Locke Lord QuickStudy: Supreme Court Upends Brand Protection Strategies

In the landmark B&B Hardware, Inc. v. Hargis Industries, Inc. case the Supreme Court held that administrative Trademark Trial and Appeal Board (TTAB) decisions on likelihood of confusion may preclude the parties from relitigating the identical issue in federal court. This decision will immediately adjust some long-held tactical strategies concerning enforcement of brands, particularly, where to file and what evidence to present in the first instance. TTAB cases will likely become more expensive and complicated as parties will attempt to win early to preclude a federal infringement action. The decision, however, is narrow – the Court merely rejects the bright-line rule that issue preclusion never applies.

Background
B&B Hardware (B&B) and Hargis Industries (Hargis) have been fighting for almost two decades. B&B owns a trademark registration for the mark SEALTIGHT covering fasteners used in the aerospace industry. Hargis started using the mark SEALTITE for fasteners used in the construction industry, and filed a trademark application covering the same. B&B opposed Hargis’ application at the TTAB, arguing that SEALTITE is confusingly similar to SEALTIGHT. The TTAB sided with B&B, finding that there was a likelihood of confusion between the respective marks, and refused registration of Hargis’ SEALTITE application.

Meanwhile, B&B sued Hargis for infringement in federal court, but things didn’t pan out for B&B. The District Court first rejected B&B’s contention that the TTAB decision on likelihood of confusion precluded Hargis from contesting the trademark infringement claim in the federal court. Then, the jury returned a verdict for Hargis, finding no likelihood of confusion. B&B appealed to the Eighth Circuit, where a split panel affirmed the District Court’s reasoning that the TTAB decision had no preclusive effects. The Supreme Court agreed to hear the case.

SCOTUS Decision
The Court first held that issue preclusion may apply to agency decision generally, and that “nothing in the Lanham Act bars the application of issue preclusion” of TTAB decisions specifically. The Court then rejected the notion that likelihood of confusion for registration is a different standard than likelihood of confusion for infringement. Despite some minor differences in the respective legal tests, the analysis is fundamentally the same.

The Court did concede that the TTAB typically assesses likelihood of confusion in a vacuum, because it assesses the marks, goods, and channels of trade only as set forth in the four corners of the relevant application or registration, regardless of whether the parties’ actual use of the mark differs in the marketplace. The Court downplayed this distinction, however, noting that the issue preclusion factors will sort out whether a district court should give preclusive effect to a TTAB decision in a lawsuit.

The Court instructed the Eighth Circuit to apply the following rule on remand: “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.”

Key Takeaways
As Justice Ginsburg’s concurring option points out, “for a great many registration decisions issue preclusion will not apply,” because the ordinary elements of issue preclusion will not be met. There are, nonetheless, several practical consequences resulting from this decision:

• Decision Not Limited to Likelihood of Confusion. While this specific case involved the likelihood of confusion analysis, it appears that the decision applies to TTAB decisions on an array of issues, including priority, descriptiveness, fame, dilution, abandonment and acquired distinctiveness.
• Higher Stakes at the TTAB. This decision immediately confers more importance on TTAB proceedings. As a result, parties will likely devote more resources to oppositions and cancellations, which could lead to larger evidentiary records, an increased number of depositions and contentious motion practice. Parties may flock to the TTAB where judges are more familiar with trademark law and the parties can forego the uncertainty of a jury trial in federal court. However, since parties have the opportunity to appeal a TTAB decision to a district court de novo where they can submit additional evidence, more TTAB decisions will likely be appealed.
• Changes in TTAB Likelihood of Confusion Analysis. The TTAB notoriously focuses much of its attention of the likelihood of confusion analysis on the similarity of the marks and relatedness of the goods. The Court notes that “there are some cases in which the TTAB places more weight on certain factors than it should.” Perhaps the TTAB will adjust the weight it affords each factor, now that its decisions will have preclusive effect on infringement litigations. It is also possible that the TTAB will be more willing to accept evidence of actual use in the marketplace.
• Parties May Skip the TTAB. Alternatively, parties may bypass a TTAB proceeding in favor of a more expensive federal action, where there is no limitation on introducing certain evidence, where plaintiffs can take advantage of the broader discovery allowances and live testimony and where monetary damages and injunctive relief are available.

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.