Confusion Preclusion: SCOTUS Says TTAB Has Preclusive Effect

Justice Alito

Justice Alito

I always get a little happy when I learn that there is a trademark matter pending before the United States Supreme Court. It’s kind of like being the geek invited to have lunch with the cool kids. Back in December 2014, the Supreme Court heard B&B Hardware, Inc., v Hargis Industries, Inc., a charming little case that has been bouncing around since the mid-1990s. It is not a game-changer by any stretch of the imagination, and the issues are not nearly as fun as some of the things I normally write about, but it does pose an interesting question: Should a Board determination of confusion be given preclusive effect in an infringement suit before an Article III court? The challenge today is to write about this and try to keep it interesting. I have a feeling we already lost some people with that last sentence, but here goes.

To begin, we need to provide a very cursory background in trademark procedure before we can get into the facts of this case. When you file a federal trademark application, the Examiner can refuse to register it based on the argument that it is confusingly similar to a pending or registered mark. If your attempts to convince the Examiner otherwise are unpersuasive, you can appeal the matter to the Trademark Trial and Appeals Board (“TTAB”). If you are a trademark owner, and you feel that a pending application is confusingly similar to your mark, you can file an opposition to the registration with the TTAB. Matters before the TTAB are similar to a civil action in that they are governed by the rules of civil procedure and are before a judge. If you are unhappy with a TTAB decision, you can appeal to the Court of Appeals for the Federal Circuit or the district court.

Now that we are all experts in trademark procedure and appeals, let’s discuss what happened with the B&B case. B&B Hardware (“B&B”) sells a fastener under the trademark Sealtight, which was registered in 1993. Hargis Industries (“Hargis”) sells screws under the mark Sealtite. Hargis applied to register Sealtite in 1996. B&B opposed the application and sued Hargis for infringement. The TTAB eventually determined that there was a likelihood of confusion between the two marks and denied Hargis’ application. Hargis did not seek judicial review of this decision. In the infringement suit, B&B argued that Hargis was precluded from contesting the confusion issue because of the Board’s determination. The district court disagreed, reasoning that since the TTAB is not an Article III court, its decision was not owed any deference. On appeal, the Court of Appeals for the Eighth Circuit affirmed the lower court, finding that since the Eighth Circuit uses a slightly different likelihood of confusion test from the TTAB, the TTAB did not decide the same likelihood of confusion issues presented to the district court. The Supreme Court accepted the invitation to weigh in on the matter.

That, my friends, is why we’re here. This case really boils down to good old fashioned issue preclusion. Issue preclusion is a concept in law that when an issue or fact is actually litigated and determined by a valid final judgment, and that determination is essential to the final judgment, it is conclusive on any further or future action by the parties. Put simply, if the parties in a car accident litigate the color of the car, and the court determines that it was red, the car is red and no more challenges to the color can be brought. The issue of color is precluded from subsequent matters. The issue in the B&B case was likelihood of confusion.

The TTAB is an administrative body, not an Article III court, which is an important distinction. When an administrative agency is acting in a judicial capacity and it resolves whatever issue there is before it, at least theoretically, that decision is binding on co-pending or future matters touching the same issue. However, there was a split in the circuit courts as to what effect a TTAB decision will have, and this depends heavily upon where the litigation is happening. The weight of a TTAB decision will vary depending on the jurisdiction, ranging from none at all to complete preclusion. The Eighth Circuit evidently is of the former school of thought. It’s important to recognize that the TTAB technically only has the authority to rule on a party’s ability to register, not use, a trademark. Therefore, the determination of likelihood of confusion in a Board proceeding rests heavily upon a consideration of the parties’ respective marks and goods only as they are shown in the application or registration. In a trademark infringement action, however, the court’s focus is whether confusion is likely as a result of the parties’ actual use of the marks in the marketplace. This can, and does, present a real pickle from an evidentiary standpoint. Case in point – the Eighth Circuit declined to find issue preclusion and refused to admit the TTAB findings into evidence.

The center of the shrubbery maze is that registration is not a prerequisite to an infringement action— it is a separate process that bestows separate rights. You can have a registration matter pending before the TTAB and a concurrent infringement matter in district court at the same time. This is why this case seems kind of convoluted— we had two different proceedings with the same issue but two possible outcomes- one for the registered mark and the other for the alleged infringement. And when it comes to a likelihood of confusion analysis, there is a bit of a wrinkle- there is no universal standard courts or the TTAB use to determine confusion. The TTAB uses the DuPont factors and the Eighth Circuit in this case relied on SquirtCo v. Seven-Up Co., but it really depends on what circuit you are in to determine which set of factors to use. What is important for our purposes today is that the Eighth Circuit declined issue preclusion based on the differing confusion analyses, and the Supreme Court found this to be erroneous. They concluded that regardless of the different factors in this particular confusion question or that, the concepts are governed by the same statutory provision and for the most part, while not identical, the analyses among the different circuits are not fundamentally different. If this were not the case, they pointed out, a person could just forum hop to a new jurisdiction that applies a particular factor differently, and arguably, more favorably. This, the Court pointed out, would encourage the very thing that issue preclusion tries to prevent. Therefore, the standard for confusion for registration and infringement purposes is the same, regardless of the individual circuit’s approach to it. That there may be a different case used in one circuit versus another is not important.

The best argument against preclusion in this case was that the standard for registration is whether the marks resembled each other and the standard for infringement purposes is use in commerce. This is an interesting question because the Board views a mark’s registration through the lens of appearance, whereas an infringement litigation will look to confusion in the marketplace. It’s a fair point, but it was ultimately unpersuasive. The Court reasoned that just because the TTAB does not always consider usage, it doesn’t apply a different standard to usage when it does. To illustrate the point, Justice Alito noted that if a mark owner uses its mark in ways that are materially the same as those included in the application, then the TTAB is deciding the same issue as a district court in infringement litigation. By contrast, if a mark owner uses its mark in ways that are martially different from the usages in the application, the TTAB is not deciding the same issue. Materiality is the key here. Trivial variation between usages in an application and uses in the marketplace don’t create different issues for the same reasons that trivial variations in appearance do not create different marks. If that were the case, a party could theoretically escape the preclusive effect by just adding some immaterial feature, which isn’t how it works. The opinion states that an issue must be understood broadly enough to prevent repetitious litigation of what is essentially the same dispute. Here, the issue was whether one mark was confusingly similar to another, which the Supreme Court determined was exactly the same as what was being litigated. We even got a bright line rule out of this case: “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.” Boom. There you have it.

Unfortunately, I don’t think this baby was completely put to bed. The opinion distinctly points out that the Court disagreed with the Eighth Circuit only insofar as their rejection of preclusion would make the doctrine difficult to apply in any trademark dispute. The case was reversed and remanded only with that very narrow understanding. Those who disagree with the majority opinion can simply look to Justice Scalia’s dissent, which (validly) points out that, historically speaking, administrative agencies are recognized as categorically different from courts. He also asks (again, validly) if Congress intended administrative preclusion, what then, is the purpose of de novo review of a TTAB decision? Justice Scalia believes that this decision will sap the Constitutional power granted to Article III courts. I’m not convinced he is wrong— it’s a fair argument and I encourage a thorough reading of the dissent. Still, at the end of the day, I am somewhat relieved but mostly disappointed that we couldn’t have had a more interesting issue to bring trademarks into the limelight, albeit briefly. Don’t get me wrong- this is an important decision— I just wish we had something a little juicier than plain ol’ civil procedure.

Oh well. Back to the geek table in the lunchroom we go.


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