In a 7-2 split decision issued on March 24, 2015, the U.S. Supreme Court held that Trademark Trial and Appeal Board (“TTAB”) rulings may have preclusive effects in subsequent federal district court litigation. The Court ruled that so long as the elements of issue preclusion are met, it is irrelevant that the TTAB is not an Article III court.
The decision in B&B Hardware, Inc. v. Hargis Indus., Inc. concluded an 18-year trademark dispute between two fastener manufacturers, B&B Hardware, Inc. (“B&B”) and Hargis Industries, Inc. (“Hargis”). In short, B&B registered the mark SEALTIGHT for its fasteners for the aerospace industry in 1993. Three years later, Hargis applied for federal trademark registration of its product “SEALTITE” for its fasteners for construction industry. B&B opposed Hargis’s attempt to register the mark “SEALTITE.” alleging before the TTAB that the marks were confusingly similar.
The following events took, in the words of the Justices, a labyrinthine turn. The question of whether either of the marks should be entitled to registration has bounced around within the PTO for nearly two decades. Contemporaneously, related federal infringement litigation was brought three times and two separate juries were empaneled and returned verdicts.
However, the question presented before the Supreme Court case arose from the following facts.
When the latest district court infringement case was pending, the TTAB denied Hargis’ attempt to register its trademark and found that there was a likelihood of confusion with B&B’s mark. B&B then argued in Federal Court that Hargis could not contest likelihood of confusion because of the preclusive effects of the TTAB decision. The district court disagreed, found no infringement and reasoned that the TTAB is not an Article III court; thus, issue preclusion does not apply.
Upon appeal, a majority panel of the Eighth Circuit affirmed on three bases: (1) because the TTAB uses different factors than the Eighth Circuit to evaluate likelihood of confusion; (2) because the TTAB placed too much emphasis on the appearance and sound of the two marks; and (3) because Hargis bore the burden of persuasion before the TTAB, while B&B bore the burden before the district court.
The Supreme Court granted certiorari and reversed the Eighth Circuit opinion. The majority rejected Hargis’ contention that issue preclusion may only apply when the same issue is before two courts. Rather, the Court ruled that when an agency “is acting in a judicial capacity and resolves disputed issues of facts” and when an agency’s enabling statute does not limit the applicability of issue preclusion, then issue preclusion can apply between the administrative agency and a court.
The Court also rejected Hargis’ argument that the stakes in a TTAB proceeding, which involves determination of whether a mark should be registered, are far lower than those in a federal infringement lawsuit. It noted, “[w]hen registration is opposed, there is good reason to think that both sides will take the matter seriously. Congress’ creation of an elaborate registration scheme, with many important rights attached and backed up by plenary review, confirms that registration decisions can be weighty enough to ground issue preclusion.”
The Court’s decision will likely change the role and the relative importance that parties will place on TTAB proceedings. Proceeding records will likely get more voluminous with increased attention on discovery since the parties will not want to risk missing evidence for fear that they will be unable to raise them later. On some likelihood of confusion matters, the Trademark Board may even gain traction as the preferred battleground. Opponents, often weary of juries, might be tempted to try their luck before the TTAB, then take a favorable decision and use it as a basis for a rapid injunction and potential award of damages.
Gibbons will continue to monitor developments in trademark law.