March 31, 2015

TTAB Decisions on Likelihood of Confusion Can Preclude District Court Findings

Arnold & Porter Advisory

On the heels of its decision earlier this year on trademark tacking, the Supreme Court issued its second trademark decision this term on March 24, 2015. In a 7-2 opinion, the Supreme Court ruled that under the doctrine of issue preclusion, courts can give preclusive effect to decisions by the Trademark Trial and Appeal Board (TTAB) on likelihood of confusion.

The case, B&B Hardware, Inc. v. Hargis Industries, Inc., 575 U.S. ____ (2015), involved a longstanding dispute over the marks SEALTIGHT and SEALTITE. In 1993, B&B obtained a registration for SEALTIGHT for fasteners for use in the aerospace industry. In 1996, Hargis filed an application for the mark SEALTITE for fasteners for use in the construction industry. B&B opposed registration of the SEALTITE mark, and the TTAB ultimately determined that the mark SEALTITE could not be registered on the basis of likelihood of confusion between the two marks.

Concurrently to the TTAB proceedings, B&B sued Hargis in district court for trademark infringement. After the TTAB announced its decision on the issue of likelihood of confusion, the district court declined to give preclusive effect to the TTAB decision on the basis that the TTAB is not an Article III court. The jury subsequently found no likelihood of confusion and returned a verdict for Hargis. On appeal, the Eighth Circuit affirmed, on different grounds than that cited by the district court, holding that issue preclusion should not apply to TTAB decisions on likelihood of confusion. 716 F.3d 1020 (2013). The Eighth Circuit cited three reasons for its decision: (1) the TTAB and district courts use different factors to assess likelihood of confusion, (2) the TTAB placed too much emphasis on the appearance and sound of the two marks, and (3) the burden of persuasion before the TTAB was on Hargis, while B&B bore the burden in the district court.

In a 7-2 decision, the Supreme Court reversed, finding that there was no basis for the Eighth Circuit's categorical rejection of the preclusive effect of TTAB decisions. Writing for the majority, Justice Samuel Alito instructed the Eighth Circuit 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."

The court further noted that "the same likelihood-of-confusion standard applies to both registration and infringement" and that a party who disagrees with a TTAB decision can seek judicial review. Moreover, the procedural differences between the TTAB and district courts did not bar issue preclusion, as there was "no categorical reason to doubt the quality, extensiveness, or fairness of the agency's procedures." Finally, the court rejected Hargis's position that "the stakes for registration are so much lower than for infringement that issue preclusion should never apply to TTAB decisions," stating that "[w]hen registration is opposed, there is good reason to think that both sides will take the matter seriously." Justice Alito was careful to limit his ruling, noting that for "a great many registration decisions issue preclusion obviously will not apply because the ordinary elements will not be met," leaving the door open for case-specific arguments for preclusion.

This decision raises the stakes in TTAB proceedings. Decisions regarding registration of a mark may have preclusive effect on subsequent infringement proceedings in district court, making it all the more important for both parties to a TTAB proceeding to vigorously litigate and, if necessary, appeal adverse registration decisions.

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