Supreme Court: An Administrative Ruling on Confusion Can Be the Last Word in Trademark Litigation

Yesterday the U.S. Supreme Court ruled in favor of Goodwin Procter client B&B Hardware, Inc., in a decision that may change the way trademark cases are litigated. The Court held that federal district courts must give preclusive effect to Trademark Trial and Appeal Board (TTAB) decisions about the likelihood of confusion between two marks, when the issues are the same. Many lower federal courts have held that TTAB decisions about the likelihood of confusion are not binding — not even on the same parties — in a subsequent trademark-infringement case in court.

The Supreme Court’s decision disapproves those decisions and holds that TTAB decisions can be preclusive if they satisfy the ordinary elements of issue preclusion. A party that loses before the TTAB, and fails to appeal or seek de novo review, cannot expect another chance to litigate the same issue before a different tribunal, such as a federal district court. The Supreme Court’s decision thus potentially raises the stakes in a TTAB dispute.

In a 7-2 decision penned by Justice Alito, the Court explained that “[a]llowing the same issue to be decided more than once wastes litigants’ resources and adjudicators’ time, and it encourages parties who lose before one tribunal to shop around for another.”  The Court applied that ordinary rule of preclusion to TTAB decisions about confusion:  preclusion is no less applicable just because a decision comes from the TTAB, and confusion before the TTAB is not legally different from confusion before a district court. Preclusion thus will depend on whether the issues are factually the same in both cases — i.e., when a trademark owner uses its trademark in ways that are materially the same as the usages included in a trademark registration application.

Justice Ruth Bader Ginsburg filed a concurring opinion to echo the Court’s comment that “for a great many registration decisions issue preclusion obviously will not apply,” because the issues presented by the registration application will be factually distinct from the issues in subsequent litigation.

Justice Thomas and Scalia dissented on the ground that agency decisions should never be preclusive on courts unless a federal statute expressly authorizes preclusion.

Litigating Confusion In Two Tribunals

Fittingly for a case about relitigation, this dispute has been underway for nearly two decades. B&B, a manufacturer of self-sealing fasteners for aerospace uses like the Mars Rover, registered the mark SEALTIGHT for use on its fasteners. A few years later, Hargis Industries, Inc., applied to the Patent & Trademark Office to register the mark SEALTITE for its own line of self-sealing construction fasteners. In an opposition proceeding, B&B successfully convinced the TTAB to deny Hargis’s registration application because SEALTITE on Hargis’s fasteners would likely cause confusion with SEALTIGHT on B&B’s fasteners. Hargis did not invoke its right to appeal.

But B&B was subsequently forced to relitigate the same confusion issue. Hargis continued to use the SEALTITE mark, and B&B pursued a district court action seeking damages and an injunction for Hargis’s infringement of its trademark. B&B argued that the TTAB’s determination of likelihood of confusion should be preclusive, and not subject to relitigation. But the district court, however, held that TTAB determinations of likelihood of confusion are not binding on federal courts. A jury ruled for Hargis and found that the marks were not likely to cause confusion. B&B appealed to the U.S. Court of Appeals for the Eighth Circuit, which also rejected preclusion. The Eighth Circuit held that “likelihood of confusion” before the TTAB is different from “likelihood of confusion” in a district court, so there could be no preclusion.

Goodwin Procter stepped into this case after the Eighth Circuit decision, which deepened a conflict in the federal courts of appeals. Goodwin filed B&B’s petition for certiorari, which the Supreme Court granted in July 2014. Goodwin partners William Jay, Ira Levy, and Robert Carroll co-authored B&B’s briefs, and Mr. Jay argued the case in December 2014.

Likely Impact:  New Preclusion Arguments In Many Agency Contexts

The Supreme Court’s ruling can potentially affect any type of agency adjudication:  the Court relied on a presumption that agency decisions are eligible for issue preclusion “except when a statutory purpose to the contrary is evident.”  The Court’s firm restatement of that presumption may open the door to preclusion arguments in other contexts, such as decisions of the Patent Trial and Appeal Board. Many independent federal regulatory agencies perform adjudication as part of their duties.

In addition, strategy in some trademark cases may need to change. Disputes over the same marks often proceed before the TTAB and district courts, although the TTAB often voluntarily stays proceedings to await a district court’s decision. The Supreme Court’s decision makes clear that whichever tribunal reaches a decision first, that decision cannot be relitigated in the other tribunal. A dissatisfied litigant should do what Hargis did not do here — appeal the first decision.

* * * * *

This is the second Supreme Court victory for Goodwin Procter’s Intellectual Property and Appellate practices in 2015. In both B&B  and the patent case Teva v. Sandoz, teams of Goodwin Procter lawyers persuaded the Supreme Court to grant certiorari and then to set aside an adverse appellate decision.

If you would like additional information about the issues in this Client Alert, please contact Willy Jay, who co-chairs Goodwin Procter’s Appellate Litigation Practice, or Rob Carroll, who is a partner in Goodwin Procter’s Intellectual Property practice.