SCOTUS Rules Federal Courts Can Be Bound By Trademark Trial And Appeal Board Decision on Likelihood of Confusion

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On March 24, 2015, the United States Supreme Court held that prior decisions by the Trademark Trial and Appeal Board (“TTAB”) can prevent federal courts from later deciding whether there is a “likelihood of confusion” in trademark infringement lawsuits. In B&B Hardware, Inc. v. Hargis Industries, Inc., the Supreme Court reversed the decision of the Eighth Circuit Court of Appeals and ruled that, “[s]o 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.”

Petitioner B&B Hardware, Inc. (“B&B”) and respondent Hargis Industries, Inc. (“Hargis”) battled for 18 years over their similar marks for metal fasteners manufactured for use in different industries. B&B’s metal fasteners are known by the mark SEALTIGHT and are used in the aerospace industry, while Hargis’s are known by the mark SEALTITE and used in the construction field. B&B registered SEALTIGHT with the United States Patent and Trademark Office (“USPTO”) in 1993. Three years later, Hargis attempted to register SEALTITE for overlapping goods. B&B opposed Hargis’s registration before the TTAB, claiming Hargis’s mark was “confusingly similar” to B&B’s SEALTIGHT mark. The TTAB agreed with B&B and denied Hargis’s application for registration because it was likely to cause confusion among consumers.

While the TTAB opposition proceeding was pending, B&B sued Hargis in federal district court for trademark infringement. The TTAB decision was announced before the court ruled on likelihood of confusion in the infringement suit. B&B argued that the district court was required to follow the TTAB’s decision on the issue of likelihood of confusion, but the district court held that a decision by a federal agency, like the TTAB, cannot support issue preclusion. The court then determined there was no likelihood of confusion between the two marks. On appeal, the Eighth Circuit acknowledged that a decision by the TTAB could bind a subsequent court on that issue, however, it nonetheless affirmed the district court’s decision, primarily on the grounds that the TTAB uses different factors to evaluate likelihood of confusion than the district courts considering trademark infringement lawsuits.

The Supreme Court reversed the decision of the Eighth Circuit and remanded, holding that a district court can be prevented from relitigating an issue previously determined by a federal agency when: (i) that agency acted in a judicial capacity; (ii) that agency resolved disputed issues of fact properly before it; and (iii) the parties had an adequate opportunity to litigate before the agency. It further explained that issue preclusion is available unless it is “evident” that Congress did not want issue preclusion to apply. In the context of trademark registrations and infringements, it is not “evident” that Congress did not want issue preclusion to apply when the elements of issue preclusion are satisfied. The elements of issue preclusion are satisfied “when an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, then the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” (citing Restatement (Second) of Judgments § 27.)

Although acknowledging that there is no live testimony during TTAB proceedings, the Court rejected Hargis’s argument that the TTAB necessarily uses materially different procedures than the district courts in assessing likelihood of confusion. The Court concluded that there is “no categorical reason to doubt the quality, extensiveness, or fairness of the [TTAB’s] procedures [because,] [i]n large part they are exactly the same as in federal court.”

Applying those standards, the Court held the district court was bound by the TTAB’s decision regarding whether there was a likelihood of confusion between the two marks. This decision should prompt trademark owners to consider whether to oppose registration of an infringing mark before the TTAB or bring a separate lawsuit for trademark infringement in the district court. Before proceeding, litigants should assess which forum will be better-suited to address the specific issues presented by their particular trademark disputes.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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