Why it matters: On March 24, 2015, the U.S. Supreme Court in B&B Hardware, Inc. v. Hargis Industries, Inc. reversed and remanded (back to the Eighth Circuit) a case that raised the question of whether Trademark Trial Appeal Board (TTAB) findings can have a preclusive effect in parallel federal court proceedings. The Court held that TTAB findings can be preclusive if the standard issue preclusion requirements are met and the issues litigated in the two actions are "materially the same."
Detailed discussion: On March 24, 2015, the U.S. Supreme Court in B&B Hardware, Inc. v. Hargis Industries, Inc. considered the question of whether Trademark Trial Appeal Board (TTAB) findings can have a preclusive effect in parallel federal court proceedings, and ruled that they can if certain circumstances are met.
In the majority opinion written by Justice Samuel Alito, the Court began by reviewing the facts of the case, noting that the matter before it was just the latest in the nearly two-decade long trademark litigation between Hargis Industries, Inc. (Hargis) and B&B Hardware, Inc. (B&B), both manufacturers of metal fasteners (Hargis for the construction business and B&B for the aerospace industry). In setting the scene, the Court stated that "[t]he twists and turns in the SEALTIGHT versus SEALTITE controversy are labyrinthine" and that the full story wrapped around a "seemingly commonplace set of facts" could "fill a long, unhappy book." For purposes of the opinion it was being asked to render, the Court "picks up the story" in 2002: When Hargis attempted to register a trademark for SEALTITE with the U.S. Patent and Trademark Office (PTO) under the Lanham Act, B&B opposed the registration, claiming that SEALTITE was too similar to B&B's own SEALTIGHT trademark. The TTAB agreed and ruled that Hargis could not register SEALTITE because of the likelihood of confusion. Hargis did not seek judicial review of the TTAB's decision. In parallel district court trademark infringement proceedings between the same parties over the same mark, B&B argued that Hargis was precluded from contesting the likelihood of confusion because of the TTAB's ruling. The district court disagreed, finding that Hargis was not so precluded because, among other things, the TTAB was not an Article III court under the Constitution, and allowed Hargis to contest the likelihood of confusion before the jury. The jury then returned a verdict for Hargis, finding no likelihood of confusion. The Eighth Circuit affirmed, holding that issue preclusion was unwarranted because (1) the TTAB and the district court used different factors to evaluate likelihood of confusion, (2) the TTAB placed too much emphasis on the appearance and sound of the two marks, and (3) Hargis bore the burden of persuasion before the TTAB while B&B bore it before the district court.
In its opinion reversing the Eighth Circuit's ruling, the Court looked first to the underlying question of "whether an agency decision can ever ground issue preclusion." The Court held that it could, stating that "issue preclusion is not limited to those situations in which the same issue is before two courts. Rather, where a single issue is before a court and an administrative agency, preclusion also often applies." Having established that a TTAB ruling can be preclusive, the Court next looked to the question of whether the TTAB used a different standard for determining likelihood of confusion than that applied by the Eighth Circuit, which was the primary reason the Eighth Circuit found that issue preclusion was absent in this case. Here, the Court found the likelihood of confusion factors used by the TTAB and the Eighth Circuit to be "essentially the same," even though they arose from separate statutory schemes and the former were used by the TTAB for questions of trademark registration while the latter were applied by the Eighth Circuit for trademark infringement analysis. After then finding that the Eighth Circuit erred with respect to its other rulings, the Court remanded the case and instructed the Eighth Circuit to "apply the following rule: So 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." On August 24, 2015, on remand, the Eighth Circuit vacated the district court's judgment in favor of Hargis (which it had previously upheld), finding in light of the Supreme Court's decision that the "ordinary elements of issue preclusion" had been met and that the usages and marks litigated before the TTAB were "materially the same" as those before the district court.
See here to read the Supreme Court's 3/24/15 opinion in B&B Hardware, Inc. v. Hargis Industries, Inc.