January 26, 2016 Articles

Likelihood of Preclusion?

How a recent Supreme Court decision may impact trademark litigation

by John Blattner

Trademark infringement cases in the federal courts turn on the question of "likelihood of confusion": does the defendant's trademark so resemble the plaintiff's that consumers who intend to buy the plaintiff's product may buy the defendant's product by mistake? If the answer is yes, the defendant will likely be permanently enjoined from further use of its trademark.

Likelihood of confusion analysis is also the key issue in opposition and cancellation proceedings in the Trademark Trial and Appeal Board (TTAB), an administrative tribunal of the U.S. Patent and Trademark Office (USPTO), which determines whether the defendant will be entitled to federal registration of its trademark. The TTAB has no authority to enjoin the defendant's use of its mark. But a recent ruling by the Supreme Court suggests that a determination of likely confusion in the TTAB may, under certain circumstances, make a court injunction a virtual certainty.

The case is B&B Hardware, Inc. v. Hargis Industries, Inc., 135 S. Ct. 1293 (2015), which addressed the question of when—if ever—a determination by the TTAB can preclude litigation of an issue in a lawsuit brought in federal district court. For some time prior to the B&B Hardware decision, most trademark practitioners seem to have assumed, and at least two circuits (the Fifth and the Eleventh) had ruled, that TTAB judgments could never have preclusive effect in federal court, owing to differences in the TTAB's scope of authority (it cannot enjoin trademark use), procedures (for example, the TTAB does not take live testimony but conducts trials on the basis of written submissions), and evidentiary standards (chiefly the district court's reliance on what actually happens in the marketplace to assess likelihood of confusion as compared with the TTAB's consideration, on certain key elements, of no more than is written in the parties' respective registrations and applications).

The case involved a protracted (almost 20-year!) dispute between B&B, which used and owned a federal registration for the mark SEALTIGHT for metal fasteners "for use in the aerospace industry," and Hargis, which was using and had applied to register the mark SEALTITE for metal fasteners "for use in the manufacture of metal and post-frame buildings." Id. at 1301. B&B had opposed Hargis's application to register SEALTITE in the TTAB, and had also sued Hargis for trademark infringement in federal district court, both on grounds of likelihood of confusion.

As it happened, the TTAB proceeding ended first, with a determination that Hargis's SEALTITE did create a likelihood of confusion with B&B's SEALTIGHT and thus was not entitled to registration. B&B argued to the district court that Hargis could no longer contest likelihood of confusion there because of the preclusive effect of the TTAB ruling. The district court agreed and the Eighth Circuit affirmed.

The Supreme Court held "that a court should give preclusive effect to TTAB decisions if the ordinary elements of issue preclusion are met." Id. at 1299. It acknowledged important differences between the TTAB and the courts, including most prominently:

It is true that "a party opposing an application to register a mark before the Board often relies only on its federal registration, not on any common-law rights in usages not encompassed by its registration," and "the Board typically analyzes the marks, goods, and channels of trade only as set forth in the application and in the opposer's registration, regardless of whether the actual usage of the marks by either party differs. This means that unlike in infringement litigation, "[t]he Board's determination that a likelihood of confusion does or does not exist will not resolve the confusion issue with respect to non-disclosed usages."

Id. at 1307–08 (alteration in original) (citations omitted) (quoting Brief for the United States as Amicus Curiae Supporting Petitioner at 23). Thus, in cases where the parties did not submit—or the TTAB did not consider—evidence on one or more of the elements of likelihood confusion analysis, the TTAB determination would not meet the "ordinary elements of issue preclusion" and would not have preclusive effect. The Court explained:

[I]f a mark owner uses its mark in ways that are materially unlike the usages in its application, then the TTAB is not deciding the same issue. Thus, if the TTAB does not consider the marketplace usage of the parties' marks, the TTAB's decision should "have no later preclusive effect in a suit where actual usage in the marketplace is the paramount issue."

Id. at 1308 (quoting 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 32:101, at 32-246 (4th ed. 2014)). But "a reason not to apply issue preclusion in some or even many cases [does not constitute] a reason never to apply issue preclusion." Id. Thus, "[i]f a mark owner uses its mark in ways that are materially the same as the usages included in its registration application, then the TTAB is deciding the same likelihood-of-confusion issue as a district court in infringement litigation." Id.

Trademark owners have long utilized TTAB proceedings as a low-cost alternative to infringement litigation. For the plaintiff, even though the TTAB lacks the authority to enjoin the defendant's use of its mark, simply keeping an offensive mark off of the USPTO's registry may be enough. In many instances, the inability to obtain a federal registration will cause the defendant to abandon its mark, especially when the mark is crucial to licensing, franchising, or other planned economic exploitation. For a defendant, inability to register a mark may be a relatively minor inconvenience so long as its ability to use the mark is not lost, such that taking the case into federal court as a declaratory plaintiff may not be worth the expense.

In the wake of B&B Hardware, that calculus may need to change—in ways that are not entirely clear. For both parties, the stakes involved in TTAB proceedings have risen dramatically. Both may feel it necessary to offer in the TTAB all of the types of evidence they would ordinarily use in a court action, such as expert testimony and consumer surveys. This could reduce the appeal of the TTAB as a low-cost alternative to court litigation. Both plaintiffs and defendants may be more likely to seek de novo review of the TTAB decision, which would allow for the introduction of additional evidence and arguments.

Some parties may be more likely to use the TTAB, in hopes that success there will obviate the need for court action. Others may find it preferable to forego the TTAB altogether, and instead proceed directly to court, where live testimony is permitted and a greater range of remedies is available. At least in the near term it seems inevitable that assertions of issue preclusion will arise in infringement cases more frequently, and be litigated more extensively, than in the past.

As the Supreme Court acknowledged, for a host of reasons it is reasonable to think that TTAB judgments will not be given preclusive effect in many, if not most, infringement actions. But it is also likely that in light of B&B Hardware, collateral estoppel will be applied more frequently than it has in the past. Thus, trademark attorneys preparing to litigate likelihood of confusion now also must give serious thought to predicting likelihood of preclusion when charting their course.

Keywords: litigation, commercial, business, trademark, TTAB, preclusion, likelihood of confusion, intellectual property, B&B Hardware

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