B&B HARDWARE: TTAB PROCEEDINGS CAN CREATE ISSUE PRECLUSION
■ Andrew W. Werner
On March 24, 2015 the U.S. Supreme Court decided in B&B Hardware, Inc. v. Hargis Industries, Inc., 575 U.S. ___ (2015); holding that when trademark usages adjudicated by the Trademark Trial and Appeal Board (“TTAB”) are materially the same as those before a district court, issue preclusion should apply so long as the other ordinary elements of issue preclusion are met.
B&B Hardware stems from a 1996 trademark registration by Hargis Industries, Inc. (“Hargis”) for the SEALTITE mark for “self-piercing and self-drilling metal screws for use in the manufacture of metal and post-frame buildings.” B&B Hardware, Inc. (“B&B”) filed an opposition at the TTAB in response to Hargis’s registration of SEALTITE, due to B&B’s 1993 registration of the mark SEALTIGHT for “threaded or unthreaded metal fasteners and other related hardwar[e]; namely, self-sealing nuts, bolts, screws, rivets and washers, all having a captive o-ring, for use in the aerospace industry.” In its opposition, B&B argued that the SEALTITE mark could not be registered
The TTAB determined there was a likelihood of confusion between the SEALTITE mark and the SEALTIGHT mark
because it is confusingly similar to B&B’s SEALTIGHT mark given both companies have an online presence, the largest distributor of fasteners sells both companies’ products, and consumers sometimes call the wrong company to place orders. Hargis contended that Hargis and B&B sell different products, for different uses, to different types of consumers, through different channels of trade. The TTAB determined that the SEALTITE mark could not be registered because it so resembled the SEALTIGHT mark as to be likely to cause confusion, after concluding that the most critical factors in a likelihood of confusion analysis were the similarities of the marks and the similarity of the goods.
In a concurrent suit for trademark infringement, B&B argued to the District Court that Hargis could not contest likelihood of confusion following the TTAB’s decision because of the preclusive effect of the TTAB decision. The District Court disagreed with B&B, reasoning that the TTAB is not an Article III court. The jury returned a verdict for Hargis, finding no likelihood of confusion. Upon appeal to the Eighth Circuit, the District Court’s decision was affirmed for three reasons: first, because the TTAB uses different factors than the Eighth Circuit to evaluate likelihood of confusion; second, because the TTAB placed too much emphasis on the appearance and sound of the two marks; and third, because Hargis bore the burden of persuasion before the TTAB, while B&B bore it before the District Court.
The three issues before the U.S. Supreme Court were:
(1) whether an agency decision can ever ground issue preclusion;
(2) whether there is an “evident” reason why Congress would not want TTAB decisions to receive preclusive effect, even in those cases in which the ordinary elements of issue preclusion are met; and
(3) whether there is a categorical reason why registration decisions can never meet the ordinary elements of issue preclusion.
Agency Decisions & Issue Preclusion
Relying on Astoria Federal Savings & Loan Association v. Solimino, 501 U. S. 104 (1991) and United States v. Utah Construction & Mining Co., 384 U. S. 394, 422 (1966), the Court reasoned that where a single issue is before a court and an administrative agency, preclusion often applies. Proclaiming the common law principle of issue preclusion as “well established”, the Court stated “in those situations in which Congress has authorized agencies 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.’” The Court then relied on previous holdings where courts have not hesitated to apply res judicata in situations “[w]hen an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate[.]”
Agency decisions can ground issue preclusion for future Article III determinations when the parties have had an adequate opportunity to litigate
In so reasoning, the Court determined that an agency decision, such as from the TTAB, can ground issue preclusion for future Article III determinations.
“Evident” Congressional Reason for TTAB Non-Preclusion
The Court pointed out that trademark registration is not a prerequisite to an infringement action but is rather a separate proceeding to decide separate rights. In the instance of where exhausting an administrative process is a prerequisite to a suit in court, giving preclusive effect to the agency’s determination in that very administrative process could render the judicial suit “strictly pro forma” and thus issue preclusion could not be grounded. This however was not the instance in this case. Additionally, the Court relied upon
“We conclude that nothing in the Lanham Act bars the application of issue preclusion in such cases. The Lanham Act’s text certainly does not forbid issue preclusion. Nor does the Act’s structure.”
ordinary preclusion law (citing Restatement (Second) of Judgments §28, Comment a and Illustration 1) to assert 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 concluded that neither the Lanham Act’s test nor its structure rebuts the “presumption” in favor of giving preclusive effect to TTAB decisions where the ordinary elements of issue preclusion are met.
Categorical Preclusion of Registration Decisions
The Court asserted that it does not matter that the statutory provisions and the factors used to assess likelihood of confusion are different as between trademark registration and trademark infringement. The Court determined the Eighth Circuit had erred in holding that issue preclusion could not apply due to the TTAB relying too heavily on “appearance and sound.” The fact that the TTAB may have erred in placing too much emphasis on certain factors in this instance does not necessarily prevent preclusion in all instances.
Next, the Court reasoned that although the TTAB and the district courts often use different procedures, procedural differences by themselves do not defeat issue preclusion. Instead of focusing on whether procedural differences exist, the Court focused on whether the procedures
Procedural differences themselves do not defeat issue preclusion
used in the first proceeding were fundamentally poor, cursory, or unfair. The Court determined there was no categorical reason to doubt the quality, extensiveness, or fairness of the TTAB’s procedures in part because they are exactly the same as in federal court, given the TTAB has adopted almost all of Federal Rule of Civil Procedure 26. Additionally, the Court asserted the ordinary law of issue preclusion already accounts for those “rare” cases where a “compelling showing of unfairness” can be made. The Court then closed by stating that “Congress’ creation of this elaborate [trademark] registration scheme, with so many important rights attached and backed up by plenary review, confirms that registration decisions can be weighty enough to ground issue preclusion.”
Trends
With the holding in this case, it is interesting to compare the Court’s trademark usage centric analysis with Fresenius USA v. Baxter Int’l, No. 2012-1334 (Fed. Cir. July 2, 2013), which considered a similar issue with respect to patent invalidity in reexamination proceedings. In Fresenius, the Federal Circuit ruled that a USPTO decision of invalidity in reexamination prevails over a prior, Federal Circuit affirmed, jury decision of validity and infringement of the same claims in view of the same prior art. With the preclusive effect of TTAB decisions, the IP community has generally received yet another indication of incentivizing the use of administrative procedures to determine who wins and who loses.
Categorised in: Newsletter Vol. 7, Issue 2
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