U.S. Supreme Court’s Trademark Trial and Appeal Board Ruling
By Jason Jones
The U.S. Supreme Court recently held in B&B Hardware, Inc. v. Hargis Industries, Inc., 135 S. Ct. 1293 (2015), that a decision of the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office (“TTAB”) on the issue of likelihood of confusion may preclude a federal court from reaching a contrary conclusion on the issue in a subsequent infringement action. But the key word in the previous sentence is may – not must – and the Supreme Court went out of its way to explain that “for a great many registration decisions” from the TTAB, “issue preclusion obviously will not apply.”
Although the decision has set the trademark bar abuzz, it should not be news to practitioners in the Second Circuit, since the Second Circuit has long recognized that in certain circumstances a decision by the TTAB could have preclusive effect in later federal court litigation.
The facts of the B&B Hardware case are relatively straightforward. The plaintiff, B&B Hardware, owned a federal registration for the mark SEALTIGHT for metal fasteners used in the aerospace industry. Meanwhile, the defendant, Hargis Industries, used the mark SEALTITE for metal fasteners in the construction industry and applied for federal registration of SEALTITE. B&B opposed registration of SEALTITE in the TTAB and, after trial, the TTAB concluded that SEALTITE was confusingly similar to SEALTIGHT and could not be registered. Hargis did not exercise its statutory right to appeal the TTAB’s decision to the U.S. Court of Appeals for the Federal Circuit or a federal district court.
B&B also sued Hargis for infringement in federal district court, claiming that Hargis’ use of SEALTITE infringed B&B’s rights in SEALTIGHT. In light of the TTAB’s finding of a likelihood of confusion, B&B argued to the district court that the TTAB’s decision precluded Hargis from arguing there was no likelihood of confusion. The district court, however, refused to give preclusive effect to the TTAB’s determination and, ultimately, a jury sided with Hargis, finding no likelihood of confusion.
B&B appealed to the Eighth Circuit, but it affirmed, holding that because the TTAB looks to different factors than do federal courts in making likelihood of confusion determinations, a federal court should never give preclusive effect to a TTAB decision on the likelihood of confusion issue. The Supreme Court granted certiorari and reversed.
The Court’s Decision
The Supreme Court analyzed whether the TTAB actually applies the same likelihood of confusion standard as district courts since the TTAB “typically analyzes the marks, goods and channels of trade only as set forth in the application and the opposer’s registration, regardless of whether the actual usage of the marks by the parties differs.” This was a closely watched facet of the case, as it is well-established that the TTAB does not typically look to the real world use of the marks made by the parties, while marketplace conditions are critical to the likelihood of confusion analysis of district courts in infringement actions. The Supreme Court acknowledged this difference, but held that this difference did not require a per se rule that TTAB decisions can never be entitled to issue preclusion. Rather, the Court explained that this was just “a reason not to apply issue preclusion in some or even many cases.”
The Court, therefore, concluded that, “[I]f 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.” But the Court explained that the reverse is also true, stating that: “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.” (Emphasis added.)
In the Second Circuit
As stated above, the Second Circuit has long recognized the principles announced by the Supreme Court in B&B Hardware. Specifically, in Levy v. Kosher Overseas Ass’n of Am., Inc., 104 F.3d 38 (2d Cir. 1997), the Second Circuit was presented with the question of whether a district court was required to give preclusive effect to a TTAB decision finding a likelihood of confusion between two marks in a subsequent infringement litigation concerning the same marks. The Second Circuit rejected such a per se rule. Instead, the Second Circuit explained that “the standards governing likelihood of confusion in [the TTAB] … can be different than the likelihood of confusion standard applicable in trademark infringement actions in a district court” because likelihood of confusion in the TTAB is determined based solely on the marks and goods as they are listed in the at-issue application and registration and not based on “actual usage” in the marketplace. Thus, the Second Circuit in Levy held that a decision of the TTAB on likelihood of confusion is entitled to preclusive effect only “where the [TTAB] has indeed compared conflicting marks in their entire marketplace context.”
As such, trademark litigators in the Second Circuit have for years already considered the possible preclusive effect of TTAB decisions in counseling clients about the costs and benefits of instituting TTAB and federal court proceedings. The Supreme Court’s holding in B&B Hardware simply takes the rule already applied in the Second Circuit and makes it a nationwide rule.