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SCOTUS Holds That Trademark Infringement Defendants in District Court Can be Bound By TTAB’s Prior Findings of Likelihood of Confusion Through the Issue Preclusion Doctrine

SUMMARY  

The Supreme Court issued its opinion March 24, 2015 in the case of B&B Hardware, Inc. v. Hargis Industries, Inc.  The Supreme Court reversed the Eight Circuit and remanded with instructions.  The issue was whether findings of likelihood of trademark infringement by the Trademark Trial and Appeal Board (“TTAB”) are binding on the parties in later district court trademark infringement litigation.  The Supreme Court held that, so long as the ordinary elements of issue preclusion were present, when the usages adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply.

PROCEDURAL POSTURE

Petitioner B&B and respondent Hargis both manufacture metal fasteners.  B&B manufactures for the aerospace industry, while Hargis manufactures for the construction trade.  In 1993 B&B registered “SEALTIGHT” for metal fasteners and other related hardware.  In 1996 Hargis sought to register “SEALTITE” for metal screws for use in the manufacture of metal and post-frame buildings.  B&B opposed Hargis’ application on the basis that the two marks are confusingly similar.  Apparently, after bouncing around the PTO for a decade, the TTAB sided with B&B.  In sum, the TTAB denied Hargis’ application because there would be a likelihood of confusion since the marks and the goods were so similar.  Hargis did not seek judicial review of the TTAB’s decision in either the Federal Circuit or District Court although it could have.

Meanwhile, B&B sued Hargis for trademark infringement.  Before the District Court ruled on infringement, the TTAB announce its decision.  B&B then argued that Hargis could not contest likelihood of confusion because of the preclusive effect of the TTAB decision.  The District Court disagreed, reasoning that the TTAB is not an Article III court.  B&B appealed to the Eighth Circuit.  The panel majority affirmed the District Court for three reasons: (1) the TTAB uses different factors than the Eight Circuit to evaluate likelihood of confusion; (2) the TTAB placed too much emphasis on the look and sound of the marks; (3) Hargis bore the burden of persuasion before the TTAB, while B&B bore it before the District Court.

SUPREME COURT ANALYSIS

The Supreme Court began its analysis by demonstrating that issue preclusion is not limited to situations in which the same issue is before two different courts.  Indeed, the Court noted that its longstanding view has been that an administrative agency (such as the PTO or TTAB) can act in a judicial capacity and resolve disputed issues of fact properly before it and res judicata will apply.

Undergirding the above reasoning, the Supreme Court continued that there was no reason why Congress would not want TTAB decisions to receive preclusive effect.  Nothing in the Lanham Act’s text or structure forbids issue preclusion.            The fact that Hargis could have challenged the TTAB decision de novo in the Federal Circuit or District Court was of no import.

Finally, the Supreme Court found that there was no support for the position that registration decisions are categorically beyond the reach of issue preclusion.  It then analyzed two arguments.  First, although many registrations will not satisfy the ordinary elements of issue preclusion, it does not follow that none will.  Notably, the Eighth Circuit held that the TTAB considers different factors to assess likelihood of confusion than the Eighth Circuit.  The Supreme Court determined that the minor variations in the TTAB’s test and the Lanham Act’s test as applied by the Eighth Circuit are, in essence, the same standard.  Second, even though the procedures in district court and the TTAB are different, the fundamental inquiry is whether the procedures in the TTAB were fundamentally poor, cursory, or unfair.  The Supreme Court determined that they are not.  And even still, basic issue preclusion law had a safety net barring application in instances where a compelling showing of unfairness can be made.

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