TTAB Decisions May Give Rise to Issue Preclusion in District Courts: the Impact of the U.S. Supreme Court’s Decision in B&B Hardware
On March 24, 2015, the United States Supreme Court issued its decision in B&B Hardware, Inc. v. Hargis Industries, Inc., a case that involved the question of whether a decision by the Trademark Trial and Appeal Board (“TTAB”) finding likelihood of confusion could preclude Hargis from contesting likeliood of confusion in federal district court. In short, the Supreme Court held that “[s]o 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.” A copy of the decision is available here: B&B Hardware decision. The oral argument can be listened to here: B&B Hardware oral argument.
Brief Summary of the B&B Hardware Decision
In 1996, Hargis Industries, Inc. (“Hargis”) filed a trademark application for SEALTITE for metal screws with the U.S. Patent and Trademark Office (“USPTO”). When the USPTO published Hargis’ SEALTITE application for opposition in 2002, B&B Hardware, Inc. (“B&B Hardware”) filed an opposition based on its prior rights in its registered SEALTIGHT mark for metal fasteners, including screws. In addition to filing an opposition, B&B Hardware also sued Hargis for trademark infringement in district court.
The TTAB sustained the opposition, issuing a decision that Hargis’ SEALTITE trademark is confusingly similar to B&B Hardware’s SEALTIGHT mark. Hargis did not appeal the TTAB’s decision. After the TTAB ruled in B&B Hardware’s favor, B&B Hardware argued in the infringement case in district court that Hargis could not contest the issue of likelihood of confusion because of the preclusive effect of the TTAB’s decision. The district court disagreed, and the jury returned a verdict for Hargis, finding no infringement.
B&B Hardware appealed to the 8th Circuit, which affirmed on three grounds: (i) the TTAB uses different factors than the 8th Circuit for likelihood of confusion, (2) the TTAB placed too much emphasis on the appearance and sound of the marks, and (iii) Hargis bore the burden of persuasion before the TTAB.
The Supreme Court then granted certiorari and reversed the 8th Circuit, holding that TTAB decisions can have preclusive effect if they meet the ordinary elements of issue preclusion. In so holding, the Supreme Court found that—despite the use of different likelihood of confusion factors—the likelihood of confusion test for registration and for infringement are the same. Yet, in the same breath, the Supreme Court acknowledged that issue preclusion should not apply where the parties’ trademark uses in the marketplace are materially different than the goods or services recited in the applcications (because the TTAB does not consider marketplace uses). The Supreme Court also noted that, while district courts and the TTAB use different procedures, the procedures employed by the TTAB are not unfair. And in any case, the losing party can seek de novo review of the TTAB’s decision by appealing. This led to the Supreme Court’s final summary of its decision:
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.
Although we won’t know the full impact of B&B Hardware until the federal courts and TTAB interpret it and determine its applicability in a variety of contexts, we can anticipate some of the impact it will have on a parties’ strategies in trademark litigation in district courts and the TTAB.
Strategic Impact #1 – Deciding Between the TTAB and District Court at the Outset
At the outset, both parties will need to carefully consider whether to try the trademark case in district court or the TTAB. This decision could turn on a number of case-specific legal and factual issues. Senior users with registered marks may lean towards a TTAB action, as the TTAB generally resolves close cases in favor of the senior user. Alternatively, it may depend on how the parties’ goods or services are identified in their respective applications versus the goods or services that the parties actually provide in the marketplace. For a plaintiff, if the goods are identified similarly in the applications but the real world goods are distinguishable, the plaintiff may opt for litigating in the TTAB whereas the defendant might prefer litigating in district court. Likewise, a defendant may have strong equitable defenses such as laches that the TTAB does not consider, which would weigh in favor of litigating in district court. After all, why litigate in the TTAB if there are issues or defenses that the TTAB will not address? In other words, the initial evaluation will need to be more thorough. This is especially true because, if you wait too long to decide that you want to litigate in district court, the TTAB may be less likely to grant your request to suspend (see Strategic Impact #2).
Strategic Impact #2 – Moving to Suspend the TTAB Proceeding
Suspending a TTAB proceeding pending the outcome of a trademark lawsuit in district court is not a new tactic. But this already common tactic will become used even more often in light of the increased deference to TTAB decisions after B&B Hardware. For parties that can afford it, district court offers so many advantages: consideration of all relevant evidence, issues, and defenses, the availability of monetary damages and injunctive relief, better ability to obtain needed discovery, the availability of harsher sanctions (including monetary sanctions), the ability to have a jury trial, and so on. However, an interesting question is whether the TTAB will become less likely to grant suspension requests. Before B&B Hardware, the TTAB routinely suspended oppositions and cancellations pending the outcome of a district court lawsuit involving the same issues. Now after B&B Hardware, will the TTAB be less likely to suspend proceedings given that its decisions may give rise to issue preclusion? At a minimum, until we see how it plays out, a party that wants to suspend a TTAB proceeding should file the motion for suspension as soon as possible.
Strategic Impact #3 – Defaulting at the TTAB
Issue preclusion is only triggered when the issue was actually litigated in the prior proceeding, which would be the TTAB proceeding in this context. Therefore, defaults do not give rise to issue preclusion. As a result, defendants in TTAB proceedings may now choose to default rather than litigate and potentially be bound by issue preclusion. This would be especially true when the defending party is more concerned with the right to use its mark than the right to register it.
Strategic Impact #4 – Litigating the TTAB Proceeding More Seriously
Clearly, the stakes have gone up in TTAB proceedings. Although the TTAB is still technically just determining the right to registration, that determination will now effect or even determine the right to use as well. Where the TTAB consider the same uses and evidence that would be considered by a district court, the TTAB’s decision will likely control and be dispositive of the right to use too. So, if you’re not going to try to suspend the TTAB proceeding, then you should litigate the TTAB proceeding as seriously as you would a federal trademark infringement case in district court. As a result, TTAB proceedings will more frequently resemble the type of full-scale litigation seen in district court.
Strategic Impact #5 – Appealing the TTAB Decision
If you forge ahead and decide to litigate a TTAB proceeding to a decision, you should appeal the decision if you lose. Even though the B&B Hardware decision gives the district court some discretion to determine the scope of preclusive effect, you would be taking a big risk counting on a district court to find no preclusive effect in a later-filed lawsuit. As the Supreme Court noted in B&B Hardware, the best opportunity for a de novo review of a TTAB decision is an appeal of that decision to a district court or to the Federal Circuit, noting that the evidentiary record is closed if the appeal is made to the Federal Circuit instead of to a district court. Either way, considering the new impact of TTAB decisions, an appeal should be taken if the party intends to contest the decision any further.
Strategic Impact #6 – Considering the Preclusive Effect of Other Issues in a TTAB Proceeding
Although the B&B Hardware decision was rendered in the context of likelihood of confusion, there are other issues that can be tried and determined in a TTAB proceeding. For example, parties in a TTAB proceeding can raise issues relating to priority of rights, ownership, abandonment, protectability of a mark (e.g., descriptiveness), consent agreements, and so on. On many of these issues, there may not be a difference between what the TTAB would consider and what a district court would consider, making it more difficult to avoid issue preclusion. However, there may be a difference in the quality of consideration.
Therefore, in cases where there are meaty, substantive issues other than likelihood of confusion, a party may want to consider the complexity inherent in determining those issues, as well as the need for discovery on those issues. The more complex and the more discovery required, the more a party should gravitate towards litigation in district court.