B&B Hardware v. Hargis Industries and the implications for Trademark Law Practice

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Best in class…and infringed by SEALTITE

Imagine this situation: you have a trademark and someone else is using and trying to trademark a similar name. You decide to sue them for trademark infringement in district court and oppose the registration at the USPTO. Your opposition is successful and is based on likelihood-of-confusion grounds (the same grounds that will win the day in court) – does the district court judge have to abide by the USPTO’s determination? The U.S. Supreme Court’s recent decision in B&B Hardware, Inc. v. Hargis Indus., Inc., No. 13-352, 575 U.S. __ (2015), says yes, but only under certain conditions. The Court’s decision leaves trademark practitioners struggling to grasp = level of impact it will have, if any, on the everyday practice of trademark law.

The second of two trademark cases heard by the Court in 2014, B&B Hardware addresses the question of whether the doctrine of issue preclusion applies to registration decisions of the USPTO’s Trademark Trial and Appeal Board (TTAB) in later civil litigation over trademark infringement.  Issue preclusion prevents parties from re-litigating issues that have already been decided by a court (or in this case, an agency)—meaning that if a second case arises between the same parties related to the same issue as the first case, the first court’s decision on the issue stands, and the second court is precluded from finding differently on that issue. Registration opposition and an infringement action are two separate trademark proceedings that can be filed by a trademark holder over similarities between the same two marks, and thus there is the potential for issue preclusion to apply. Here, B&B Hardware opposed Hargis Industries’ registration of the mark SEALTITE on the basis that it was too similar to its own registered mark, SEALTIGHT— and while the TTAB was deciding the registration issue, B&B brought suit against Hargis for trademark infringement in District Court. Ultimately, the TTAB sided with B&B, barring registration of SEALTITE on the grounds that it was likely to be confused with SEALTIGHT. B&B then argued that the TTAB’s likelihood-of-confusion analysis should preclude the district court from conducting its own analysis and determining an opposite result.

In the 7-2 decision written by Justice Alito (with Justices Thomas and Scalia dissenting), the majority reversed the Eighth Circuit and held that issue preclusion does apply to administrative agencies such as the TTAB where the issue decided by the agency is “materially the same” as the issue before the court. The Court determined that even though the likelihood-of-confusion analysis conducted by the TTAB in the context of registration varies somewhat from the likelihood-of-confusion analysis conducted by a court in an infringement suit, they are not materially different standards.

Although, as Ronald Mann of SCOTUSblog points out, the decision may well be cited for its clear recitation of the doctrine of issue preclusion, the extent to which it will affect the everyday practice of trademark law is less clear.  The Court itself acknowledged that for “a great many registration decisions issue preclusion obviously will not apply because the ordinary elements will not be met”  (such as when there are different parties or issues presented).  And in her concurrence, Justice Ginsberg clarified her understanding that the decision would not invoke issue preclusion for contested registrations where the likelihood-of-confusion analysis only compared two marks in the abstract, and not their marketplace usage.

It appears that most legal commentators agree that the decision is unlikely to affect most trademark registrations. Laura Chapman and Toni Qui of the National Law Review suggest that litigants can attempt to bypass preclusion from a negative TTAB decision by appealing to the district court for a de novo review (which the Court also alluded to). John Welch of TTABlog agrees that the de novo review is a critical loophole, and adds that B&B Hardware may just be the very rare case where the opposition to registration and infringement action were simultaneous, and the TTAB’s decision was not appealed.

Thus, while the stakes of not appealing a negative decision from TTAB on registration have been raised somewhat in that TTAB’s analysis could carry forward into any future infringement litigation, the likelihood that issue preclusion will affect most trademarks seems pretty remote. There may be some carryover for patent law, says Dennis Crouch of PatentlyO, since the same reasoning the Court applied to the TTAB could likely be applied to the Patent Trial and Appeal Board (PTAB)—unless, unlike trademark’s Lanham Act, the Court views patent statutes as barring the application of issue preclusion. All in all, SCOTUSblog may be right that the biggest impact the case may have on trademark practice could well be the Court’s descriptions of the processes and procedures of trademark registration and infringement litigation as they get applied and interpreted in future litigation.