On March 24, 2015, the United States Supreme Court decided that a Trademark Trial and Appeal Board ("TTAB") ruling on likelihood of confusion can preclude later litigation on the same issue in federal courts in cases where the cases are "materially the same." As a result of B&B Hardware, Inc. v. Hargis Industries, Inc. et al., case number 13-352, 575 U.S. ___ (2015), a TTAB decision regarding registration may also decide whether a court will prevent someone from using a trademark.
The TTAB is an administrative board within part of the United States Patent and Trademark Office ("PTO"). This board hears and determines actions regarding the registration or cancellation of trademarks. The key factor in these actions is often whether there is a "likelihood of confusion" between the trademarks at issue. Federal courts also analyze whether there is a "likelihood of confusion" between trademarks in infringement lawsuits.
B&B brought an opposition action in the TTAB against Hargis' application to register SEALTITE for metal screws for use in the construction industry. B&B's opposition was based on its registration for SEALTIGHT for metal fasteners in the aerospace industry. The TTAB refused Hargis' application, concluding it was likely to be confused with B&B's prior registration.
B&B also brought a trademark infringement action against Hargis' use in federal district court. B&B argued Hargis was prevented from relitigating the TTAB's finding of likelihood of confusion since the court had to accept the TTAB's decision on that issue under the concept of "issue preclusion." Issue preclusion means a decision on an issue directly involved in one legal proceeding is binding in a subsequent action between the same parties.
The district court refused to be bound by the TTAB, stating only decisions by constitutionally authorized courts can have preclusive effect and administrative agencies like the TTAB cannot have preclusive effect. A jury ruled in favor of Hargis, in essence ignoring the TTAB's finding of likelihood of confusion for registration purposes and finding Hargis' mark was not likely to be confused with B&B's mark and, therefore, did not infringe B&B's mark.
The Eighth Circuit Court of Appeals affirmed the district court, but based its reasoning on the differences between the TTAB's likelihood of confusion test and the Eighth Circuit's likelihood of confusion tests. The Eighth Circuit concluded the TTAB's decision on the issue of registration was different from the infringement action in the district court. Therefore, the Eighth Circuit held the district court was not bound by the TTAB's decision.
The Supreme Court reversed, ruling that TTAB decisions can have preclusive effect "[s]o long as the other ordinary elements of issue preclusion are met" and "the usages adjudicated by the TTAB are materially the same as those before the district court." The Supreme Court was careful to note that TTAB decisions will not always have a preclusive effect on federal infringement proceedings. For instance, "[i]f the TTAB does not consider the marketplace 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 a paramount issue."
The Supreme Court's ruling is limited to situations where the usages decided by the TTAB are materially the same as those before the district court. The key distinction between TTAB proceedings and district court infringement cases is that the TTAB only determines issues of registrability while the courts can determine both the right to use and the right to register.
The impact of proceeding before the TTAB is now potentially much higher since an adverse decision on registration could preclude a later action to enjoin use of a mark. From a practical perspective, a party may have to treat the TTAB proceeding as it would a district court action and bring all relevant evidence to bear, including expensive survey evidence and discovery. While TTAB proceedings are traditionally considered a more cost effective process to address trademark concerns, cost differences between TTAB proceedings and district court litigation will likely narrow.
Parties in TTAB proceedings may want to consider selectively and carefully expanding the typical scope of such an action. Now, the introduction of evidence in TTAB proceedings regarding factual inquiries about the commercial impressions in the marketplace, the channels of trade, and related issues may build a record that could determine whether issue preclusion will apply in a subsequent infringement case. A TTAB order excluding certain evidence could help convince a district court that the likelihood of confusion issue that the TTAB decided was materially different from the likelihood of confusion issue that the district court must decide in the infringement action. In that situation, there would be no issue preclusion. If, however, the use reflected in the PTO filings and the actual use of a mark in commerce are essentially the same, the TTAB decision will now likely bind the court.
If an opposer fails to prevent registration at the TTAB, it may want to file a civil action in U.S. District Court under Section 21 of the Lanham Act rather than appealing to the Federal Circuit. In such a case, an opposer would be entitled to de novo review of the TTAB decision and would be able to include infringement claims and, therefore, potentially avoid the TTAB ruling's preclusive effect.
The Supreme Court's decision will impact strategies of protecting and enforcing rights. Where the likelihood of confusion case is contested, parties may be more inclined to forego TTAB proceedings to avoid a potentially preclusive and unfavorable determination. Federal courts offer more control and a broader platform in which to litigate. Moreover, federal motion practice, discovery and judicial involvement offer parties the assurance that they have been given every opportunity to plead and support their claims and defenses. A potential drawback, however, is district courts may not be as familiar as the TTAB in interpreting trademark issues.
Another consequence of this decision is that parties will need to be very careful in the preparation of trademark applications to avoid or create a risk of issue preclusion. The registration process may be used to foreclose future disputes over use. The parameters of applications and their prosecution will, therefore, take on increased importance.
The Supreme Court's decision could result in more resources and expenses in and raise the stakes of TTAB proceedings. Parties may litigate a TTAB action more aggressively since a TTAB decision could have a preclusive effect. For instance, the parties may conduct more discovery and submit more evidence, which could ultimately increase the cost of TTAB proceedings. Alternatively, parties could decide to avoid the TTAB altogether and go straight to federal court, where remedies of injunctive relief and monetary damages are available, even though litigation costs and time commitments are significant.
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