Early in December 2014, the U.S. Supreme Court heard oral arguments in B&B Hardware, Inc. v. Hargis Industries, Inc. At issue are inconsistencies by the 12 regional federal courts appeal in giving preclusive effect in trademark infringement cases to a denial by the Trademark Trial and Appeal Board (TTAB) of an application to register a trademark in an opposition action. Issue preclusion prevents a party to a lawsuit from re-litigating an issue once it has been decided in a previous case where the party was given a full and fair opportunity to litigate the issue. The issue here is “likelihood of confusion.”
B&B owns a U.S. registration for the trademark SEALTIGHT. When Hargis applied to register SEALTITE, B&B opposed the registration. The TTAB held for B&B. B&B then sued Hargis in district court, alleging trademark infringement. The district court found that the TTAB’s ruling for B&B did not have preclusive effect on the district court case. B&B appealed to the Eighth Circuit. The Eight Circuit held that the TTAB and the district court used different tests to reach their findings of a likelihood of confusion, so refused to apply issue preclusion. B&B appealed to the Supreme Court.
The preclusive effect of interest here is based upon the principle that “later courts should honor the first actual decision of a matter that has been actually litigated.” Charles Alan Wright et al., Federal Practice and Procedure § 4416, at 386 (2ed. 2002). There are at least two differences in how the TTAB and courts decide “likelihood of confusion.”
First, though the TTAB is very similar to a court, it is an administrative tribunal and only has authority in registering trademarks. It not a court authorized under Article III of the Constitution. Second, while both the TTAB and courts decide “likelihood of confusion,” some differences exist in the standards are used by those two bodies. The TTAB determines “likelihood of confusion” based upon whether there is likely confusion between marks based upon the potential use of a mark in connection with how goods are described in a trademark registration or application therefore (which might be broader than the actual goods used in the market). Courts, by contrast, decide “likelihood of confusion” based upon how a mark is used in the marketplace.
These two situations are highly overlapping, but not identical. There are other procedural differences. Testimony in TTAB proceedings occurs by way of depositions, and witness testimony is presented on paper, not by live witness testimony. In a TTAB action, discovery is usually limited, and may not include evidence such as differences in sales channels, price, and other features. The Supreme Court will be called upon to decide the materiality of the differences in these two proceedings. The oral arguments provided no clear prediction of the court’s opinion.
The Supreme Court decision should resolve a conflict currently existing among the 12 regional federal courts of appeal. At the opposite end from the Eight Circuit, the Second, Third and Seventh Circuits have given preclusive effect to TTAB rulings in trademark infringement cases. In between, the Fifth and Eleventh Circuits have denied issue preclusion but afford TTAB decisions a presumption of validity.
The Supreme Court’s decision will likely have a significant impact on TTAB proceedings. Precluding re-litigation on the question of likelihood of confusion in a court after a TTAB decision greatly increases the stakes involved at the TTAB level. With more at stake, a party to a TTAB proceeding might have no choice but to go all-out in the TTAB. If a losing party in a TTAB proceeding faces the possibility it will be precluded from contesting confusion in the future, the luxury of fighting a TTAB proceeding on a reduced budget (which exists today) might cease to exist.
The Supreme Court’s decision will likely be rendered in April or May 2015.