On March 24, 2015, the United States Supreme Court issued its decision in B&B Hardware, Inc. v. Hargis Industries, Inc., holding that "a court should give preclusive effect to [Trademark Trial and Appeal Board] decisions if the ordinary elements of issue preclusion are met." 575 U.S. __ (2015) (slip op., at 2). The issue before the Supreme Court was whether the district court should have applied issue preclusion to the TTAB's decision that "SEALTITE" is confusingly similar to "SEALTIGHT." Id.
Background and Procedural History of B&B Hardware
In 1996, Hargis Industries, Inc. ("Hargis") applied to
register the mark SEALTITE for "self-piercing and
self-drilling metal screws for use in the manufacture of metal and
post-frame buildings." As part of the long-running trademark
dispute between the parties, B&B Hardware, Inc.
("B&B") opposed the application in 2003 on the basis
that SEALTITE was likely to cause confusion with B&B's
registered SEALTIGHT mark for "threaded or unthreaded metal
fasteners and other related hardwar[e] ... for use in the aerospace
industry." While the opposition proceeding was pending,
B&B brought an infringement action against Hargis in the United
States District Court for the Eastern District of Arkansas. Shortly
thereafter, the TTAB denied registration to Hargis's SEALTITE
mark, holding that the mark was likely to cause confusion with
B&B's SEALTIGHT mark. Hargis did not seek judicial review
of the TTAB's
decision.
B&B then moved for summary judgment on the issue of whether
the TTAB's prior finding of likelihood of confusion in a matter
involving the same parties and trademarks should be given
preclusive effect. The district court denied B&B's request
for summary judgment, holding that the TTAB's determination did
not preclude the jury's consideration of the likelihood of
confusion issue. The district court also declined to admit the
TTAB's decision into evidence at trial. While the jury was
informed that the TTAB refused to register Hargis's mark, the
jury was not told how the TTAB resolved the likelihood of confusion
issue. Ultimately, the jury found that Hargis's use of the
SEALTITE mark was not likely to cause confusion with B&B's
SEALTIGHT
mark.
On appeal of the preclusion issue, a divided panel of the United
States Court of Appeals for the Eighth Circuit, consisting of
Judges Shepherd, Loken, and Colloton, affirmed. Judge Shepherd,
writing the opinion for the majority, held that TTAB findings
regarding a likelihood of confusion should be accorded neither
preclusive effect nor deference. B&B Hardware v. Hargis
Indust., 716 F.3d 1020, 1026 (8th Cir. 2013). The Eighth
Circuit held that for preclusion to apply, the issue sought to be
precluded must be the same as the issue involved in the original
action. This prerequisite was not satisfied because the likelihood
of confusion issue decided by the TTAB in opposition proceedings
was not the same issue decided by district courts in trademark
infringement actions. The Eighth Circuit noted that the TTAB relies
on the 13-factor test articulated in In re E.I. DuPont
DeNemours & Co., 476 F.2d 1357 (C.C.P.A. 1973), to
evaluate whether there is likely to be confusion between the
applied-for mark and an existing registration, while district
courts in the Eighth Circuit rely on the six-factor test enumerated
in SquirtCo. v. Seven-Up Co., 628 F.2d 1086 (8th Cir.
1980), to evaluate the likelihood of confusion analysis. The Court
also noted that the TTAB's analysis emphasizes the similarities
between the marks and ignores evidence of actual market use.
Finding that such evidence is "critical" to the
likelihood of confusion analysis in infringement actions, the
Eighth Circuit held that the TTAB did not decide the same
"likelihood of confusion" issue presented to the district
court. Therefore, preclusion was not
appropriate.
The dissenting judge, Judge Colloton, argued that if the TTAB
considered evidence of marketplace context and preclusion would
otherwise apply, TTAB findings should be entitled to preclusive
effect. Both the district court and the TTAB were deciding the same
issue—whether there was a likelihood of confusion—and
any differences between the two likelihood of confusion tests were
minimal. Further, the dissent feared that the majority's effort
to distinguish the analysis in TTAB proceedings from the analysis
in infringement actions meant that TTAB findings would never be
afforded preclusive effect in federal court. As the TTAB decides
factual issues in the course of determining the right to
registration, the dissent argued there is no policy reason why
those issues should not be foreclosed from further litigation as
long as the requirements for preclusion are satisfied.
Differences Between TTAB Proceedings and District Court Actions
As the Eighth Circuit noted in B&B Hardware, and as other courts have recognized, there are several differences between opposition and cancellation proceedings before the TTAB and trademark infringement actions before a district court. Even though both tribunals must analyze whether there is a likelihood of confusion, key differences include:
- The TTAB focuses on whether a mark is entitled to registration, whereas district courts focus on the alleged infringer's actual use of the mark at issue.
- The TTAB relies on the 13-factor DuPont test and applies those factors to the information contained in the application or registration at issue. District courts, however, use multifactor tests (which vary by circuit) and apply those factors to evidence regarding how the trademark is actually used in the marketplace.
- The scope of discovery is narrow in proceedings before the TTAB, and testimony is presented in writing to a panel of judges. In district court proceedings, the scope of discovery is broader, and evidence is presented live before a judge or jury.
- Upon a finding of likelihood of confusion, the TTAB may refuse to register the mark, in whole or in part, or may cancel a registered trademark in a cancellation proceeding. District courts, however, may award monetary damages, costs, and attorneys' fees, and they may permanently enjoin a party from using a trademark. As the TTAB's remedies are limited, there is generally far less incentive to litigate TTAB proceedings as aggressively as district court infringement actions.
Circuit Split
Apart from the Eighth Circuit, every circuit to address the issue has concluded that TTAB decisions regarding likelihood of confusion are entitled to at least some deference in subsequent trademark infringement actions. For example:
- The Third and Seventh Circuits have accorded preclusive effect to TTAB determinations regarding a likelihood of confusion. See Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244 (3d Cir. 2006); EZ Loader Boat Trailers, Inc. v. Cox Trailers, Inc., 746 F.2d 375 (7th Cir. 1984).
- The Second Circuit has held that TTAB findings regarding a likelihood of confusion should be given preclusive effect, but only when the TTAB takes the marketplace context into account in a meaningful way. See Levy v. Kosher Overseers Ass'n of Am., Inc., 104 F.3d 38, 42 (2d Cir. 1997).
- The Fifth and Eleventh Circuits, while not giving preclusive effect to TTAB decisions regarding a likelihood of confusion, have held that TTAB decisions are entitled to deference unless there is persuasive evidence to the contrary. See American Heritage Life Insurance Co. v. Heritage Life Insurance Co., 494 F.2d 3 (5th Cir. 1974); Freedom Savings and Loan Association v. Way, 757 F.2d 1176 (11th Cir. 1985).
Supreme Court: Issue Preclusion Applies to TTAB Decisions
In a majority opinion written by Justice Alito, the Supreme
Court held that TTAB decisions on likelihood of confusion have
preclusive effect in subsequent district court actions when the
trademark usages at issue are materially the same and ordinary
elements of issue preclusion are met. The Court first clarified
that an agency decision may form the basis for issue preclusion
without violating Article III. It then concluded that nothing in
the Lanham Act's text or structure prevented the application of
issue preclusion.
The Court then examined whether there was a categorical reason why
TTAB decisions could never meet the ordinary elements of issue
preclusion and found there was none. The Court rejected the Eighth
Circuit's finding that the likelihood of confusion issue
decided by the TTAB is not the same issue decided by a district
court in a trademark infringement action. According to the Court,
it does not matter that registration and infringement are governed
by different statutory provisions, or that there are "minor
variations" in the factors used by the TTAB and the Eighth
Circuit to assess likelihood of confusion.
The key inquiry is whether the likelihood of confusion standard
for purposes of registration is the same standard as likelihood of
confusion for purposes of infringement. The Supreme Court concluded
that they are the same because: (i) the operative language of the
registration provision, 15 U.S.C. § 1052(d), is essentially
the same as the infringement provision, 15 U.S.C. § 1141(1);
(ii) the likelihood of confusion language that Congress used in
§§ 1141(1) and 1052(d) has been central to trademark
registration since at least 1881; and (iii) district courts can
cancel registrations during infringement litigation, just like they
can adjudicate infringement in actions seeking judicial review of
registration decisions.
The Supreme Court was not persuaded by Hargis's argument that
the text of the Lanham Act's registration provision asks
whether the marks at issue "resemble" each other, whereas
the text of the infringement provision is directed at "use in
commerce" of the marks. The fact that the TTAB does not always
consider the same usages as a district court does not mean that it
applies a different standard to the usages it does consider. If a
trademark owner uses its mark in ways that are materially the same
as the usages included in its federal trademark application, the
TTAB will be deciding the same likelihood of confusion issue as the
district court in a subsequent or concurrent infringement
litigation. However, if the TTAB does not consider the marketplace
use of the parties' marks, then its decision should not be
given preclusive effect in a subsequent infringement action in
which actual market use is the "paramount"
issue.
The Supreme Court also rejected Hargis's argument that issue
preclusion should not apply because the TTAB uses different
procedures than district courts. The Supreme Court noted that the
correct inquiry is whether the procedures used in the first
proceeding were fundamentally poor, cursory, or unfair. As there
was no reason to doubt the quality, extensiveness, or fairness of
the TTAB's procedures, there was no reason issue preclusion
should not apply.
Finally, the Court rejected Hargis's argument that issue
preclusion should not apply since the stakes are much lower in a
proceeding before the TTAB than in an infringement action. The
Court found that the benefits of registration are substantial, and
Congress's creation of an elaborate registration scheme
confirms that registration decisions can be weighty enough to
ground issue
preclusion.
Justice Ginsburg concurred on the understanding that when the TTAB
does not consider marketplace usage, the TTAB's opinion is not
entitled to preclusion on the likelihood of confusion issue.
Justice Thomas issued a dissenting opinion, which was joined by
Justice Scalia. The dissenting opinion argued that the decision to
grant TTAB determinations preclusive effect was not grounded by a
common law presumption in favor of administrative preclusion or the
text, structure, or history of the Lanham Act. Accordingly, the
TTAB's registration decisions were not entitled to preclusive
effect in subsequent infringement actions.
Practical Implications
Prior to the B&B Hardware decision, the most
significant risk of losing an opposition or cancellation proceeding
was the inability to obtain, prevent, or cancel a trademark
registration. Regardless of the holding, an infringement action
could be instituted in federal district court. Since TTAB decisions
could now have preclusive effect, a negative decision could bar
trademark owners from enjoining use of the challenged mark in
federal court. Given these higher stakes, trademark owners should
anticipate that TTAB proceedings will now be far more contentious.
Parties will be more inclined to devote significant resources to
TTAB proceedings, adopt aggressive positions such as affirmative
defenses and counterclaims, and appeal the TTAB's rulings, if
necessary.
Accordingly, trademark owners should carefully consider whether
they will benefit from a likelihood of confusion determination in
the TTAB or federal court before initiating TTAB proceedings. If a
trademark owner will benefit from a thorough review of marketplace
use and a broader scope of discovery, it may not want to institute
a TTAB action that might bar it from presenting further evidence of
actual use in a subsequent infringement action. On the other hand,
if actual marketplace use of the relevant mark reduces the
likelihood of confusion, TTAB proceedings may provide an
opportunity for trademark owners to increase the chances of finding
a likelihood of confusion between the relevant marks. Similarly, if
a trademark owner anticipates that its key witnesses will not
testify well in court, the TTAB may provide a more favorable forum
for resolving the likelihood of confusion issue since it does not
hear live
testimony.
B&B Hardware may also affect a trademark owner's
ability to obtain a preliminary injunction, which limits or stops
the use of an allegedly infringing mark prior to a final
determination of the merits. Notably, this form of relief is
exclusive to federal courts and, like damages, is unavailable in
TTAB proceedings. In order to obtain a preliminary injunction, a
trademark owner must establish (among other things) that it is both
likely to succeed on the merits and suffer irreparable harm in the
absence of preliminary relief. If the likelihood of confusion issue
has already been decided by the TTAB, it should be far easier to
establish a likelihood of success on the merits. At the same time,
however, a trademark owner who waits until the TTAB issues its
final determination to seek a preliminary injunction may find it
more difficult to establish a likelihood of irreparable harm given
the delay in filing suit. Ultimately, the preclusive effect
afforded to TTAB determinations will benefit trademark owners most
in situations where an applicant files an intent-to-use
application, loses an opposition proceeding before the TTAB, and
then proceeds to use the mark in commerce. Under these
circumstances, the Supreme Court's decision should make it
easier for trademark owners to move for and obtain preliminary
injunctive relief.
Finally, B&B Hardware may also affect the manner in
which goods and services are identified in trademark applications.
On the one hand, it would be beneficial to have a broad
identification for opposition purposes. However, if an applicant
faces an objection to the application, a more narrowly tailored
identification of goods or services would assist in arguments
against a likelihood of confusion.
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.
