March 26, 2015
On March 24, 2015, a divided Supreme Court (7-2) reversed the Eighth Circuit’s determination that the defendant in an infringement action could relitigate a finding by the Patent and Trademark Office’s Trademark Trial and Appeal Board (“TTAB”) that the defendant’s mark was confusingly similar to the plaintiff’s. In B&B Hardware, Inc. v. Hargis Industries, Inc., 13-352 (U.S. Mar. 24, 2015), the Court held that “consistent with principles of law that apply in innumerable contexts . . . a court should give preclusive effect to TTAB decisions if the ordinary elements of issue preclusion are met.” Slip op. at 2. Applying this broader holding to the specific facts before it, the Court went on to hold that when the usages adjudicated by the TTAB are materially the same as those before the district court, and the other elements of issue preclusion are met, the parties are precluded from relitigating whether or not a likelihood of confusion exists. Id. at 22. Justice Samuel Alito authored the majority opinion.
The dispute before the Court arose when Respondent, Hargis Industries, Inc. (“Hargis”), attempted to register is SEALTITE mark. Slip op. at 6. Petitioner B&B Hardware, Inc. (“B&B”) both opposed SEALTITE’s registration and sued for trademark infringement on the ground that Hargis’s SEALTITE mark was confusingly similar to its SEALTIGHT mark. Id. at 6-7. While the infringement action was pending but before the District Court ruled on likelihood of confusion, the TTAB agreed with B&B that SEALTITE was confusingly similar to SEALTIGHT in the context of the proposed use and denied registration on this basis. Id. at 7. B&B then argued to the District Court that the TTAB’s determination was entitled to preclusive effect, such that Hargis was barred from contesting likelihood of confusion in the infringement action. Id. at 7-8. The District Court rejected B&B’s argument, believing that preclusion did not apply because the TTAB was not an Article III court. Id. at 8. On appeal, the Eighth Circuit accepted for the sake of argument that agency decisions could ground issue preclusion, but nonetheless found that issue preclusion did not apply because the TTAB and the Eighth Circuit used different legal standards to assess likelihood of confusion. Id. The Supreme Court granted certiorari.
The decision raises a number of issues that will be important both in the context of trademark law, and in connection with the question of when courts authorized under Article III to the U.S. Constitution should defer and give preclusive effect to the determinations of administrative agencies, especially bodies like the TTAB that operate quasi-judicial proceedings.
First, the Supreme Court confirmed that under its past precedents, an agency decision can serve as the predicate for issue preclusion if the elements of the test are met. Slip op. at 8-9. The Court cited its decision in Astoria Fed. Sav. & Loan Assn. v. Solimino, 501 U.S. 104 (1991), which held that where Congress has authorized agencies to resolve disputes, “courts may take it as a given that Congress has legislated with the expectation that [issue preclusion] will apply except when a statutory purpose to the contrary is evident.” Id. at 9 (quoting Astoria, 501 U.S. at 108).
Second, the Court considered whether there was any reason specific to the trademark law, the Lanham Act, to conclude that Congress did not want TTAB decisions to be preclusive. Slip op. at 12-13. Looking to the Act’s text, which “certainly d[id] not forbid issue preclusion,” and to its structure, which provided for separate (and even concurrent) administrative and judicial proceedings to decide separate rights, the Court saw no reason to rebut the presumption favoring preclusion. Id. at 13-14. Notably, the Court was not persuaded by Hargis’s argument that affording TTAB decisions preclusive effect would bog down the trademark registration process by encouraging the parties to spend more time and energy before the TTAB. Id. at 14 (“This concern does not change our conclusion. Issue preclusion is available unless it is ‘evident,’  that Congress does not want it.”) (internal citation omitted).
Third, the Court found that there is no “categorical reason” to prohibit courts from applying issue preclusion to TTAB decisions, so long as the elements of issue preclusion are met. Slip op. at 15-22. Importantly, the Court concluded that the legal standard used to analyze the critical element of likelihood of confusion between two trademarks in registration proceedings is “essentially the same” as the one used in infringement actions, even though the statutory provision that covers trademark registration uses slightly different language than the provisions that cover trademark infringement claims. Id. at 15-18. The majority opinion noted that courts had been basically applying the same likelihood-of-confusion standard through different statutory regimes since at least 1881. Id. at 16-17. The Court further noted that the party seeking to establish the likelihood of confusion (the opposer in a TTAB proceeding, the plaintiff in a trademark infringement action) bears the burden of persuasion in both tribunals. Id. at 20-21. The Court also rejected Hargis’s arguments that issue preclusion should not apply because the TTAB follows different procedures than the district court does, and the stakes for registration will always be considerably lower than for infringement. Id. at 19-22. The Court’s majority saw no reason to doubt the quality, extensiveness, or fairness of the TTAB’s determinations, id. at 20, and no reason to believe that the stakes would always be lower in a contested registration proceeding. Id. at 21 (“When registration is opposed, there is good reason to think that both sides will take the matter seriously.”) Accordingly, the Court reversed the Eighth Circuit and remanded with instructions to apply the following rule: “So 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.” Id. at 22.
Fourth, despite reaching this outcome in the case before the Court, the majority opinion acknowledges that many trademark registrations will not satisfy the ordinary elements of issue preclusion. Indeed, the Court specifically recognized that “if the TTAB has not decided the same issue as that before the district court, there is no reason why any deference would be warranted.” Slip op. at 19. For example, if the TTAB only addresses “the mark as shown in the application” to register that mark and not “the market-place usage of the parties’ marks, the TTAB’s decision should ‘have no later preclusive effect in a suit where actual usage in the marketplace is the paramount issue.'” Id. at 17-18 (citations omitted). Similarly, the Court noted that if the TTAB prevents a party from introducing “material evidence,” issue preclusion may not apply because courts will not give preclusive effect to a determination if there is a “compelling showing of unfairness.” Id. at 20. Moreover, only a contested proceeding that is “actually litigated” before an agency like the TTAB that is “acting in a judicial capacity and resolves disputed issues of fact” qualifies for issue preclusion. Id. at 9, 10. Part of the Court’s reasoning that it is appropriate to apply issue preclusion in this context is that “[w]hen a registration is opposed, there is good reason to think that both sides will take the matter seriously.” Id. at 21 (emphasis added). As a result, although the majority opinion does not make this point explicit, an uncontested decision of an examining attorney of the Patent and Trademark Office will likely not qualify for issue preclusion.
Fifth, the Court warns however that parties should not be able to escape issue preclusion in this context if there is only an “immaterial” difference between the marks considered by the TTAB and the marks at issue in a subsequent litigation. The “issue” to be precluded, the Court warned, “must be understood broadly enough ‘to prevent repetitious litigation of what is essentially the same dispute.'” Id. at 18-19 (quoting Restatement (Second) of Judgments §27, Comment c, at 252–253). Interestingly enough, the same Court decided unanimously earlier this term that in federal court litigation, a jury–not a judge–should decide the factual question of whether the current trademark creates the “same, continuing commercial impression” as an earlier version of the mark. Hana Financial, Inc. v. Hana Bank et al., 13-1211 (U.S. Jan. 21, 2015). Although the majority opinion in B&B Hardware did not expressly address Hana Financial, it did note that “the right to a jury trial does not negate the issue-preclusive effect of a judgment, even if that judgment was entered by a juryless tribunal.” Slip op. at 11.
Sixth, in part of its analysis, the Court addressed the fact that the Court of Appeals for the Federal Circuit (which hears direct appeals of TTAB proceedings) has fashioned a slightly different factor test to evaluate the likelihood of confusion between two competing trademarks from the factor test adopted by the Court of Appeals for the Eighth Circuit. Id. at 15-16. The Court concluded that “the factors are not fundamentally different, and ‘[m]inor variations in the application of what is in essence the same legal standard do not defeat preclusion,'” particularly where there should be one single federal standard. Id. (quoting Smith v. Bayer Corp., 564 U. S. ___, ___ n.9 (2011) (slip op., at 12 n.9)). In fact (although the Court did not explicitly reference it), just about every circuit court of appeals has adopted its own version of the likelihood-of-confusion factor test in each one’s attempt to provide guidance to district courts in applying the federal likelihood-of-confusion standard. Compare Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961); AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979); 4 McCarthy § 23.19, n.2 (“Each circuit has created its own list of factors and the litigator is well-advised not to rely upon a list from a ‘foreign’ circuit.”). As a result, the fact that a trademark case was tried in one circuit should similarly not prevent the decision from being given preclusive effect in a different circuit.
Justice Thomas, joined by Justice Scalia, dissented on the grounds that the Astoria presumption did not apply to statutes enacted before that case was decided, and because the text, structure, and history of the Lanham Act did not otherwise support a finding that Congress intended the TTAB’s registration decisions to be given preclusive effect. The dissent also criticized the Astoria presumption on the basis that it was unfounded and raised serious constitutional concerns about requiring independent Article III courts to give preclusive effect to the determinations of executive administrative agencies. However, because those concerns were not necessary to the outcome endorsed by the dissent, the dissenting justices reserved them for another day.
This decision is likely to have far-reaching implications for trademark prosecution and litigation practice. Because courts have traditionally been quick to reject the outcome of TTAB proceedings, some trademark owners have dismissed the importance of such proceedings. The Court’s majority opinion in B&B Hardware will change that dynamic. At a minimum, the opinion underscores the importance of carefully considering whether to oppose a trademark registration proceeding before the TTAB–and whether to pursue immediate judicial review of an adverse TTAB determination. The Court made clear that when a party believes the TTAB erred, that party should seek immediate judicial review and not rely on the fact that a court may reevaluate the question de novo in a subsequent infringement proceeding. “The fact that the TTAB may have erred . . . does not prevent preclusion.” Slip op. at 19. Indeed, it may be the availability of such judicial review of TTAB decisions that gave the majority comfort in providing such a vigorous endorsement of issue preclusion in this context.
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