In a 7-2 decision, the U.S. Supreme Court held that a party can be precluded from litigating an issue that was previously decided by the United States Patent and Trademark Office ("USPTO"). B&B Hardware, Inc. v. Hargis Indus., Inc., (March 24, 2015). Here, B&B registered the mark SEALTIGHT for metal fasteners with the USPTO. A few years later, Hargis filed an application to register the mark SEALTITE for metal fasteners with the USPTO. B&B filed an opposition to Hargis' application in the USPTO. B&B also sued Hargis for trademark infringement in district court. Before the district court litigation reached trial, the opposition proceeding before the Trademark Trial and Appeal Board ("TTAB") of the USPTO concluded. The TTAB refused to register Hargis' mark because it was confusingly similar to B&B's registered mark. Hargis did not appeal the TTAB's decision so it became final. Because the district court litigation was still ongoing, B&B argued to the district court that Hargis was precluded from contesting likelihood of confusion because of the TTAB decision. The district court disagreed because the TTAB is not a district court. The district court case proceeded to trial where a jury found that there was no trademark infringement because there was no likelihood of confusion between the two marks. B&B appealed to the Eighth Circuit Court of Appeals, which affirmed the district court decision of non-infringement. B&B then appealed to the U.S. Supreme Court, which reversed the Eight Circuit, and found that the TTAB decision could preclude Hargis from arguing no likelihood of confusion in a district court litigation and remanded the case to determine if issue preclusion should apply.
The U.S. Supreme Court's decision turned on three issues. First, the U.S. Supreme Court considered whether an administrative agency decision, such as a TTAB decision, can ever be ground for issue preclusion. The purpose of issue preclusion is to prevent a losing party from re-litigating the same issue over and over again until it wins. There is no right of a losing party for a rematch. Barring suits for issue preclusion protects against multiple lawsuits, inconsistent verdicts, wasting of judicial resources, and wasting money. With this in mind, the U.S. Supreme Court found no reason why that rationale should be limited to two district court litigations. It should also apply to rulings from administrative agencies. Not letting issue prelusion attach to administrative agencies decisions would allow parties multiple opportunities to re-litigate the same issue over and over circumventing the intent of issue preclusion.
Second, the U.S. Supreme Court considered if there was any reason why Congress would not have wanted issue preclusion to attach to decisions of the TTAB. The U.S. Supreme Court reviewed previous case law and the statutes and could not find any indication that Congress did not want issue preclusion to attach to decisions of the TTAB.
Third, the U.S. Supreme Court determined if there is a categorical reason why TTAB decisions regarding registration can never meet the ordinary elements of issue preclusion. The U.S. Supreme Court noted that it did not matter that registration by the USPTO and trademark infringement are governed by different statutes. Nor does the standard that each tribunal use have to be identical. That is, it is not an issue if there are minor variations in the standard used by the TTAB for registration and the district court for infringement. The U.S. Supreme Court believed that the two standards are legally equivalent, which is all the matters. Indeed, the U.S. Supreme Court noted that district courts, using its standard, has the ability to cancel trademark registrations during infringement litigation and adjudicate infringement in suits seeking judicial review of registrations.
The U.S. Supreme Court also considered the effect of procedural differences between a TTAB trial and a district court trial. For example, there are no live witnesses at a TTAB trial. The U.S. Supreme Court determined that procedural differences, by themselves, are not determinative. The only issue is whether the procedures used by the first tribunal were fundamentally poor, cursory, or unfair. The TTAB procedures were not, so issue preclusion should apply.
The U.S. Supreme Court, however, did not hold that issue preclusion should always apply to TTAB decisions. "If the mark owner uses its mark in ways that are materially the same as the usage included in its registration application, then the TTAB is deciding the same likelihood-of-confusion issue as a district court litigation." If the TTAB does not consider that actual use of the mark, then issue preclusion should not apply.
Two justices dissented from the opinion. The dissent believed that a decision by the TTAB (or any other administrative agency), cannot preclude a party from litigating an issue in a district court. The dissent did not believe that there is any support in any legislation or previous case law to support extending issue preclusion to administrative agency decisions. Furthermore, the dissent is concerned about separation of powers because administrative agencies are part of the executive branch of government, not the judicial branch. Allowing issue preclusion from a TTAB decision deprives a party the right to seek remedy for a wrong from a district court.
This case has been pending before the USPTO and district courts for nearly 20 years. There are likely few cases that have a similar fact pattern. The U.S. Supreme Court's holding, however, is likely to have broad ramifications. If administrative agency decisions can be grounds for issue preclusion, parties need to carefully consider bringing such actions before an administrative agency and whether to appeal an adverse decision because those decisions can have preclusive effect on later litigation.