By: Jonathan Hu

On March 24, 2015, the Supreme Court of the United States reversed the Eight Circuit’s decision and ruled that issue preclusion applies in B&B Hardware v. Hargis Industries, Inc.[1] Justice Alito delivered the majority opinion for the Court, in which he was careful to limit the holding to only certain trademark infringements. Justice Ginsburg filed a concurrence, while Justices Thomas and Scalia dissented.

Background:

The Petitioner, B&B Hardware, Inc. (“B&B”), manufactures and sells self-sealing fasteners in the aerospace industry. B&B registered the mark “SEALTIGHT” in 1993. The Respondent, Hargis Industries, Inc. (“Hargis”), also manufactures and sells fasteners, but in the construction industry. Hargis attempted to register the mark “SEALTITE” in 1996, but B&B opposed the application and sued Hargis for infringement. The Trademark Trial and Appeal Board (“TTAB”) determined that there was a likelihood of confusion between the two marks and thus denied Hargis’ application. In contrast, a jury trial in 2000 found B&B’s mark to be merely descriptive and that it had not acquired a secondary meaning. This finding was further upheld by the Eighth Circuit in 2001.[2] However, when the TTAB took up Hargis’ petition to cancel B&B’s mark in 2001, the TTAB dismissed the petition in 2003. The TTAB also denied a subsequent attempt by Hargis to register “SEALTTIE” in 2007.[3]

In 2003, B&B filed a second infringement suit against Hargis. The Eastern District Court of Arkansas dismissed this suit in 2007 on the grounds that the first infringement suit precluded the second one.[4] However, the Eighth Circuit reversed this decision in 2009 on the grounds that the prior case did not address the issue of likelihood of confusion.[5] On remand, a jury found no likelihood of confusion between “SEALTIGHT” and “SEALTITE”. In response, B&B sought a new trial because the district court refused to give preclusive effect, or even deference, to the TTAB’s likelihood of confusion finding. The district court denied the motion.[6] The Eighth Circuit affirmed and reasoned that the TTAB did not decide the same likelihood of confusion issue that was presented to the district court.[7]

The Supreme Court granted a writ of certiorari on July 1, 2014[8] and heard the case on December 2, 2014.

Decision:

The Court found that issue preclusion applied because the same likelihood-of-confusion applied to both registration and infringement in this case.[9] While the TTAB may have focused on different factors in its analysis, compared to the district court, the case turned on whether the same standard to the usage was applied. Here, the Court determined the same standard was applied for three reasons. First, the operative language is essentially the same. Second, the likelihood-of-confusion language that Congress used these Lanham Act provisions has been central to trademark registration. Third, district courts can cancel registrations during infringement litigation, just as they can adjudicate infringement in suits seeking judicial review of registration decisions. The Court found no reason to think that the same district court judge should apply two separate standards for likelihood of confusion.

Dissent:

Justice Thomas’ dissent was focused on the broader issue of giving administrative agencies the power to preclude issues from Article III courts. The dissent examined the genesis of the majority opinion’s precedence and found the dicta both unpersuasive and troubling. Justice Thomas concluded that to presume administrative agencies have the power to preclude issues from Article III courts, and apply it to adjudication in a private-rights dispute, would raise serious constitutional questions.

Justice Alito’s opinion sidesteps Justice Thomas’ dissent. Justice Alito noted in footnote 2 that the Court was not specifically deciding the issue of administrative agencies having the power to preclude issues from Article III courts. This was because neither party challenged this foundation. In theory this leaves the topic open for future debate. However, the Court’s 7-2 opinion in this case noted that until Congress clarifies otherwise, administrative agencies will continue to have the opportunity to decide and thereby preclude certain issues from future re-litigation.

Impacts:

There are various ramifications from this case.

First, the decision does not cover every instance of the TTAB’s findings for a likelihood of confusion. Justice Ginsburg’s concurrence specifically highlighted that the Court’s opinion for issue preclusion does not apply to all instances because contested registrations are often decided upon a comparison of the marks in the abstract and apart from their marketplace usage. When the registration proceeding is of that character, there will be no preclusion of the likelihood-of-confusion issue in a later infringement suit.

Second, parties will take more care when litigating in front of the TTAB. “While the TTAB cannot award damages or find infringement, its decisions could now be used as grounds for finding infringement in District Court.”[10]  This may specifically impact how evidence is presented by parties to the TTAB because of the Court’s focus on how the comparison and evidence presented to the TTAB may determine when preclusion is appropriate.[11]

Lastly, “prior to this decision, if a case was simultaneously pending in the District Court and before the TTAB, the TTAB would readily stay its determination until the litigation in District Court was resolved.”[12] With the Court’s affirmation that issue preclusion may apply from the TTAB’s decisions, this may no longer be the case.

 


 

[1] B&B Hardware, Inc. v. Hargis Industries, Inc., 113 U.S.P.Q.2d 2045.

[2] B&B Hardware, Inc. v. Hargis Industries, Inc., 252 F.3d 1010 (8th Cir. 2001).

[3] B&B Hardware, Inc. v Sealtite Building Fasteners, 2007 WL 2696310, at *12-13 (2007).

[4] B&B Hardware, Inc. v. Hargis Industries, Inc., 2007 WL 2711647 (E.D. Arkansas 2007).

[5] B&B Hardware, Inc. v Hargis Industries, Inc., 569 F.3d 383, 390 (8th Cir. 2009).

[6] B&B Hardware, Inc. v. Hargis Industries, Inc., 736 F.Supp.2d 1212 (E.D. Arkansas 2010).

[7] B&B Hardware, Inc. v. Hargis Industries, Inc., 716 F.3d 1020, 1024 (8th Cir. 2013).

[8] B&B Hardware, Inc. v. Hargis Industries, Inc., 134 S.Ct. 2899 (2014).

[9] B&B Hardware, Supra 1.

[10] Munro, John E., B&B Hardware, Inc. v. Hargis Industries, Inc.: Trademark Litigation Might Get Simpler, National Law Review, (March 27, 2015), http://www.natlawreview.com/article/bb-hardware-inc-v-hargis-industries-inc-trademark-litigation-might-get-simpler.

[11] See Little, Trevor, US Supreme Court decision means that TTAB proceedings just got more important, World Trademark Review, (March 25, 2015), http://www.worldtrademarkreview.com/blog/detail.aspx?g=6d2aef4b-31a5-4528-b712-b31a1d456973.

[12] Munro, John E., Supra 10.