In Hargis, the Supreme Court ruled that TTAB likelihood of confusion rulings can potentially be given collateral estoppel effect in later trademark infringement court actions between the parties. Because the focus in TTAB proceedings involving registration is typically much narrower than in infringement cases, many courts had determined that issue preclusion was not available. However, the Court's ruling in Hargis left open the possibility in appropriate circumstances—where the TTAB's decision considered the actual marketplace usage of the parties' mark—for the TTAB's likelihood of confusion finding to be binding in a later court action. Because of that potential preclusive effect, litigants in TTAB cases will have to give serious consideration to the manner in which they litigate those cases and the evidence they choose to present.
The Hana Case
The underlying dispute. The plaintiff in Hana began using the "Hana Financial" mark in 1995 and obtained a federal registration for a logo incorporating the name in 1996. The defendant began using its name "Hana Bank" in Korea in 1991. In 1994, the defendant established a service, "Hana Overseas Korean Club," for Korean expatriates and ran advertisements in the United States using the name (and the name "Hana Bank" in Korean). In 2000, the defendant changed the name of the service to "Hana World Center," and in 2002, it established its first physical presence in the United States by operating a bank under the name "Hana Bank."
In 2007, the plaintiff sued the defendant, alleging that use of the name "Hana Bank" infringed the plaintiff's "Hana Financial" mark. The defendant invoked the tacking doctrine, alleging it had priority by virtue of its 1994 uses in advertising. The district court granted summary judgment to the defendant, but the Ninth Circuit reversed, finding disputed issues of fact as to priority. On remand, the case was tried before a jury, which was instructed that a party may claim priority based on the earlier use of a technically distinct, but similar mark that is the legal equivalent of the mark in question and creates the same continuing commercial impression. The jury returned a verdict in favor of the defendant, and the district court denied the plaintiff's posttrial motion for judgment as a matter of law. The Ninth Circuit affirmed, holding that while tacking was available only in narrow circumstances, the issue involved a highly fact-sensitive inquiry reserved for the jury.
The Supreme Court decision. Based on a split in the circuits as to whether tacking was an issue of fact for the jury or an issue of law for the court, the Supreme Court granted certiorari. Noting that the issue of tacking turned on whether the two marks created the same commercial impression in the eyes of the ordinary consumer, the Court found that the test "falls comfortably within the ken of a jury." Hana, 135 S. Ct. at 911. Drawing on rulings from a variety of doctrinal contexts in which the key question is how an ordinary person or community would make an assessment, the Court found that the jury is generally the decision maker empowered to provide the fact-intensive answer. Thus, the Court had little difficulty in unanimously concluding that the question of whether tacking is warranted is one for the jury.
The plaintiff had argued that assessing whether marks are "legal equivalents" necessarily involved application of a legal standard. However, the Court explained that application of a legal standard to facts is a mixed question of law and fact, and those have typically been resolved by juries. To the extent any danger exists that the jury may improperly apply the relevant legal standard, the solution, according to the Court, was to make the standard clear through jury instructions. Hana, 135 S. Ct. at 911–12. Significantly, in this case, the jury instruction on tacking was submitted in essentially the form proposed by the plaintiff.
The plaintiff also claimed that permitting juries to resolve the tacking issue would eliminate the predictability needed for a smooth functioning trademark system. But the Court saw the situation as no different than any other legal area in which juries answer dispositive factual questions or make dispositive applications of legal standards to facts. The unpredictability involved in having juries make such decisions has never been deemed a reason not to employ them. In any event, the Court explained that unpredictability and uncertainty will necessarily be involved in the kind of judgment calls that are required in deciding fact-intensive disputes. Hana, 135 S. Ct. at 912.
The Court pointed out that judges may of course continue to decide the tacking issue where summary judgment is appropriate or in a bench trial. However, where the facts do not warrant summary judgment and a jury has been empaneled to hear the case, tacking is a question to be resolved by the jury. Hana, 135 S. Ct. at 913. Because the Hana case involved such a situation, the Supreme Court affirmed the decision below upholding the jury's determination that tacking was appropriate.
Implications of the Supreme Court's decision. The Supreme Court's decision will likely make it easier for trademark owners to apply the tacking doctrine to an earlier-used mark. As the Ninth Circuit's decision in Hana had noted, judicial decisions held that tacking applies only in "exceptionally narrow circumstances." Hana Fin., Inc. v. Hana Bank, 735 F.3d 1158, 1160 (9th Cir. 2013). If the jury instruction used in Hana is any guide, however, that message will not be conveyed to juries. Rather, the jury will simply be instructed that the marks must create the same continuing commercial impression and the later mark should not materially alter the character of the earlier mark. Such a standard should provide the jury with considerable leeway to uphold variations in marks in more than the "exceptionally narrow circumstances" suggested by legal precedents.
Because the tacking issue only arises in limited contexts, however, the true significance of Hana likely lies in its impact on how likelihood of confusion is to be resolved. Unlike tacking, likelihood of confusion is central to virtually every trademark dispute. There is good reason to believe that the logic of Hana would be equally applicable to the likelihood of confusion issue, which also turns on the ordinary consumer's perception. Indeed, the Ninth Circuit's decision in Hana specifically noted that tacking and likelihood of confusion are "analogous trademark issue[s]." Hana, 735 F.3d at 1164 n.5. And at oral argument before the Supreme Court in Hana, Justice Kennedy asked whether the justices should have in the back of their minds what effect their ruling will have on the likelihood of confusion issue.
If the justices were thinking about the potential impact of their ruling on likelihood of confusion, their decision did not betray such a thought process. The decision is silent about likelihood of confusion, which has also caused a split in the circuits on how it is to be treated. Most courts, including the Ninth Circuit, have found likelihood of confusion to be a pure issue of fact, but the Second and Sixth Circuits, as well as the Federal Circuit, the reviewing court for the TTAB, have held the ultimate issue of likelihood of confusion to be a legal issue.
Beyond the issue of judge vs. jury determination, the split on likelihood of confusion is significant because of its potential impact on the standard of appellate review. Appellate courts that treat likelihood of confusion as a pure fact issue will only overturn decisions if they are clearly erroneous. In the Second Circuit, which treats the issue as a mixed question of law and fact, the individual likelihood of confusion factors (e.g., similarity of the marks, similarity of the goods, etc.) will be reviewed for clear error, but the ultimate balancing of factors is subject to de novo review. Similarly, in the Federal Circuit, likelihood of confusion is reviewed de novo, giving that court considerable authority to monitor and shape the decisions of the TTAB.
If the Hana decision applies to likelihood of confusion as well as tacking, the result could be more deference to lower court rulings in those circuits that previously considered themselves at liberty to review that issue de novo. Perhaps most interestingly, in the context of appeals from TTAB rulings on issues of registration, the Federal Circuit could find itself granting more deference to the decisions of TTAB judges who act both as finders of fact and arbiters of law in such contested proceedings, thereby potentially limiting its oversight role in the registration process. It would be ironic if a decision rooted in the role of the jury ends up having this effect in a context in which there is no jury at all, but the Supreme Court's decision in Hana does logically suggest this scenario.
The Hargis Case
The underlying dispute. The Hargis case made its way to the Supreme Court following a complicated history that the Supreme Court said "could fill a long, unhappy book." Hargis, 135 S. Ct. at 1301. The petitioner, B&B Hardware, Inc. (B&B), and the respondent, Hargis Industries, Inc. (Hargis), both manufacture metal fasteners used to seal things tightly. B&B's fasteners are used in the aerospace industry, while Hargis manufactures fasteners for use in construction. In 1993, B&B obtained a federal registration for SEALTIGHT for "threaded or unthreaded metal fasteners and other related hardware; namely, self-sealing nuts, bolts, screws, rivets and washers, all having a captive o-ring, for use in the aerospace industry." In 1996, Hargis applied to register SEALTITE for "self-piercing and self-drilling metal screws for use in the manufacture of metal and post-frame buildings." Hargis's application was eventually published for opposition in 2002, and B&B filed an opposition proceeding. The TTAB sustained B&B's opposition, finding that B&B had established a likelihood of confusion based on the close similarity of the marks, notwithstanding their use in different industries for different purposes. Hargis did not appeal the TTAB's decision.
While the TTAB proceeding was pending, B&B sued Hargis for trademark infringement in federal court. After the TTAB issued its ruling (and following a number of other proceedings in the case not relevant to the Supreme Court's decision), B&B argued to the district court that Hargis could not contest likelihood of confusion because the TTAB decision should be granted preclusive effect under the collateral estoppel doctrine. The district court rejected the argument, holding that collateral estoppel did not apply to the decision of an agency, which was not an Article III court. The case was then tried to a jury, which ruled in favor of Hargis, finding no likelihood of confusion.
B&B appealed to the Eighth Circuit, which affirmed in a 2–1 opinion. Although the Eighth Circuit accepted for the argument's sake that agency decisions can form the basis for issue preclusion, the panel affirmed the decision not to grant preclusive effect to the TTAB decision in light of the different factors used by the Eighth Circuit and the TTAB in evaluating likelihood of confusion. B&B Hardware, Inc. v. Hargis Indus., Inc., 716 F.3d 1020 (8th Cir. 2013).
The Supreme Court decision. The Supreme Court began by ruling that issue preclusion can apply when an administrative agency is acting in a judicial capacity and resolves disputed issues properly before it that the parties had an adequate opportunity to litigate. Turning to whether issue preclusion should apply to the TTAB's likelihood of confusion determinations, the Court explained that this question depended on whether likelihood of confusion for purposes of registration is the same standard as likelihood of confusion for purposes of infringement. While noting that the Eighth Circuit's likelihood of confusion factors differed somewhat from those applied by the TTAB—the principal objection the Eighth Circuit had to application of collateral estoppel—the Supreme Court reasoned that the factors were not fundamentally different and that minor variations in the application of essentially the same legal standard do not defeat issue preclusion. Because the operative statutory language for likelihood of confusion was essentially the same in the context of both registration and infringement, the Court concluded that the same legal standard governed in both contexts and that issue preclusion was thus at least potentially available.
The Court recognized the TTAB's potentially narrower focus in the registration context, acknowledging that it typically analyzes the marks, goods, and channels of trade only as set forth in the parties' application and registration and not as actually used in the marketplace. However, according to the Court, this reality simply provided "a reason not to apply issue preclusion in some or even many cases," and was not "a reason never to apply issue preclusion." Hargis, 135 S. Ct. at 1308. In short, the availability of issue preclusion turned on the extent to which the TTAB decision considered actual marketplace usage.
Based on this reasoning, the Court reversed the Eighth Circuit's decision refusing to grant issue preclusion to the TTAB's decision and remanded the case for further review based on its opinion. The Court explained that the Eighth Circuit's conclusion that the TTAB had relied too heavily on appearance and sound similarities in finding a likelihood of confusion missed the point. If the TTAB had misapplied the standard, the appropriate remedy was for the aggrieved party to seek judicial review. However, Hargis had failed to do that. Any error that the TTAB may have made does not prevent preclusion, because as the Eighth Circuit dissent had argued, "issue preclusion prevent[s] relitigation of wrong decisions just as much as right ones." Hargis, 716 F.3d at 1029 (Colloton, J., dissenting).
In a short but potentially significant concurring opinion, Justice Ginsburg pointed out that the majority opinion correctly recognized that "for a great many registration decisions issue preclusion obviously will not apply," because contested registrations are often decided upon an abstract comparison of the marks apart from actual marketplace usage. Hargis, 135 S. Ct. at 1310 (Ginsburg, J., concurring). In such circumstances, there will be no issue preclusion on the likelihood of confusion issue in a later infringement action. Based on such an understanding, Justice Ginsburg joined the 7–2 majority opinion.
Implications of the Supreme Court's decision. Although the Supreme Court's decision in Hargis clearly establishes the potential availability of issue preclusion with respect to the TTAB's determinations of likelihood of confusion, the key question in the aftermath of the decision is the extent to which courts will actually apply the doctrine to particular findings. The language of the majority's own opinion, as well as Justice Ginsburg's concurrence, suggests that in actual practice, the number of instances in which issue preclusion will be found may be quite few. The TTAB has a long history of eschewing actual marketplace facts, and it would be surprising to see the TTAB depart from that course of practice.
Other cases may not be situated in as favorable a posture for issue preclusion. The inclusion of specific information regarding the channels of trade in which the products are sold, such as what appeared in the application and registration analyzed in Hargis, tends to be the exception, not the rule. It is more common for parties to describe their goods and services in broader terms when applying for registration since a narrower description creates potentially narrower protection. Accordingly, unless a party is deliberately seeking to avoid a potential citation of a conflicting mark, there may be little incentive to match the description in an application to the narrower realities of marketplace usage. For similar reasons, parties may often apply for marks that are defined more broadly, such as in standard character form (potentially covering any form of usage), rather than tailoring the mark to the specific execution in which it appears in the marketplace, perhaps involving a particular stylization, color scheme, or logo design. To the extent these potentially significant distinguishing characteristics are absent from the application, the TTAB's decision may not provide sufficient consideration of marketplace conditions to support application of issue preclusion in a later infringement action.
Still, even if the likely outcome is that issue preclusion for TTAB decisions ends up being the exception and not the rule, the Hargis decision poses an important strategic challenge to TTAB litigants trying to determine how best to present their case. At the outset, the very choice of forum has to command more attention. The question of how to proceed in a TTAB case will also require careful consideration. Are there important marketplace usage facts that could affect the decision? If so, a party may wish to try presenting such evidence in order to create the potential for issue preclusion to apply. In appropriate circumstances, it may even make sense to seek amendment of an application to include marketplace restrictions that could avoid a likelihood of confusion as a means of supporting the introduction of marketplace use evidence. With issue preclusion potentially lurking, a party may also need to devote more time and resources to TTAB proceedings, as the ramifications of an adverse ruling may no longer be limited to not obtaining a registration and could potentially pave the way for a later court injunction actually prohibiting use.
Finally, parties may wish to appeal unfavorable TTAB decisions to a district court in order to submit new evidence and obtain de novo review. Indeed, considering the Hargis decision together with the Hana case points strongly in favor of such a course, as Hana suggests that ordinary appellate review via the Federal Circuit may lead to deferential review of the decision below, and Hargis opens the possibility for issue preclusion if no appeal at all is taken.
The Supreme Court's two trademark decisions this term may prove to have significant consequences, particularly with respect to TTAB practice. Even though the Hana case did not deal with TTAB proceedings, its potential impact on the standard of review for likelihood of confusion determinations could end up exerting significant influence on appellate review of TTAB decisions, which at present are subject to de novo review as issues of law. And the Hargis decision could change the entire landscape of TTAB litigation by potentially vesting such proceedings with greater impact than simply deciding the narrow issue of registration. It will be important to see how lower courts react to these two cases over the next several years and whether they extend the rationale of Hana to likelihood of confusion determinations and accept the invitation of Hargis to treat the TTAB's likelihood of confusion determinations as dispositive of later infringement claims.
Keywords: litigation, intellectual property, trademarks, tacking, likelihood of confusion, collateral estoppel, issue preclusion