Supreme Court holds that TTAB’s decisions have preclusive effect on courts

By Marie-Andrée Weiss

Supreme Court trademark cases are quite rare, and so the recent B&B Hardware, Inc. v. Hargis Industries, Inc. case has been much discussed. The Supreme Court held that Decisions of the Trademark Trial and Appeal Board (TTAB) have a preclusive effect in subsequent trademark infringement suits if the other ordinary elements of issue preclusion are met; that is, when the usages adjudicated by the TTAB are materially the same as those before the district court.

Recap of the Procedure Described as “Labyrinthine” by the Supreme Court

There are two ways for a trademark owner to prevent another mark to be registered, if he believes there is a likelihood of confusion with his own mark. Under 15 U.S.C. § 1052(d), he may file an opposition to the registration of the junior mark, claiming that it “so resembles [the registered mark]… as to be likely, when used on or in connection with the goods of the applicant, to cause confusion, or to cause mistake, or to deceive.” In that case, it is the TTAB which ultimately decides whether there is or is not a likelihood of confusion between the two marks.

A trademark owner may also choose to file a trademark infringement suit in a federal court, under 15 U.S.C. § 1114(1), the infringement provision of the Lanham Act. A registration proceeding and a trademark infringement suit can occur at the same time, which was the case here.

Petitioner B&B Hardware (B&B) and Respondent Hargis Industries, Inc. (Hargis) both manufacture metal fasteners, a product which must seal tightly. They have been litigating for almost twenty years. B&B registered SEALTIGHT as a trademark in 1993. Hargis filed a trademark registration for the SEALTITE trademark in 1996, but the USPTO refused the register the mark because it was confusingly similar with SEALTIGHT.

SEALTITE was published for opposition in 2002 and B&B filed an opposition in February 2003, claiming it was confusingly similar with SEALTIGHT. The TTAB sided with B&B, and Hargis did not seek judicial review of this decision. B&B had also filed a trademark infringement suit against Hargis, but the TTAB published its decision before the District Court ruled on likelihood of confusion. B&B then argued that Hargis could not contest likelihood of confusion because of the preclusive effect of the TTAB decision. The District Court rejected issue preclusion, reasoning that the TTAB is an agency, not an Article III court, that is, a court created by Article III of the U.S. Constitution, which created the federal courts.

B&B appealed to the Eight Circuit, which affirmed, not on Article III grounds, however, but because the TTAB considers different likelihood of confusion factors than the Eighth Circuit. Indeed, the TTAB use the thirteen DuPont factors to evaluate likelihood of confusion, but the Eight Circuit uses the six-factor test from the 1980 Squirt Co v. Seven-Up Co. case.

B&B appealed to the Supreme Court, which granted certiorari. On March 24, 2015, the Supreme Court reversed the judgment and remanded it for further proceedings.

The question presented to the Supreme Court was whether the District Court should have considered the issue to be precluded because the TTAB’s decision that SEALTITE is confusingly similar to SEALTIGHT.

TTAB is an administrative agency, not a court, but agency decision can ground issue preclusion

The District Court had rejected issue preclusion because the TTB is not an Article III Court. But the Supreme Court disagreed, because the Restatement (Second) of Judgments and several of its own cases “make clear that issue preclusion is not limited to those situations in which same issue is before two courts “ (p. 9, emphasis in the text), noting further and that “where a single issue is before a court and an administrative agency, preclusion also often applies” (p.9).

The Lanham Act does not forbid issue preclusion

The Supreme Court cited its 1991 Astoria Fed. Sav. & Loan Assn. v. Solimino case, which held that issue preclusion is available unless it is “evident” that Congress does not want it (Astoria at 108). For the Supreme Court, neither the text nor the structure of the Lanham Act forbids issue preclusion, noting that “[w]hat matters here is that registration is not a prerequisite to an infringement action. Rather, it is a separate proceeding to decide separate rights” (p.14).

The TTAB and the courts apply the same likelihood of confusion standard

The Eighth Circuit had refused to issue preclusion because the TTAB did not use the same factors than the Eighth Circuit to assess likelihood of confusion, reasoning that legal issues are not identical if the second action applies a different legal standard than the first one, even though the facts are the same in both suits.

The Supreme Court cited Professor McCarthy’s seminal treaty on trademark law, where he wrote that issue preclusion applies where “the issues in the two cases are indeed identical and the other rules of collateral estoppels are carefully observed” (p.15). For the Supreme Court, “the same likelihood-of-confusion standard applies to both registration and infringement” (p.15), and the real question is “whether likelihood of confusion for purposes of registration is the same standard as likelihood of confusion for purposes of infringement” (p. 16).

The Supreme Court noted that “the operative language,” that is, the registration provision codified at 15 U.S.C. § 1052(d), and the infringement provision codified at 15 U.S.C. § 1114(1) ”is essentially the same.” Also, the likelihood-of-confusion language used in the Lanham Act “has been central to trademark registration since at least 1881,”when the Act of March 3, 1881 used a “likely to cause confusion” standard for registration. Finally, “district courts can cancel registrations during infringement litigation [and] [t]here is no reason to think that the same district judge in the same case should apply two separate standards of likelihood of confusion”( p. 15-16).

Hargis unsuccessfully argued that the infringement standard in the registration provision of the Lanham Act is whether the marks resemble each other, while the infringement standard in the infringement provisions of the Lanham Act is whether the infringing mark has been used in commerce. But while the Supreme Court found “some force” in this argument, as the TTAB only reviews the uses of the mark encompassed in the registration, not actual uses, some of which may not be disclosed, the argument nevertheless fails as this does not mean that the TTAB “applies a different standard to the usages it considers” (p. 18, Supreme Court emphasis).

TTAB and court procedures are both of the same quality

The Supreme Court added that “[n]o one disputes that the TTAB and district courts use different procedures”(p.19). However, “[p]rocedural differences, by themselves… do not defeat issue preclusion” (p.20). Instead, for the Supreme Court, “the correct inquiry is whether the procedures used in the first proceeding were fundamentally poor, cursory, or unfair. As there was no “categorical reason to doubt the quality, extensiveness, or fairness” of the TTAB procedure, the argument that registration is incompatible with issue preclusion failed.

Registration action and infringement action are both important

Hargis also argued that, because what is at stake in a registration action is much less important than an infringement action, issue preclusion should never apply to TTA decisions. The Supreme Court disagreed, as registration is an important process with “substantial” benefits, such as incontestability of a mark after five years of being registered, and Congress even allowed district courts to review the TTAB decisions de novo. Because a district court adjudication has a preclusive effect in another district court, the Supreme Court concluded that it should not be different for unchallenged TTAB decisions.

The Supreme Court instructed the court on remand 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” (p. 22).