later actions. Because the TTAB decides issues of registrability, there are many instances in which issue preclusion will not apply in later infringement actions. However, this ruling will undoubtedly affect the way parties approach contested TTAB proceedings.

Both parties to the action manufacture metal fasteners—B&B Hardware for the aerospace industry and Hargis Industries for the construction industry. B&B offers products under the mark SEALTIGHT and Hargis under SEALTITE. Though there are obvious differences between these industries, both companies naturally want their products associated with a tight seal. In 1933, B&B registered its SEALTIGHT mark. Decades later, Hargis applied to register SEALTITE. B&B opposed that application in the TTAB in 2002, claiming that the SEALTITE mark is confusingly similar to its SEALTIGHT mark. The TTAB proceeding was complete with discovery, even depositions. The TTAB sided with B&B, finding that SEALTITE so resembles the SEALTIGHT mark that it is likely to cause consumer confusion and it denied registration.

Concurrently, B&B sued Hargis in federal court for trademark infringement. The question addressed by SCOTUS was whether Hargis should have been precluded from relitigating the issue of likelihood of confusion based on the TTAB's prior decision.

Held: "[A] court should give preclusive effect to TTAB decisions if the ordinary elements of issue preclusion are met." Slip Op. at 2. First, issue preclusion can apply in situations in which an administrative agency makes a final decision—both SCOTUS case law and the Restatement (Second) of Judgments make clear that issue preclusion is not limited to matters before two courts, but instead can apply when an agency is acting in its judicial capacity and parties have had adequate opportunity to litigate the issues. Second, nothing in the Lanham Act bars giving TTAB rulings preclusive effect. Finally, the TTAB's registration decisions can meet the ordinary elements of issue preclusion. In this case, the TTAB applied the same likelihood-of-confusion standard as is applied in the context of infringement. That the TTAB and district courts use different factors to reach a conclusion does not mean that they apply a different standard. Moreover, those factors are "not fundamentally different." Slip Op. at 16. Where the TTAB has already decided the same issue, and where the other elements of the collateral estoppel doctrine are met, issue preclusion applies.

Additionally, the procedural differences between TTAB and federal court proceedings do not, themselves, defeat issue preclusion. The inquiry is not whether they are different but is instead "whether the procedures used in the first proceeding were fundamentally poor, cursory, or unfair" such that issue preclusion should not apply in the second. Slip Op. at 20. Naturally, situations may arise when the TTAB's proceedings were ill-suited for deciding a particular issue, in which case a party can make a showing that it would be unfair to apply issue preclusion. Additionally, as both the Majority's opinion and Justice Ginsburg's concurring opinion note, for many of the TTAB's registration decisions, issue preclusion will not apply because the required elements of the doctrine will not have been met (i.e. the identical issue must have been actually litigated in a prior proceeding and ultimately decided as a necessary part of the tribunal's final judgment).

The main take away from the Court's ruling is that a TTAB decision can be a final judgment for purposes of collateral estoppel where a party does not exercise its right to appeal, as Hargis failed to do here. However,  contested registrations often are decided by comparing the marks "in the abstract" and apart from actual use in the marketplace. In the majority of cases, then, issue preclusion likely would not be appropriate in a later infringement action. Nonetheless, the Court's ruling undoubtedly will change the way parties approach TTAB proceedings.

The decision raises the stakes for all parties in TTAB proceedings, which previously have been relatively quick and inexpensive in comparison to federal litigation. More time, energy and money will go into the proceedings because the petitioner may not get a "do over" in a later infringement action in court. Similarly, TTAB defendants may invest more in the proceedings if the preclusive effect of the TTAB's judgment in the defendant's favor could essentially function as a declaratory judgment of non-infringement. Alternatively, a defendant may choose simply not to answer a petition to cancel or oppose a registration, opting to take a default judgment and lose the registration instead of proceeding when there is the possibility of an adverse judgment that can pave the way for litigation over damages and injunctive relief. Many trademark owners may forego TTAB proceedings and go directly to court to pursue infringement action and cancellation simultaneously. In court they can seek damages, not available in TTAB proceedings, and can take advantage of more robust proceedings that include live testimony and consideration of a greater scope of facts. Additionally, we are likely to see more appeals from TTAB likelihood-of-confusion decisions. In any event, parties must seriously consider their strategy with respect to both trademark prosecution and enforcement.

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.

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