In a landmark ruling that is likely to affect the strategy of trademark owners seeking to protect their brands or adopt new ones, the Supreme Court has held that decisions of the Trademark Trial and Appeal Board (TTAB) can be given preclusive effect by district courts in trademark infringement actions as long as the ordinary elements of issue preclusion are met and the issues adjudicated by the TTAB are materially the same as those before a district court. B&B Hardware, Inc. v. Hargis Indus., Inc., No. 13-352, 575 U.S. ____ (Mar. 24, 2015).
Although the Court did acknowledge that issue preclusion may not apply for a "great many" decisions of the TTAB, this opinion undoubtedly will have a significant and immediate impact on every aspect of the decision making process pertaining to TTAB proceedings and perhaps on the TTAB itself.
Plaintiff B&B Hardware had argued that a TTAB decision in its favor finding a likelihood of confusion to exist between its registered SEALTIGHT mark and the Hargis SEALTITE mark should be given preclusive effect in a district court proceeding against Hargis for trademark infringement. The district court declined to do so and a jury ultimately returned a verdict in favor of Hargis, finding no likelihood of confusion. The Eighth Circuit affirmed, reasoning, in part, that the TTAB used different factors than the district court to evaluate likelihood of confusion.
The Supreme Court, in a 7-2 opinion written by Justice Alito, disagreed, finding that the decision of an administrative agency like the TTAB can be given preclusive effect when the agency is acting in a judicial capacity and where the ordinary elements of issue preclusion are present, namely, "when an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment." The Court also found there was nothing in the Lanham Act to rebut what it found to be the presumption of giving preclusive effect to TTAB decisions where the ordinary elements of preclusion were met and that the different factors weighed by the TTAB and the district court in assessing the likelihood of confusion were nothing but "[m]inor variations" of the same legal standard.
The Supreme Court did acknowledge that issue preclusion would not apply to all, and perhaps not even most, TTAB decisions. As the Court stated:
"…for a great many registration decisions issue preclusion obviously will not apply because the ordinary elements [of issue preclusion] will not be met. For those registrations, nothing we say today is relevant."
Two exceptions where the ordinary elements might not be met are suggested in the opinion. The first could occur if a mark owner uses its mark in ways that are materially different from the usage shown in the application. For example, if the TTAB does not consider actual marketplace usage – and it often does not and sometimes cannot – the TTAB's decision should have no preclusive effect in an action where actual usage in the marketplace is the paramount issue. Another exception might be found if one of the different procedures used by the TTAB, such as the TTAB's bar on live testimony, could be shown to materially and unfairly prejudice a party's ability to present its case.
The Court remanded the case back to the Eighth Circuit with the following instruction: "So long as the other ordinary elements of issue preclusion are met, when usages adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply."
Justice Ginsburg concurred based on her understanding that preclusion would not apply where the TTAB decision is made based on a comparison of the mark in the abstract, apart from marketplace usage. Justices Thomas and Scalia dissented, essentially disagreeing with the conclusion of the majority that Congress intended TTAB decisions to have preclusive effect.
Major exceptions notwithstanding, the Court's decision in B&B Hardware has elevated the potential importance of TTAB proceedings, once largely thought to be critical only to the right to register a mark and not the right to use that mark. It will have a significant impact on the entire decision making process involved in determining whether to commence a proceeding before the TTAB and the strategy to be used in that proceeding. In order to take advantage of, or possibly to avoid, the potentially preclusive effect of TTAB proceedings, a party should be well-versed in the elements of issue preclusion and gather and present evidence in the case accordingly. The Court's decision also is likely to result in increased use of the appeal process which allows de novo review of unfavorable TTAB decisions by the district courts. At the very least, it will require trademark practitioners and their clients to revisit and reassess traditional notions of the importance and impact of TTAB proceedings.