Supreme Court: TTAB 'likelihood of confusion' decisions can have preclusive effect in court

United States of America

In B&B Hardware v Hargis Industries (Case 13-352), the Supreme Court has concluded that a decision of the Trademark Trial and Appeal Board (TTAB) denying registration of a trademark on likelihood of confusion grounds can have preclusive effect in a later district court infringement action. Justice Alito delivered the opinion of the court, in which Chief Justice Roberts, and Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan joined. Justice Ginsburg filed a concurring opinion. Justice Thomas filed a dissenting opinion, in which Justice Scalia joined.

In reversing the Court of Appeals for the Eighth Circuit, the court explained that likelihood of confusion for registration purposes is the same as likelihood of confusion for infringement purposes, and held that where the “ordinary elements of issue preclusion are met” and “when the usages adjudicated by the TTAB are materially the same as those before the district court”, the application of issue preclusion is appropriate.

B&B Hardware Inc produces, markets and sells fasteners adapted for use in the aerospace industry under the trademark SEALTIGHT, which B&B registered in 1993. Hargis Industries Inc sells self-drilling screws for use in the construction industry under the trademark SEALTITE. Hargis applied to register the SEALTITE mark and B&B opposed. The TTAB sustained the opposition, refusing to register the SEALTITE mark in view of the prior SEALTIGHT registration, concluding that there was a likelihood of confusion between the two marks.

B&B also brought an infringement action against Hargis in the Eastern District of Arkansas seeking to prevent Hargis’ actual use of the SEALTITE mark. The district court refused to give preclusive effect to the TTAB decision, gave the decision no deference and even refused to admit it into evidence for consideration by the jury on the basis that the TTAB is not an Article III court. After trial, a jury returned a verdict in favour of Hargis, effectively concluding that despite the TTAB’s determination that SEALTITE was too similar to SEALTIGHT to be registered, the mark did not give rise to a likelihood of confusion and therefore did not infringe.

On appeal, the Eighth Circuit affirmed, concluding because Eighth Circuit precedent has established a “likelihood of confusion” test different from that applied by the TTAB, the decision by the TTAB on the registration issue was different from the decision faced by the district court and the jury in the infringement action.

B&B argued that, when two proceedings resolve the same legal or factual issue, the ruling in the first proceeding should control. Because the “likelihood of confusion” issue was actually litigated and finally decided before the TTAB, that decision should control in the later infringement action. According to B&B, the “likelihood of confusion” language used in the Lanham Act is the same whether the underlying dispute concerns infringement or registration. B&B also took the position that, although the Eighth Circuit identifies likelihood of confusion factors that may appear different from those identified and relied on by the TTAB, the likelihood of confusion analysis is really the same in both forums. Thus, because the two proceedings involved the same marks, the same set of goods and the same market conditions, B&B argued that the Eighth Circuit’s denial of preclusion should be reversed, and that TTAB’s decision should have been given deference. The United States, by way of an amicus brief submitted by the Solicitor General, supported B&B, arguing that where materially identical usages are at issue in an opposition proceeding and an infringement suit, the likelihood of confusion standard should be the same in both and preclusive effect is therefore warranted.

Hargis took the position that administrative decisions, such as those made by the TTAB, do not bind Article III courts unless Congress intended to give preclusive effect to the administrative body. Here, in light of the text of the Lanham Act, Hargis argued that Congress plainly did not intend for findings from registration proceedings to control infringement litigation, pointing to the fact that, among other things, the remedies for infringement actions are substantial, while registration serves to streamline litigation by creating a presumption of ownership, validity and the exclusive right to use.

Hargis also took the position that statutory allowance of de novo review of TTAB decisions in federal court further supported its position. Moreover, according to Hargis, even if TTAB decisions are given preclusive effect, the TTAB’s “likelihood of confusion” determination for registration purposes is not preclusive for an infringement action because the two proceedings decide different issues. For registration proceedings, a trademark is rejected if it “so resembles” a previous mark so as to be “likely to cause confusion”. For infringement actions, any person whose “use” is “likely to cause confusion” is liable.

Writing for the majority, Justice Alito concluded that TTAB decisions can form the basis of issue preclusion in later district court infringement proceedings. The court first addressed whether an agency decision can ever ground issue preclusion. Relying on case law and the restatement (second) of judgments, the court found that issue preclusion is not limited to situations in which the same issue is before two courts, but will also apply often before a court and an administrative agency. This principle, however, has its limits. In those situations where Congress has authorised agencies to resolve disputes, issue preclusion will apply except when a contrary statutory purpose is evident, or when the ordinary elements of issue preclusion are not met.

Here, the text and structure of the Lanham Act provides no “evident” reason why Congress would not want issue preclusion to apply to TTAB decisions. The court was not troubled by the fact that TTAB’s decisions could be reviewed de novo because a decision – in other contexts – can have preclusive effect even if it could have been appealed and reviewed de novo. The court found no “categorical” reason why a decision on a registration issue can never meet the ordinary elements required for issue preclusion, and concluded that issue preclusion, therefore, should apply where “the issues in the two cases are indeed identical and the other rules of collateral estoppel are carefully observed”.

In explaining its difference of opinion with the Eighth Circuit (whose primary objection to issue preclusion in the current context was that the TTAB considers different factors than do district courts in reaching a conclusion on infringement), the court expressly stated that the likelihood of confusion standard for purposes of registration is the same as the likelihood of confusion standard for purposes of infringement. The fact that different “factors” may be delineated by the TTAB and courts of the Eighth Circuit (or, presumably, other circuits) for assessing likelihood of confusion is not determinative. The factors – whether the DuPont factors used by the TTAB or the SquirtCo factors used by the Eighth Circuit – are fundamentally the same. Further, with a single standard, parties cannot escape preclusion by choosing new courts that apply the same standard differently. The likelihood of confusion standard is the same for registration and infringement because:

  1. the operative language is essentially the same;
  2. the likelihood of confusion language in the Lanham Act has been historically central to registration since at least 1881; and 
  3. district courts can cancel registrations in infringement actions and adjudicate infringement in suit seeking judicial review of registration decisions.

Concluding that preclusion may be applied in appropriate circumstances, the court further explained that, when the “use” for infringement purposes is materially the same as the usages asserted and examined in the context of a registration proceeding, the TTAB is effectively deciding the same likelihood of confusion issue. The key is assessing whether the uses are materially the same, and in that context the court explained that trivial variations between the usages set out in an application and the use of a mark in the marketplace do not create different “issues” so as to avoid preclusion.

In a one-paragraph concurring opinion, Justice Ginsburg highlighted that issue preclusion will not apply for many registration proceedings because contested registrations are often decided upon by comparing the marks in the abstract, apart from their marketplace usage.

Writing for the dissent, Justice Thomas, joined by Justice Scalia, opined that the principles of issue preclusion should not apply to decisions by administrative agencies. Justice Thomas explained that at common law issue preclusion applied only to a decision by a “court of competent jurisdiction”, which would include courts of law, courts of equity, admiralty courts and foreign courts. As such, federal courts have traditionally hesitated to extend common law preclusion principles to administrative tribunals. In light of this history, Justice Thomas declined to accept the majority’s position that the TTAB is a tribunal whose decisions warrant preclusive effect in the context of the Lanham Act. Congress, he argues, did not intend for preclusion to apply here because of the limited authority the Lanham Act gives the TTAB, and because of the act’s provision for de novo review. Justice Thomas also expressed constitutional concerns, based on the fact that the TTAB derives its authority from Article II of the Constitution, as opposed to Article III, and opined that it is not clear that the TTAB would have the power to adjudicate claims involving core private rights.

The Supreme Court’s decision is grounded on the common law principles supporting issue preclusion. Although issue preclusion will not always apply for all registration proceedings, it will apply when the ordinary elements of issue preclusion exist. The court’s clarification that the likelihood of confusion test is the same for purposes of registration and infringement will likely have far-reaching impact. In addition to perhaps adding a degree of standardisation to the likelihood of confusion tests used in the various circuits, opposition proceedings will likely be more vigorously litigated as trademark applicants will need to focus not only on registration of their mark, but on how an unfavourable TTAB decision on registration could later form the basis of a district court’s decision on infringement.

Timothy J Kelly and Ronald A Lee, Fitzpatrick Cella Harper & Scinto, New York

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