In trademark infringement suits, how much weight, if any, should federal courts give to Trademark Trial and Appeal Board(“TTAB”) decisions on the likelihood of confusion between marks? Today, it depends—the circuits are split. That may soon change, however, as the U.S. Supreme Court last week agreed to take the issue under review.

Case Overview

On July 1, 2014, the Supreme Court granted certiorari review to B&B Hardware, Inc. v. Hargis Industries, Inc., a trademark infringement case from the U.S. Court of Appeals for the Eighth Circuit. In B&B Hardware, a divided panel of the Eighth Circuit ruled that the TTAB’s finding of a “likelihood of confusion” for purposes of trademark registration is a different issue than a federal court’s determination of a “likelihood of confusion” for purposes of trademark infringement. As a result, the Eighth Circuit ruled that the TTAB’s decisions should be given neither preclusive effect nor deference in infringement actions.

The appeal stems from a trademark dispute between B&B Hardware, Inc. (“B&B”) and Hargis Industries, Inc. (“Hargis”). B&B does business as Sealtight Technology, and sells self-sealing fasteners used in the aerospace industry under the mark “Sealtight.” Hargis does business as Sealtite Building Fasteners, and sells construction fasteners used in the metal construction industry under the mark “Sealtite.” B&B registered its mark with the U.S. Patent & Trademark Office, and, when Hargis subsequently applied to register “Sealtite,” filed an opposition with the TTAB.

The TTAB held for B&B. Applying the multifactor likelihood of confusion balancing test used by the Federal Circuit, the TTAB found that Hargis’s mark was likely to confuse consumers and denied registration. In light of its TTAB victory, B&B sued Hargis in federal district court, alleging trademark infringement and arguing that the TTAB’s likelihood of confusion finding should preclude the court from examining the issue. The district court disagreed and sent the issue to a jury, which ultimately found against B&B. B&B appealed based on issue preclusion, but the Eighth Circuit affirmed.

Circuit Split

As B&B noted in its petition for a writ of certiorari, circuits are split on whether TTAB decisions on the likelihood of confusion should be given preclusive effect or deference in trademark infringement actions in federal court. This split centers primarily on the TTAB’s analysis of the similarity of the trademarked products’ marketplace usage and channels of trade.

For example, the Eighth Circuit in B&B Hardware ruled that TTAB decisions should be accorded neither preclusive effect nor deference because the TTAB’s balancing test does not give sufficient weight to the trademarked products’ marketplace context. The Eighth Circuit reasoned that, in the trademark registration dispute, the TTAB did not decide “the same likelihood-of-confusion issues … as those brought in the [trademark infringement] action before the district court.” In particular, the Eighth Circuit noted that the TTAB largely “ignore[d] a critical determination of trademark infringement, that being the marketplace usage of the marks and products.” Indeed, when applying its multifactor test for likelihood of confusion, the TTAB determined that, based on the usage disclosed in B&B’s trademark registration, B&B’s “Sealtight” product moved in different channels of trade than Hargis’s “Sealtite” product, and that this factor weighed against B&B. Yet, the TTAB still found a likelihood of confusion and rejected Hargis’s application for registration based on the similarity of the marks and the underlying products. Ultimately, the Eighth Circuit concluded that, “While this approach may be appropriate when determining issues of registration,” for issue preclusion to apply in a federal trademark infringement action, the TTAB must have given the marketplace context greater weight.

Unlike the Eighth Circuit, every other circuit that has addressed this issue has concluded that TTAB decisions on the likelihood of confusion carry at least some weight in trademark infringement proceedings. For instance, the Third and Seventh Circuits have both given preclusive effect to such TTAB rulings in trademark infringement cases because the same issue—the likelihood of confusion—already had been “actually litigated.” Jean Alexander Cosmetics, Inc. v. L’Oreal USA, Inc., 458 F.3d 244, 254 (3d Cir. 2006).

Similarly, the Second Circuit has also permitted issue preclusion, but has taken a more fact-specific approach to determining whether it applies. To receive preclusive effect, the TTAB’s analysis “must have taken into account, in a meaningful way, the context of the marketplace.” Levy v. Kosher Overseers Ass’n of Am., Inc., 104 F.3d 38, 42 (2d Cir. 1997). It is unclear, however, whether this standard requires the TTAB to have examined the products’ actual marketplace usage, rather than the usage anticipated or set out in an application or registration.

Finally, the Fifth and Eleventh Circuits have forged a middle road, denying issue preclusion but generally affording TTAB decisions a presumption of correctness “out of respect for the expertise of the TTAB.” Freedom Sav. & Loan Ass’n v. Way, 757 F.2d 1176, 1181 (11th Cir. 1985). These circuits dictate that courts should accept the TTAB’s likelihood of confusion findings “unless the contrary is established by evidence which carries thorough conviction.” American Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3, 10 (5th Cir. 1974).

Given this circuit split, how should the Supreme Court rule? In an amicus brief in support of B&B’s petition for certiorari, the U.S. Solicitor General argued for a clear-cut issue preclusion standard based entirely on “whether the actual usage of the marks at issue in the infringement action differs materially from the usage of the marks set forth in the application for registration and in the opposer’s prior registration submitted in the [TTAB] proceedings.” Applying this standard to B&B Hardware, the TTAB’s ruling would receive preclusive effect if the usage disclosed in B&B’s initial registration and considered by the TTAB concerned the same goods and channels of trade at issue in the federal infringement action. Conversely, issue preclusion would not apply if the marketplace context at issue in the infringement action differed materially from that considered by the TTAB.

Implications for Practitioners

In the grand scheme of trademark law, the question of issue preclusion is a relatively narrow one. Nevertheless, the Supreme Court’s decision in B&B Hardware could have wide-ranging implications for practitioners and trademark owners.

On one hand, a decision in favor of the Eighth Circuit view that denies preclusive effect or deference to the TTAB ruling is likely to reduce the incentive to use that forum as a less-expensive means for resolving trademark disputes. On the other hand, a decision that provides for preclusive effect in all cases is likely to lead to the same outcome, since parties that perceive an advantage in the thorough review of marketplace factors will be forced to bring cases in the federal courts or risk not being able to present such evidence. Although not raised as an issue in B&B’s petition for certiorari, the Supreme Court will also have to consider what rule applies in cases involving intent-to-use applications where there is, by definition, no evidence of the applicant’s marketplace use to consider.

Trademark cases are highly fact-specific and do not often lend themselves to hard and fast rules like those reflected in the Eight Circuit’s opinion and, to a lesser extent, in the decisions from the Third and Seventh Circuits. The Second Circuit’s approach, which relies on a more fact-specific analysis that considers the extent and importance of marketplace evidence before deciding on preclusion, appears to be the most sensible approach. Regardless of the direction it takes, the Supreme Court’s decision should resolve the current circuit split in favor of a uniform approach and bring clarity to the applicable law.

The case is B&B Hardware, Inc. v. Hargis Indus., Inc., 716 F.3d 1020 (8th Cir. 2013),cert. granted, No. 13-352 (U.S. July 1, 2014).