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From Products Liability Law Daily, March 25, 2015

High Court’s decision on binding nature of TTAB decisions may impact effect of other agency decisions

By Cheryl Beise, J.D.

Final decisions issued by the Trademark Trial and Appeal Board (TTAB) may be binding in later infringement litigation, the U.S. Supreme Court has held. “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,” wrote Justice Samuel Alito, on behalf of a 7-to-2 majority. Justice Ruth Bader Ginsburg filed a brief concurring opinion, while Justice Clarence Thomas, joined by Justice Antonin Scalia, filed a dissenting opinion (B&B Hardware, Inc. v. Hargis Industries, Inc., March 24, 2015, Alito, S.).

The Court reversed a decision of the U.S. Court of Appeals in St. Louis, holding that a district court properly refused to give any deference to the TTAB’s likelihood of confusion findings in an opposition proceeding involving the same parties.

Background. The dispute in this case involved two companies that owned similar marks for metal fasteners. The petitioner, B&B Hardware, Inc. (B&B), used the mark SEALTIGHT for fasteners used in the aerospace industry, while respondent Hargis Industries, Inc. (Hargis) used the mark SEALTITE for fasteners used in the construction trade. The parties’ litigation history spanned nearly two decades.

The present controversy arose in 2002, when B&B filed an opposition proceeding with the TTAB seeking to block Hargis from registering the mark SEALTITE. In 2007, the Board sustained the opposition, finding a likelihood of confusion with B&B’s previously registered SEALTIGHT mark.

While the opposition proceeding was still pending before the Board, B&B Hardware filed an infringement suit against Hargis in the Eastern District of Arkansas. The district court rejected B&B Hardware’s argument that the Board’s likelihood-of-confusion determination should be given preclusive effect or, in the alternative, some measure of deference. A jury subsequently found that there was no likelihood of confusion between the parties’ SEALTIGHT and SEALTITE marks.

A divided panel of the Eighth Circuit affirmed the district court’s holding that the Board’s likelihood of confusion determination was not entitled to preclusive effect or any deference.

Agency decision preclusion. The Supreme Court first clarified that an agency decision can ground issue preclusion. The district court in this case had rejected issue preclusion because agencies are not Article III courts. “Both this Court’s cases and the Restatement make clear that issue preclusion is not limited to those situations in which the same issue is before two courts,” the Court said.

In situations in which Congress has authorized agencies to act in a judicial capacity to resolve disputes, “courts may take it as given that Congress has legislated with the expectation that the principle [of issue preclusion] will apply except when a statutory purpose to the contrary is evident.” Astoria Federal Savings & Loan Association v. Solimino, 501 U. S. 104, 107 (1991). Issue preclusion is available unless it is “evident” that Congress does not want it, the Court determined.

Lanham Act. The Court next held that there was nothing in the text or structure of the Lanham Act to forbid issue preclusion. The Court also rejected Hargis’s argument that the Lanham Act should be read narrowly to avoid constitutional concerns.

The Lanham Act provides that a party can seek judicial review of a TTAB registration decision in a de novo district court action. It did not follow, however, that unchallenged TTAB decisions could not have preclusive effect. “Ordinary preclusion law teaches that if a party to a court proceeding does not challenge an adverse decision, that decision can have preclusive effect in other cases, even if it would have been reviewed de novo,” the Court said. In other words, if district court decisions reviewing challenged TTAB decisions had preclusive effect, unchallenged TTAB decisions should not be treated differently.

Likelihood of confusion. The Eighth Circuit had determined that preclusion was unwarranted because the TTAB considered different factors in analyzing likelihood of confusion for registration purposes than the district court considered in analyzing likelihood of confusion for determining trademark infringement. The Supreme Court rejected this argument.

The same likelihood-of-confusion standard applies to both registration and infringement, the Court explained. The operative language of the Lanham Act provisions governing registration and infringement is essentially the same. In addition, courts in an infringement action have the authority to cancel trademark registrations, and there was no reason to think that a court deciding infringement and cancellation would apply two separate likelihood-of-confusion standards.

Hargis argued that registration proceedings and infringement actions were distinguishable because the USPTO considers a registrant’s or applicant’s identified uses of a mark whereas a district court considers actual uses of a mark in commerce. However, this did not mean that the TTAB applied a different standard, the Court noted.

“If a mark owner uses its mark in ways that are materially the same as the usages included in its registration application, then the TTAB is deciding the same likelihood-of-confusion issue as a district court in infringement litigation,” the Court said. Conversely, if the TTAB does not consider the market-place usage of the parties’ marks, then the TTAB decision would not have preclusive effect in a later case in which the market-place use was materially different from the uses considered by the TTAB, the Court explained. The uses must be materially different. “Otherwise, a party could escape the preclusive effect of an adverse judgment simply by adding an immaterial feature to its mark.”

TTAB procedure. Hargis also argued that registration is categorically incompatible with issue preclusion because the TTAB uses procedures that differ from those used by district courts. “Procedural differences, by themselves, however, do not defeat issue preclusion,” the Court said. There was no allegation that the TTAB’s procedures are unfair and in large part, they are exactly the same as in federal court, the Court noted. The fact that the TTAB relies on written rather than live testimony was not a material difference, in the Court’s view.

The Court reversed the Eighth Circuit’s decision and instructed the appeals court on remand “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.”

Concurring opinion. Justice Ginsburg wrote in concurrence to clarify her understanding that preclusion would not apply in cases where the TTAB’s registration decision was based on “a comparison of the marks in the abstract and apart from their marketplace usage.”

Dissenting opinion. Justice Thomas, joined by Justice Scalia, wrote a dissenting opinion. Justice Thomas took issue with the majority’s “presumption that when Congress enacts statutes authorizing administrative agencies to resolve disputes in an adjudicatory setting, it intends those agency decisions to have preclusive effect in Article III courts.” Justice Thomas would hold that the TTAB’s trademark registration decisions are not entitled to preclusive effect in a subsequent infringement suit.

Justice Thomas noted that the presumption in favor of administrative preclusion was first announced in the Court’s Astoria decision in 1991. Justice Thomas would not apply the presumption of administrative preclusion to the Lanham Act and other statutes that were enacted prior to 1991.

Justice Thomas also expressed “serious constitutional concerns” regarding the majority’s sweeping application of administrative preclusion on Article III courts. “The majority does not address the distinction between private rights and public rights or the nature of the power exercised by an administrative agency when adjudicating facts in private-rights disputes.”

The case is No. 13-352.

Attorneys: William M. Jay (Goodwin Procter LLP) for B&B Hardware, Inc. Neal Kumar Katyal (Hogan Lovells US LLP) and James C. Martin (Reed Smith LLP) for Hargis Industries, Inc.

Companies: B&B Hardware, Inc.; Hargis Industries, Inc.

MainStory: TopStory SupremeCourtNews

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