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Perspective

Inter Partes Litigation Within the U.S. Patent and Trademark Office: New Opportunities for Specialists?

Theodore H. Davis Jr.

©2015. Published in Landslide, Vol. 8, No. 1, September/October 2015, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

For much of the country’s history, inter partes disputes within the U.S. Patent and Trademark Office (USPTO) have not attracted the attention of those more accustomed to litigating the validity of patents and trademarks in the courts. Nevertheless, following their authorization by the America Invents Act (AIA) in 2011, inter partes review and post-grant review proceedings before the Patent Trial and Appeal Board (PTAB) have become increasingly important. Although it occurred in a reexamination proceeding initiated prior to the AIA, one reason for this is the Federal Circuit’s 2013 holding in Fresenius USA, Inc. v. Baxter Int’l, Inc.1 that the PTAB’s invalidation of a patent under the preponderance-of-the-evidence standard of proof can trump an Article III court’s finding of validity under the clear-and-convincing-evidence standard. Another is a series of opinions from the Supreme Court between 2014 and 2015 making litigation in federal district court decidedly less attractive for patentees.2

It is litigation arising in the Trademark Trial and Appeal Board (TTAB), however, that has truly raised the stakes in proceedings before federal agencies such as the USPTO. In B & B Hardware, Inc. v. Hargis Industries,3 the Supreme Court addressed the question of whether a final determination of the likelihood of confusion between two marks by the TTAB can have issue-preclusive (or collateral estoppel) effect in later district court litigation. The Court answered this question affirmatively, holding that “[s]o long as the other ordinary elements of issue preclusion are met, when the usages [of the parties’ marks] adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply.”4

The Court’s “materially the same” language responds to the TTAB’s usual practice of not taking into account how parties actually use their respective marks in the marketplace. In particular, and contrary to a trial court entertaining an infringement action, the TTAB generally compares marks based on how they are described in any filings the parties may have made in the USPTO, which all too often do not address such considerations as the intended customers for the goods and services provided under the marks or the manner in which the marks are presented.5 Because of that practice, much of the commentary on B & B has opined that the decision will have limited effect in subsequent infringement litigation involving the same marks.

Whether that actually proves to be the case, however, remains to be seen. First, the TTAB decides many questions other than the likelihood of confusion between particular marks. With the possible exception of likely dilution, it does so by applying the same doctrinal standards and considering the same evidence and testimony as that applied and considered by Article III courts; in other words, it considers precisely the same issues for purposes of the test for issue preclusion as does a district court. As a consequence, if B & B triggers a wave of holdings of issue preclusion, those holdings are far more likely to involve final adjudications on the merits of questions within the TTAB’s jurisdiction other than likely confusion.

Second, the Court’s escape hatch if the TTAB has not taken marketplace usage into account appears to operate in only one direction. It clearly limits the preclusive effect of plaintiffs’ victories before the TTAB in cases in which the parties’ actual uses of their respective marks would make confusion unlikely in the real world. But what of the outcome of an inter partes proceeding in which the plaintiff fails to demonstrate likely confusion even under an application of the TTAB’s pro-plaintiff methodology? Should such a plaintiff escape the preclusive effect of a defense victory by invoking marketplace considerations when the absence of those considerations from the TTAB’s analysis could only have weighed in the plaintiff’s favor in the first place? A failure to give preclusive effect to a final TTAB determination of no likelihood of confusion under these circumstances would doubly penalize the defendant by (1) forcing it to defend itself without being able to invoke marketplace considerations and then (2) using that same inability to dismiss the effect of any final victory the defendant achieves despite that disadvantage. The more logical rule is that a defendant defeating a claim of likely confusion before the TTAB necessarily has established the absence of likely confusion in the marketplace: in other words, the narrow issue decided in a later infringement action should be subsumed within the broader issue already decided by the TTAB (and therefore be the same issue for purposes of the issue-preclusion analysis). If so, the stakes for plaintiffs advancing claims of likely confusion before the TTAB are considerably higher than for defendants taking issue with those claims.

On a broader level, the Court’s decision is additionally significant because it confirms that the outcome of contentious proceedings before federal agencies generally can have issue-preclusive effect. That holding, which the Court had never previously reached in such an unambiguous fashion,6 is not limited to proceedings within the USPTO. To the contrary, in the short period of time since B & B was decided, the opinion has led litigants (with varying degrees of success) to invoke it in such unrelated contexts as employment disputes,7 suits for recovery under the False Claims Act,8 and bankruptcy proceedings.9 If this trend continues, it may produce an evolution away from a model in which district court litigation is the main event and toward one in which parties represented by counsel with agency-specific expertise have the upper hand.

Endnotes

1. 721 F.3d 1330 (Fed. Cir. 2013), cert. denied, 134 S. Ct. 2295 (2014).

2. See Teva Pharma. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831 (2015) (holding that factual findings underlying patent claim construction are subject to clearly erroneous review, even if claim construction is ultimately a question of law); Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) (holding that abstract ideas are not patentable merely because they are implemented through the use of a computer); Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014) (mandating invalidation of patents for indefiniteness if their claims fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention); Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) (loosening standards for awards of attorneys’ fees to prevailing defendants); Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014) (holding all aspects of district courts’ awards of attorneys’ fees to be subject to review for abuse of discretion).

3. 135 S. Ct. 1293 (2015).

4. Id. at 1310.

5. See, e.g., Octocom Sys., Inc. v. Houston Computer Servs., Inc., 918 F.2d 937, 942 (Fed. Cir. 1990) (“The authority is legion that the question of registrability of an applicant’s mark must be decided on the basis of the identification of goods set forth in the application regardless of what the record may reveal as to the particular nature of an applicant’s goods, the particular channels of trade or the class of purchasers to which sales of the goods are directed.”).

6. For earlier opinions from the Court anticipating the holding in B & B, but ultimately citing other reasons for their outcomes, see United States v. Utah Constr. & Mining Co., 384 U.S. 394, 422 (1966); Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 403-04 (1940).

7. See, e.g., Jackson v. Frisco Indep. Sch. Dist., No. 14-40371, 2015 WL 3687803, at *1 (5th Cir. June 15, 2015).

8. See United States v. United Techs. Corp., 782 F.3d 718, 726 (6th Cir. 2015).

9. See In re Bennett, 528 B.R. 273, 277 (Bankr. E.D. Pa. 2015).

Theodore H. Davis Jr.

Theodore H. Davis Jr. is chair of the ABA Section of Intellectual Property Law. He is a partner at Kilpatrick Townsend & Stockton LLP in Atlanta, Georgia, where he divides his practice between client counseling and litigation in the fields of trademark, copyright, false advertising, and unfair competition law. He is also an adjunct professor at Emory University School of Law.