On March 24, 2015, the Supreme Court issued its decision in the case of B&B Hardware, Inc. v. Hargis Industries, Inc., reversing the decision of the Eighth Circuit and holding that a decision on likelihood of confusion by the Trademark Trial and Appeal Board (“TTAB”) should be given preclusive effect in subsequent District Court litigation, provided the TTAB decision is based on adjudication of “materially the same” usages as those before the District Court. The Court’s decision comes after granting certiorari to a July 1, 2014 petition filed by B&B Hardware, Inc. (“B&B”), which presented the following two questions:

(1) Whether the TTAB’s finding of a likelihood of confusion precludes a party from relitigating that issue in subsequent infringement litigation in which likelihood of confusion is an element and (2) whether, if issue preclusion does not apply, a district court is obligated to defer to the TTAB’s finding of a likelihood of confusion absent strong evidence to rebut it.

B&B’s appeal stems from a May 1, 2013 decision by the Eighth Circuit Court of Appeals affirming the Eastern District of Arkansas’s decision to give no preclusive effect to a TTAB determination and precluding B&B from presenting any such evidence to the jury. See B & B Hardware, Inc. v. Hargis Indus., Inc., 716 F.3d 1020, 1026 (8th Cir. 2013).

B&B’s appeal to the Supreme Court comes after more than fifteen years of litigation with Hargis Industries, Inc., (“Hargis”) over the parties’ respective trademarks. B&B manufactures and sells a fastener product for the aerospace industry under the name “Sealtight,” while Hargis sells a product under its “Sealtite” mark used in the construction of metal buildings. In 2007, the TTAB denied Hargis’s attempt to register the “Sealtite” mark finding that there was a likelihood of confusion with B&B’s “Sealtight” mark. B&B attempted to use this favorable ruling by the TTAB in the concurrent trademark infringement action by arguing that the TTAB’s finding is preclusive as to the issue of likelihood of confusion. B&B also sought to admit the TTAB’s decision into evidence at trial.

The Eastern District of Arkansas rejected B&B’s arguments and found that the TTAB’s decision was not preclusive on the issue of likelihood of confusion, and further rejected B&B’s attempt to admit the TTAB’s decision into evidence. The Eighth Circuit affirmed the District Court, based on the premise that the TTAB’s analysis of likelihood of confusion is different from that done by a district court during a trademark infringement case. B&B Hardware, 716 F.3d at 1025. The Eighth Circuit also stated that “the same likelihood-of-confusion issues were not decided by the TTAB as those brought in the action before the district court.” Id. at 1024. Because these analyses were different, the Eighth Circuit did not apply issue preclusion to the TTAB’s decision.

With its decision, the Eighth Circuit joined a growing list of Circuit Courts that had been split on this issue, as follows:

Click here to view table.

The Supreme Court’s March 24, 2015 decision settled the circuit split in favor of the Second, Seventh, and Third Circuits. In the 7-2 decision written by Justice Alito, the Court held 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.” Slip Op. at pg. 22.

The Court does acknowledge, however, that not all TTAB findings on likelihood of confusion will meet the necessary elements to prove issue preclusion. Slip Op. at pg. 15. Specifically, the Court noted that if 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 the paramount issue.’” Slip Op. at pg. 18. In reaching its holding, the Court rejected the Eighth Circuit’s reasoning that because the standards applied by the TTAB were different from that applied by a district court, issue preclusion cannot apply. Slip Op. at pg. 16 (“The real question, therefore, is whether likelihood of confusion for purposes of registration is the same standard as likelihood of confusion for purposes of infringement. We conclude it is . . ..”).

With the Supreme Court holding that the likelihood-of-confusion standards in the TTAB and District Courts are sufficiently aligned for there to be issue preclusion, District Court litigants can be expected to focus their arguments for and against issue preclusion on whether there is alignment of the facts underpinning a TTAB decision with the facts asserted in the subsequent litigation to lead to actual marketplace confusion:

If a mark owner uses its mark in ways that are materially the same as the usages included in its registration application, then the TTAB is deciding the same likelihood-of-confusion issue as a district court in infringement litigation. By contrast, if a mark owner uses its mark in ways that are materially unlike the usages in its application, then the TTAB is not deciding the same issue. Thus, if 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 the paramount issue.

Slip Op. at 18

Justice Thomas and Justice Scalia dissented, calling into question the majority’s reliance on a presumption that when Congress enacts statutes authorizing administrative agencies to resolve disputes it intends those agency decisions to have preclusive effect in Article III courts.