CAFC provides trademark owners with tool to defend marks from repeated attacks

United States of America

After nearly half a century of disputes between Disney Enterprises Inc and Stephen Slesinger Inc (SSI) over ownership of rights in Winnie-the-Pooh, the US Court of Appeals for the Federal Circuit has handed down a decision that may finally bring the dispute to an end. The decision, Stephen Slesinger Inc v Disney Enterprises Inc (Appeal 2011-1593, December 21 2012), upheld a Trademark Trial and Appeal Board (TTAB) decision dismissing SSI’s claims in a trademark ownership case on the ground of collateral estoppel. 

The saga begins in 1930, when SSI obtained merchandising rights in the United States and Canada from AA Milne, author of "Winnie-the-Pooh". Thirty years later, in 1961, SSI “assigned, granted and set over” to Disney the merchandising rights it had obtained in the 1930 agreement. Over 20 years later, in 1983, a dispute arose between SSI and Disney regarding the scope of activities that Disney was authorised to conduct under the 1961 agreement. The two companies executed another agreement in which SSI “'assign[ed], grant[ed] and set over unto Disney the sole and exclusive right in the United States to project, exhibit and broadcast visually and audibly any motion pictures, [as well as] various further rights in and to said work, which include merchandise', television, radio and analogous processes” (Id). Although the parties had reached a new agreement, both walked away with totally different interpretations of its terms.

As a result, in 1991 SSI brought suit against Disney in Los Angeles Superior Court for breach of contract, claiming that it had not been receiving appropriate royalty payments. The California court ultimately dismissed SSI’s claim, and the California Court of Appeals affirmed.

Meanwhile, SSI had initiated nearly identical claims against Disney in the US District Court for the Central District of California. In 2006 SSI amended its district court claim to allege that Disney’s exploitation of the Winnie-the-Pooh characters infringed SSI’s trademarks and copyrights. The district court, presented with cross motions for summary judgment, determined that SSI had assigned rather than licensed its rights to Disney under the 1983 agreement and dismissed SSI’s claims, based on the “clear terms” of the agreement and conduct of the parties. The court noted that SSI had not objected to any of Disney’s trademark applications or copyright registrations in the 20-year interval between the 1983 agreement and the resolution of the California case in 2006. 

Undaunted, SSI filed petitions with the TTAB in December 2006 attempting to cancel Disney’s trademark registrations for POOH, WINNIE-THE-POOH, CLASSIC POOH, MY FRIENDS TIGGER & POOH and other Pooh-related marks. SSI again claimed that the 1983 agreement merely granted Disney a licence, not the right to register the marks. Disney maintained that the 1983 agreement assigned all the Winnie-the-Pooh rights, and moved to dismiss the cancellations. Based on the district court’s earlier decision, and applying the collateral estoppel doctrine, the TTAB dismissed SSI’s claims. SSI then appealed to the Federal Circuit, which considered whether collateral estoppel was properly applied in this case.

Collateral estoppel, also known as issue preclusion, is a legal doctrine - first articulated by Justice Harlan in Southern Pacific Railroad Co v United States (168 US 1, 48-49 (1897)) - that is often used to ensure the finality of judgments and minimise the waste of judicial resources. Collateral estoppel refers to the court’s refusal to rehear arguments on an issue that has already been adjudicated in another forum (see S Pac RR Co, 168 US at 48-49 (“a right, question or fact distinctly put in issue, and directly determined by a court of competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties or their privies”)). In deciding whether the collateral estoppel doctrine applies, courts consider four elements:

  1. a prior action presented an identical issue;
  2. the prior action actually adjudged and litigated the issue;
  3. the judgment in the prior action necessarily involved determination of the identical issue; and
  4. the estopped party was fully represented in the prior action. 

The doctrine has not deterred parties like SSI from trying to sidestep prior unfavourable decisions. SSI conceded that the first and fourth elements of the collateral estoppel analysis were satisfied, but argued that the second and third elements had not been satisfied, as the trademark ownership issue had not been clearly decided by the district court. Specifically, SSI argued that the district court did not definitively settle whether the 1983 agreement was a licence or an assignment. After all, it argued, the court did not use the term 'assignment', did not declare that SSI had “no rights at all” as a result of the 1983 agreement, and did not need to determine ownership to rule on the underlying issue of trademark infringement. 

Despite SSI’s pleas and a dissent by Judge Reyna, Chief Judge Rader and Judge O’Malley of the Federal Circuit determined that the TTAB had correctly applied the collateral estoppel rule when it dismissed SSI’s trademark cancellation proceedings. The district court had clearly decided that SSI transferred ownership of Winnie-the-Pooh, and necessarily resolved the license-assignment issue. Accordingly, the collateral estoppel doctrine applied and SSI’s cancellation proceedings were properly dismissed.

The Federal Circuit decision stays true to the simple message that Justice Harlan articulated in Southern Pacific Railroad: once an issue has been litigated and decided, it cannot be reasserted in a different tribunal in the hope of garnering a more favourable result. Because the Federal Circuit decision affirmed the TTAB’s dismissal on the grounds of collateral estoppel, trademark owners now have another tool with which they can defend marks from repeated attacks. Disney may finally have wandered out of the Hundred Acre Wood and into the clear with respect to its ownership of Pooh and his friends.

James L Bikoff, David K Heasley, Amer Raja and Griffin Barnett, Silverberg Goldman & Bikoff LLP, Washington DC

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