On March 24, 2015, the U.S. Supreme Court heightened the importance of U.S. Trademark Trial and Appeal Board (“TTAB”) decisions in related trademark infringement litigation which will likely result in brand owners having to battle more extensively in TTAB actions. B&B Hardware, Inc. v. Hargis Industries, Inc., ___ U.S. ___ (2015). The Court held that a prior TTAB ruling on likelihood of confusion between two trademarks can, in certain circumstances, be binding in a related trademark infringement action in federal court. This is a significant ruling because TTAB administrative proceedings determine whether or not a trademark is capable of registration, not use. Under B&B Hardware, TTAB rulings now have the potential to impact use of a trademark, which has significant implications for brand owners’ U.S. registrations and enforcement strategies and will require that TTAB actions be taken all the more seriously.
The B&B Hardware case involved two manufacturers of metal fasteners operating in different industries: B&B Hardware manufactures fasteners for the aerospace industry, while Hargis Industries manufactures fasteners for use in construction. In 1993, B&B Hardware registered its SEALTIGHT mark in connection with metal fasteners for the aerospace industry. In 1996, Hargis applied to register SEALTITE in connection with metal fasteners for use in construction. B&B HARDWARE objected to Hargis’ registration of the SEALTITE mark in opposition proceedings before the TTAB and Hargis’ use of the trademark in an infringement action brought in federal district court.
In 2007, the TTAB issued a ruling in favor of B&B Hardware that found a likelihood of confusion between the two marks. Though an appeal to a federal district court or the Federal Circuit Court of Appeals was available, Hargis chose not to do so. In a concurrent federal suit for trademark infringement, B&B Hardware argued that the TTAB’s decision should have a preclusive effect regarding likelihood of confusion. The district court disagreed, and a jury subsequently found no likelihood of confusion between the marks.
On appeal, the U.S. Court of Appeals for the Eighth Circuit upheld the jury’s decision, noting that the TTAB uses different factors to determine questions involving likelihood of confusion, and had given too much weight to the appearances and sounds of the two marks. In B&B Hardware, the Supreme Court reversed the Eighth Circuit's decision, holding that the question of confusion had been “forever settled” by the TTAB under the doctrine of issue preclusion. B&B Hardware at 8.
The doctrine of issue preclusion provides that when a determination has been made with regard to a certain question in dispute, that determination is considered conclusive in subsequent actions involving the same question. Among other exceptions, courts might not consider a prior determination conclusive when the specific issue cannot be appealed or there are differences in the quality or extensiveness of the procedures followed in separate actions. In theory, issue preclusion prevents wasting time and money in multiple lawsuits, conserves judicial resources, and minimizes the possibility of inconsistent verdicts.
In B&B Hardware, the Court considered whether the TTAB’s prior decision on likelihood of confusion (a ruling by an administrative agency) should have a preclusive effect on likelihood of confusion in a trademark infringement suit in federal court. The Court reasoned that the TTAB acted in a judicial capacity and had resolved the disputed question of likelihood of confusion using essentially the same standard that federal courts use to determine likelihood of confusion. As such, the TTAB’s decision precluded the parties relitigating the same issue in the infringement suit. The Court also found that there were no evident reasons why TTAB decisions should not receive preclusive effect because Congress, in enacting the relevant trademark laws, did not specifically provide so.
Despite the significant implications raised by its decision, the Supreme Court was careful to state that “for a great many registration decisions issue preclusion obviously will not apply because the ordinary elements [of issue preclusion] will not be met.” For example, issue preclusion will not apply if the use of the respective marks in the marketplace is different from the marks as registered and viewed by the TTAB in the abstract. Where the TTAB does not “consider the marketplace usage of the parties’ marks” in the same way federal courts consider such usage, the TTAB’s decision will not have a binding effect in a subsequent infringement action.
Practical Impact on Brand Owners
- Parties will need to consider potential implications in a possible federal court action when initiating and defending opposition or cancellation actions before the TTAB. On one hand, a favorable TTAB ruling could lower the costs of obtaining an injunction or damages in a subsequent infringement action. On the other hand, an unfavorable TTAB ruling could hamper later infringement actions.
- The costs of TTAB proceedings will likely increase as the Court's decision makes the stakes higher to put on a full case before the TTAB.
- If a losing party in a TTAB proceeding believes the TTAB's decision is wrong, it should consider appealing the decision to the Federal Circuit or seeking a de novo review from a district court as opposed to fighting out a full-blown trademark infringement action in federal court.
- If the TTAB finds likelihood of confusion, there is an increased risk the losing party will be sued for trademark infringement in federal court seeking monetary damages and/or injunctive relief.
- The reasoning behind the Supreme Court’s issue preclusion ruling could apply to the TTAB’s determinations on other issues, including descriptiveness, acquired distinctiveness, priority, abandonment and genericness.
- The specific facts of a dispute may change the strategy for when brand owners may find it more attractive to pursue an action in federal court as opposed to the TTAB or vice-versa.