<i>B&B</i> Offers Rest And Repose

After the complaint was initially dismissed by the district court based on the prior district court litigation, the Eighth Circuit (in appeal number two) reversed and remanded. On remand, the district court rejected B&B's contention that the Board's 2003 finding of likelihood of confusion was entitled to preclusive effect; the case was tried before a jury, and B&B lost. B&B then began appeal number three in the Eighth Circuit, B&B Hardware, Inc. v. Hargis Industries, 716 F.3d 1020 (8th Cir. 2013), which refused to give collateral estoppel effect to the prior TTAB finding.

Supreme Court Decision

In B&B Hardware, Justice Alito, writing for the majority, applied the general rule for issue preclusion: “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 determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” Slip op. at 9, quoting Restatement (Second) of Judgments '27, p. 250 (1980). Applying Astoria Fed. Sav. & Loan Assn. v. Solomino, 501 U.S. 104, 108 (1991), the Supreme Court held (despite concerns from the dissent about applying a 1991 holding to a 1946 statute) that “courts may take it as a given” that Congress intends issue preclusion to apply to administrative proceedings, “except when a statutory purpose to the contrary is evident.” Slip op. at 9.

Finding that the Lanham Act reveals no such contrary purpose, the Supreme Court rejected arguments that the standard of likelihood of confusion in the TTAB differed from likelihood of confusion in the district courts. Said the Court: “the operative language is essentially the same” (notwithstanding modest differences). Moreover, the likelihood of confusion language “has been central to trademark registration since at least 1881.” Further, “district courts can cancel registrations during infringement litigation, just as they can adjudicate infringement in suits seeking judicial review of registrations decisions.” According to the court: “There is no reason to think that the same district judge in the same case should apply two separate standards of likelihood of confusion.” Slip op. at 16-17.

The Court thus rejected Hargis' argument that the seemingly single statutory test of “likelihood of confusion” in fact masks two dynamically disparate determinations because, in the context of registration proceedings, the test is framed in terms of the “resemblance” between two marks that is or is not likely to cause confusion, whereas in the infringement context the statutory test points to whether there is a likelihood of confusion as the two marks are “used in commerce.” On this basis, Hargis, its amici and various commentators, had suggested that there is some unbridgeable gulf between the right to register and the right to use.

'No Trade, No Mark'

Although not mentioned by the Supreme Court, what these arguments failed to consider is perhaps the most distinguishing feature of the U.S. system of trademark law, which, as a result of its common law roots, is based on use in commerce, or as is sometimes said, “no trade, no mark.” Unlike civil law systems that predominate across the globe, the right to register a mark in the United States flows primarily and directly from use in commerce. The relatively recent ability to file an application based on intent-to-use or based on a foreign application or registration (rather than actual use in commerce) creates exceptions to this principle that may require different analyses of preclusion where such non-use is in issue; however, as this author argued before the recent decision, for that very reason, these exceptions do not justify ignoring the common law basis of U.S. trademark law. See , J. Moskin, “Will There Be Any Repose at This B&B? The Supreme Court Weighs Collateral Estoppel from the TTAB,” 104 Trademark Rptr. 1434 (November'December, 2014). Hence, in both the TTAB and the district courts, the issue is not simply “likelihood of confusion,” but “likelihood of consumer confusion,” i.e., confusion among the relevant classes of consumers of the two parties' goods or services.

That said, the Supreme Court did acknowledge that collateral estoppel would not apply in all cases.

It is true that a party opposing an application to register a mark before the Board often relies only on its federal registration, not on any common-law rights in usages not encompassed by its registration, and the Board typically analyzes the marks, goods, and channels of trade only as set forth in the application and in the opposer's registration, regardless of whether the actual usage of the marks by either party differs.

Slip op. at 17 (citations omitted).

As a result, explained the Court: “This means that unlike in infringement litigation, '[t]he Board's determination that a likelihood of confusion does or does not exist will not resolve the confusion issue with respect to non-disclosed usages.'” Id. Where there are material differences between the marks or the marketplace conditions considered in the two proceedings, preclusion with not apply. Id. at 18. According to the Court: “If 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.” Slip op. at 18.

However, Justice Alito cautioned that merely because the TTAB gives different weight than it should to certain factors will not prevent application of preclusion principles. “When that happens, an aggrieved party should seek judicial review. The fact that the TTAB may have erred, however, does not prevent preclusion.” Slip op. at 19. Quoting the dissenting Eighth Circuit judge in B&B Hardware , Alito remarked: “[I]ssue preclusion prevent[s] relitigation of wrong decisions just as much as right ones.” Id.

Analysis

Although there have been several predictions that B&B Hardware will lead to increased litigation, the reasoning seems doubtful. It is true that that a contrary decision, declining to give any preclusive effect to TTAB findings, likely would have made such rulings decidedly less consequential. However, it is less clear how the actual ruling changes anything in this regard. Certainly, prior to B&B Hardware, no litigant in the TTAB could merely assume a decision would simply sink like a stone, as the circuits were split. Compare, Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244, 250'51 (3d Cir. 2006); Levy v. Kosher Overseers Ass'n of Am., 104 F.3d 38, 42 (2d Cir. 1997), and EZ Loader Boat Trailers, Inc. v. Cox Trailers, Inc., 746 F.2d 375, 377 (7th Cir. 1984) (permitting application of collateral estoppel in at least some instances), with Freedom Sav. & Loan Ass'n v. Way, 757 F.2d 1176 (11th Cir. 1985); Am. Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3 (5th Cir. 1974) (declining to apply the doctrine). Moreover, the Court did not hold that issue preclusion always applies. That answer will turn primarily on whether the actual uses of the respective marks differ materially from the uses litigated in the TTAB (as specified in the applications or registrations at issue).

Just as before the March 24 decision, an applicant that loses a TTAB proceeding must weigh carefully whether to proceed with use of the mark. Now, as before, a litigant having lost in one forum cannot assume a different outcome in a different forum. On the other hand, losing opposers face essentially the same decision they now have of deciding whether to seek review by appeal to the Federal Circuit or by filing a civil action in U.S. District Court under Section 21 of the Lanham Act. If critical evidence is overlooked in the TTAB, the dissatisfied litigant can indeed receive full de novo review under Section 21(b) of the Lanham Act, 15 U.S.C. '1071(b), even submitting new evidence and raising new issues in the appeal proceeding before the district court (see, Aktieselskabet AF 21. November 2001 v. Fame Jeans, 525 F. 3d 8 (D.C. Cir. 2008)), and obtaining a determination by a judge (or, where issues of infringement or damages are raised, a jury), in a subsequent district court litigation. Doing so avoids any preclusive effect ' now as before.

For the Supreme Court to have affirmed the Eighth Circuit's decision in B&B Hardware that collateral estoppel effect can never be given a TTAB finding of likelihood of consumer confusion would have risked opening the door to permit relitigation of a previously decided issue any time two tribunals have less than completely commensurate criteria for analyzing that issue. This could have effected not just TTAB decisions, but also the various federal district courts, state courts (which also have jurisdiction to hear infringement claims and occasion to assess likelihood of confusion) and other tribunals, such as the International Trade Commission (ITC). Such microanalysis of the relatedness or identity of issues could have clouded application of the collateral estoppel doctrine generally, in the field of trademark law and other areas as well.

To be sure, there are cases where the relevant facts and issues do differ sufficiently such that collateral estoppel cannot fairly be applied. However, in finding that collateral estoppel can apply in at least some instances, this B&B should stand as an edifice to help, not hinder, litigants to find rest and repose, as the doctrine dictates. While not every case will be a candidate for collateral estoppel, the door is now left open and (however dimly) a light is left on in the window.

Jonathan Moskin is a partner in the New York office of Foley & Lardner LLP and a member of this newsletter's Board of Editors.

The U.S. Supreme Court, in B&B Hardware, Inc. v. Hargis Industries, 575 U.S. ____, No. 13-352 (March 24, 2015), concluded that a Trademark Trial and Appeal Board (TTAB) finding of likelihood of confusion can have preclusive effect in a later infringement litigation. “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.” Slip op. at 22. There have been immediate suggestions that Patent Trial and Appeal Board findings should likely also have preclusive effect (which seems unremarkable), and also concerns that B&B Hardware suddenly made trademark opposition proceedings more expensive by raising the stakes.

Case Background

The decision follows 18 years of tortuous litigation, which in itself demonstrates the importance of the finality and repose collateral estoppel is meant to encourage. B&B registered its SEALTIGHT trademark in the United States Patent and Trademark Office (PTO) in 1993. When Hargis, in 1996, was refused registration by the PTO for its own mark, SEALTITE, it sought to cancel B&B's registration. While that proceeding was pending, B&B commenced infringement litigation in federal court, which B&B lost on grounds its mark was invalid as merely descriptive. In appeal number one in 2001, the Eighth Circuit affirmed. However, by the time the Board resumed consideration of the cancellation proceeding, B&B's registration had become “incontestable” and could no longer be challenged as merely descriptive, so that the cancellation proceeding against B&B's registration was dismissed. In 2003, B&B commenced an opposition challenging Hargis' application for SEALTITE (which by then had been approved by the PTO) as being likely to cause confusion with its prior mark (now incontestable). The Board agreed with B&B, finding the marks confusingly similar. (It was this TTAB decision that B&B contended merited preclusive effect.) Meanwhile, B&B had separately commenced a new infringement suit against Hargis in federal court.

After the complaint was initially dismissed by the district court based on the prior district court litigation, the Eighth Circuit (in appeal number two) reversed and remanded. On remand, the district court rejected B&B's contention that the Board's 2003 finding of likelihood of confusion was entitled to preclusive effect; the case was tried before a jury, and B&B lost. B&B then began appeal number three in the Eighth Circuit, B&B Hardware, Inc. v. Hargis Industries, 716 F.3d 1020 (8th Cir. 2013), which refused to give collateral estoppel effect to the prior TTAB finding.

Supreme Court Decision

In B&B Hardware, Justice Alito, writing for the majority, applied the general rule for issue preclusion: “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 determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” Slip op. at 9, quoting Restatement (Second) of Judgments '27, p. 250 (1980). Applying Astoria Fed. Sav. & Loan Assn. v. Solomino, 501 U.S. 104, 108 (1991), the Supreme Court held (despite concerns from the dissent about applying a 1991 holding to a 1946 statute) that “courts may take it as a given” that Congress intends issue preclusion to apply to administrative proceedings, “except when a statutory purpose to the contrary is evident.” Slip op. at 9.

Finding that the Lanham Act reveals no such contrary purpose, the Supreme Court rejected arguments that the standard of likelihood of confusion in the TTAB differed from likelihood of confusion in the district courts. Said the Court: “the operative language is essentially the same” (notwithstanding modest differences). Moreover, the likelihood of confusion language “has been central to trademark registration since at least 1881.” Further, “district courts can cancel registrations during infringement litigation, just as they can adjudicate infringement in suits seeking judicial review of registrations decisions.” According to the court: “There is no reason to think that the same district judge in the same case should apply two separate standards of likelihood of confusion.” Slip op. at 16-17.

The Court thus rejected Hargis' argument that the seemingly single statutory test of “likelihood of confusion” in fact masks two dynamically disparate determinations because, in the context of registration proceedings, the test is framed in terms of the “resemblance” between two marks that is or is not likely to cause confusion, whereas in the infringement context the statutory test points to whether there is a likelihood of confusion as the two marks are “used in commerce.” On this basis, Hargis, its amici and various commentators, had suggested that there is some unbridgeable gulf between the right to register and the right to use.

'No Trade, No Mark'

Although not mentioned by the Supreme Court, what these arguments failed to consider is perhaps the most distinguishing feature of the U.S. system of trademark law, which, as a result of its common law roots, is based on use in commerce, or as is sometimes said, “no trade, no mark.” Unlike civil law systems that predominate across the globe, the right to register a mark in the United States flows primarily and directly from use in commerce. The relatively recent ability to file an application based on intent-to-use or based on a foreign application or registration (rather than actual use in commerce) creates exceptions to this principle that may require different analyses of preclusion where such non-use is in issue; however, as this author argued before the recent decision, for that very reason, these exceptions do not justify ignoring the common law basis of U.S. trademark law. See , J. Moskin, “Will There Be Any Repose at This B&B? The Supreme Court Weighs Collateral Estoppel from the TTAB,” 104 Trademark Rptr. 1434 (November'December, 2014). Hence, in both the TTAB and the district courts, the issue is not simply “likelihood of confusion,” but “likelihood of consumer confusion,” i.e., confusion among the relevant classes of consumers of the two parties' goods or services.

That said, the Supreme Court did acknowledge that collateral estoppel would not apply in all cases.

It is true that a party opposing an application to register a mark before the Board often relies only on its federal registration, not on any common-law rights in usages not encompassed by its registration, and the Board typically analyzes the marks, goods, and channels of trade only as set forth in the application and in the opposer's registration, regardless of whether the actual usage of the marks by either party differs.

Slip op. at 17 (citations omitted).

As a result, explained the Court: “This means that unlike in infringement litigation, '[t]he Board's determination that a likelihood of confusion does or does not exist will not resolve the confusion issue with respect to non-disclosed usages.'” Id. Where there are material differences between the marks or the marketplace conditions considered in the two proceedings, preclusion with not apply. Id. at 18. According to the Court: “If 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.” Slip op. at 18.

However, Justice Alito cautioned that merely because the TTAB gives different weight than it should to certain factors will not prevent application of preclusion principles. “When that happens, an aggrieved party should seek judicial review. The fact that the TTAB may have erred, however, does not prevent preclusion.” Slip op. at 19. Quoting the dissenting Eighth Circuit judge in B&B Hardware , Alito remarked: “[I]ssue preclusion prevent[s] relitigation of wrong decisions just as much as right ones.” Id.

Analysis

Although there have been several predictions that B&B Hardware will lead to increased litigation, the reasoning seems doubtful. It is true that that a contrary decision, declining to give any preclusive effect to TTAB findings, likely would have made such rulings decidedly less consequential. However, it is less clear how the actual ruling changes anything in this regard. Certainly, prior to B&B Hardware, no litigant in the TTAB could merely assume a decision would simply sink like a stone, as the circuits were split. Compare, Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244, 250'51 (3d Cir. 2006); Levy v. Kosher Overseers Ass'n of Am., 104 F.3d 38, 42 (2d Cir. 1997), and EZ Loader Boat Trailers, Inc. v. Cox Trailers, Inc., 746 F.2d 375, 377 (7th Cir. 1984) (permitting application of collateral estoppel in at least some instances), with Freedom Sav. & Loan Ass'n v. Way, 757 F.2d 1176 (11th Cir. 1985); Am. Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3 (5th Cir. 1974) (declining to apply the doctrine). Moreover, the Court did not hold that issue preclusion always applies. That answer will turn primarily on whether the actual uses of the respective marks differ materially from the uses litigated in the TTAB (as specified in the applications or registrations at issue).

Just as before the March 24 decision, an applicant that loses a TTAB proceeding must weigh carefully whether to proceed with use of the mark. Now, as before, a litigant having lost in one forum cannot assume a different outcome in a different forum. On the other hand, losing opposers face essentially the same decision they now have of deciding whether to seek review by appeal to the Federal Circuit or by filing a civil action in U.S. District Court under Section 21 of the Lanham Act. If critical evidence is overlooked in the TTAB, the dissatisfied litigant can indeed receive full de novo review under Section 21(b) of the Lanham Act, 15 U.S.C. '1071(b), even submitting new evidence and raising new issues in the appeal proceeding before the district court (see, Aktieselskabet AF 21. November 2001 v. Fame Jeans, 525 F. 3d 8 (D.C. Cir. 2008)), and obtaining a determination by a judge (or, where issues of infringement or damages are raised, a jury), in a subsequent district court litigation. Doing so avoids any preclusive effect ' now as before.

For the Supreme Court to have affirmed the Eighth Circuit's decision in B&B Hardware that collateral estoppel effect can never be given a TTAB finding of likelihood of consumer confusion would have risked opening the door to permit relitigation of a previously decided issue any time two tribunals have less than completely commensurate criteria for analyzing that issue. This could have effected not just TTAB decisions, but also the various federal district courts, state courts (which also have jurisdiction to hear infringement claims and occasion to assess likelihood of confusion) and other tribunals, such as the International Trade Commission (ITC). Such microanalysis of the relatedness or identity of issues could have clouded application of the collateral estoppel doctrine generally, in the field of trademark law and other areas as well.

To be sure, there are cases where the relevant facts and issues do differ sufficiently such that collateral estoppel cannot fairly be applied. However, in finding that collateral estoppel can apply in at least some instances, this B&B should stand as an edifice to help, not hinder, litigants to find rest and repose, as the doctrine dictates. While not every case will be a candidate for collateral estoppel, the door is now left open and (however dimly) a light is left on in the window.

Jonathan Moskin is a partner in the New York office of Foley & Lardner LLP and a member of this newsletter's Board of Editors.