The Trademark Trial and Appeal Board has long been viewed as an economical alternative to litigation for parties seeking to protect their trademark rights. But if developments in four recent trademark cases are any indication, that may be changing soon. Between the TTAB's growing appeal to non-U.S. companies and a 2017 U.S. Supreme Court ruling on disparaging trademarks, the TTAB stands to gain in popularity as a venue for those challenging trademark registration. At the same time, the increasingly high stakes are likely to make the TTAB a more burdensome place to hash out trademark challenges. Companies will need to carefully weigh their strategies, because TTAB proceedings increasingly look less like the streamlined mechanisms they were designed to be and more like litigation.
Belmora v. Bayer Consumer Care AG Could Lead to Uptick in TTAB Cases
The Belmora case is one of the first decisions allowing an owner of a wholly foreign mark to protect its trademark in the U.S. This could mean a surge in holders of foreign trademarks challenging brands in the US market.
Bayer has sold pain relievers in Mexico under the name "FLANAX" since the 1970s (marketing the same product in the U.S. as "ALEVE"). Bayer does not use the FLANAX mark in the U.S. In 2004, rival Belmora began using the mark "FLANAX" in the U.S. to sell pain relievers. Even though Bayer had not used the FLANAX mark in the U.S., the company successfully petitioned the TTAB to cancel Belmora's "FLANAX" registration under Section 43(a) of the Lanham Act for deceptive use.
On appeal, the district court relied on the standard principal that a trademark owner needs to use the mark in the U.S. to have the right to enforce the mark. And Bayer's foreign mark did not create a "protectable interest" sufficient to give it standing to challenge Belmora's mark. But the Fourth Circuit reversed the district court, and agreed with the TTAB, finding that owners of foreign trademarks can bring claims for unfair competition and deceptive use if they can show injuries proximately caused by deceptive conduct. As the Fourth Circuit explained, "the plain language of § 43(a) does not require that a plaintiff possess or have used a trademark in U.S. Commerce as an element of the cause of action." Belmora tried to flip the script again and appealed to the Supreme Court. But in February 2017, the Supreme Court denied cert, leaving owners of foreign marks left to wonder how far they can take the Belmora decision.
After Belmora, there may be an influx of owners of foreign marks taking advantage of their new ability to challenge a competitor's trademark registrations. Because the Fourth Circuit is currently the only one recognizing this standing, these challenges may be limited to the Fourth Circuit or the TTAB. Given that petitioning the TTAB can be more streamlined than a claim in district court, foreign owners may choose to go through the TTAB. This can result in an uptick in the number of petitions filed with the TTAB.
Matal v. Tam Increases Need to Monitor TTAB Applications and File Oppositions
In June 2017, with the Matal v. Tam decision, the Supreme Court held that the prohibition on disparaging marks under Section 2(a) of the Trademark Act violated the First Amendment. Matal v. Tam involved an application to register the mark "The Slants" by musician Simon Tam for his rock band. Tam's application to register "The Slants" was originally denied by the TTAB because it was said to disparage people of Asian descent. Tam said he chose this name to "reclaim" it and "drain it of its denigrating force as a derogatory term for Asian persons." Tam argued that refusing to register his trademark violated his right to free speech. In response, the U.S. Patent and Trademark Office argued that registering the name as a trademark on the federal registry is government speech and not entitled to First Amendment protection. The Supreme Court sided with Tam and invalidated Section 2(a)'s disparagement provision as unconstitutional.
The TTAB should see increased traffic as parties attempt to register trademarks that would have previously run afoul of Section 2(a)'s disparagement provision. And with the fall of the disparagement provision, other restrictions on trademark registrations like the scandalous, immoral or tarnishing marks may fall as well. Past applicants who have been denied under this section may try again, and there may be a land grab by those seeking to register vulgar marks. Some of the new applications will be commentary on or parodies of established marks (e.g. F@ck McDonalds). In the past, these marks would have likely been rejected by the Trademark Examiner under Section 2(a). But with 2(a)'s restrictions removed more offensive, disparaging, and tarnishing marks are likely to be published for opposition. Companies will now have to monitor these applications and bring opposition proceedings at the TTAB to prevent registration of these marks.
B & B Hardware v. Hargis: Higher Stakes, Lower Efficiency
When Hargis Industries, Inc. tried to register its trademark for SEALTITE with the United States Patent and Trademark Office, B & B Hardware opposed, claiming SEALTITE was too similar to B & B's trademark SEALTIGHT. The TTAB refused to register SEALTITE, finding there was a likelihood of confusion between the two marks. Hargis did not appeal the TTAB's decision. Later, in an infringement litigation between the two companies in District Court, B & B argued Hargis was precluded from challenging the finding of likelihood of confusion because the TTAB had already decided the issue. The Eight Circuit disagree, holding issue preclusion did not apply because the TTAB and the court used different factors in their analysis. But the Supreme Court reversed the Eighth Circuit and held that issue preclusion could apply to cases decided by the TTAB if the other ordinary elements of issue preclusion are met. In particular, the Supreme Court emphasized the likelihood of confusion tests in the court and the TTAB could be similar enough to allow for issue preclusion.
Although the Supreme Court overturned the Eighth Circuit, Justice Ginsburg's concurring opinion might temper the scope of the decision. She said that, because contested registrations are often decided by comparing marks in the abstract then "for a great many registration decisions issue preclusion obviously will not apply." Where the TTAB makes a decision without consideration of real world use of the mark, it is arguable that the issue before the district court is not similar enough to the one decided by the TTAB to support issue preclusion. Some trademark owners may try to limit or exclude evidence of real world uses presented in TTAB proceedings to limit the scope of issue preclusion.
But Ginsburg's concurrence might not be enough to ease the anxiety of trademark owners confronting TTAB proceedings. Given the high stakes preclusion lends to TTAB proceedings, parties will be hesitant to hold back at the TTAB stage in case a district court judge interprets B & B's holding broadly. As a result, TTAB proceedings may look less like the streamlined mechanisms they were designed to be and more like litigation. And some parties may avoid the TTAB all together in favor of going straight to district court to avoid the risks of issue preclusion. This option is especially likely if TTAB proceedings become more inefficient as a result of their heightened stakes as parties pull out all the stops to get more in the record.
Shammas v. Focarino: Need for Complete Record for Federal Appeal Could Boost Costs
There are two ways to appeal an ex parte TTAB decision: (1) to the Federal Circuit or (2) to a district court. Appeals to the Federal Circuit are decided on the record before the TTAB. But if a party wants to submit new evidence, they can appeal to the district court instead. Under the Shammas decision parties seeking review before a district court must pay for the Trademark Office's attorney's fees—even if the appealing party wins the case. Shammas could bog down, and increase the cost of ex parte TTAB proceedings because parties will want to present all possible evidence so they have a complete record on appeal to the Federal Circuit and avoid the risk of paying the Trademark Office's attorneys' fees.
What's Next for Parties Turning to the TTAB?
While Belmora's grant of foreign standing and Matal's opening up registration to offensive marks will likely increase the number of proceedings coming through the TTAB, issue preclusion and fee shifting means parties must think hard about whether to proceed in the TTAB or a district court. The heightened stakes resulting from issue preclusion and the need to get the right evidence in the record to avoid needing to appeal to a district court means TTAB proceedings will become more onerous and expensive. But more parties might think it beneficial to cut to the chase and file in district court from the start. This means more contentious issues may sidestep the TTAB, but the issues that to go to the TTAB will still be harder fought. While much remains to be seen, the influx of proceedings from foreign trademark owners, increased applications for offensive marks, and the heightened stakes from preclusion and fee shifting means that the TTAB will be more important than ever as a venue for trademark disputes.
Originally published by Law360 (subscription required) on September 7, 2017.
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