Since the U.S. Supreme Court decided in B&B Hardware, Inc. v. Hargis Indus., Inc. that the decisions of the Trademark Trial & Appeal Board can be preclusive in later civil litigation, practitioners have been on the watch to see how federal district courts would apply this new rule.  The federal court in the Southern District of New York has now had an occasion to apply B&B Hardware to a dispute involving wines.

The Plaintiff Cesari is an Italian wine producer and owner of a federal trademark registration for the mark LIANO for use in connection with wines.  The Peju defendants are family-owned companies operating a winery in Northern California.  In 2003, Peju applied to register the mark LIANA, also for wines.  Cesari opposed Peju’s application, and in 2004 the Trademark Trial & Appeal Board granted summary judgment in Cesari’s favor, finding that the marks were confusingly similar.

Although thwarted in its efforts to register the mark, Peju (according to the district court decision) nevertheless continued to use the mark, selling several hundred cases over the years, mostly at high prices through specific trade channels.  They also opened a second winery using the LIANA name.  Cesari, oddly, did nothing about this, at least until 2016, when Peju had the temerity to file a new trademark application for the LIANA mark.  Cesari again opposed, but also sued for infringement in federal court.

Cesari moved for summary judgment in district court, on the grounds that the 2004 TTAB decision was preclusive as to the issue of confusing similarity.  On December 11, 2017, the court issued an order granting summary judgment (at least with respect to the Peju entity that was party to the original opposition).  The court reasoned that the parties and issues were identical, and that the issue had been fully and fairly litigated in the TTAB proceeding.

Peju argued that the issues were not the same, because the TTAB did not (as indeed it cannot) assess certain marketplace conditions which might make confusion less likely.  Specifically, Peju pointed out that: (a) the wines are different varieties and originate from different regions; (b) its wines are sold at a high price point, to a more sophisticated purchaser; and (c) its wines are sold through limited online and offline channels.  The court found all this to be “a distinction without a difference” and blithely concludes that the “parties each use their mark in ways that are materially the same as the usages adjudicated by the TTAB.”  The narrower uses described by Peju in this case, the court felt, were encompassed in the broader uses addressed by the TTAB.

The court, unfortunately, seems very much to be missing the point.  The court quotes but ignores this passage from the B&B Hardware decision: “Thus, if the TTAB does not consider the marketplace usage of the parties’ marks, the TTAB’s decision should have no later preclusive effect where the actual usage in the marketplace is a paramount issue.”  The court suggests that issue preclusion would not apply only if Peju were selling something completely different – “bicycles or soda, for instance”.

This is precisely the sort of post-B&B Hardware decision that some practitioners feared – and that Justice Ginsburg appeared to anticipate in her concurrence, where she states:

The Court rightly recognizes that “for a great many registration decisions issue preclusion obviously will not apply.”  That is so because contested registrations are often decided upon “a comparison of the marks in the abstract and apart from their marketplace usage.” When the registration proceeding is of that character, “there will be no [preclusion] of the likel[ihood] of confusion issue . . . in a later infringement suit.”  On that understanding, I join the Court’s opinion.  [Citations omitted.]

The Cesari court appears to misapprehend the nature and scope of TTAB proceedings, and in particular the limitations on the evidence the parties can introduce.  The TTAB must consider all possible uses under the umbrella of “wines” and thus overlap is inevitable.  The district court, by contrast, is supposed to examine the likelihood of confusion arising from what the parties are actually doing.  The court in Cesari dodges that responsibility.  (And if confusion is so likely, one wonders why Cesari did not feel it necessary to pursue the matter for twelve years.)

All of which points to the higher stakes which now attach to TTAB proceedings, and the need for counsel in TTAB proceedings to make a very clear record about what the Board did and did not consider, in the event of future litigation.

The case is Cesari S.R.L. v. Peju Province Winery L.P. et al., Case No. 17 Civ. 873 (NRB), U.S. Dist. Ct., S.D.N.Y.