U.S. Supreme Court’s Decision in B&B Hardware, Inc. v. Hargis Industries, Inc.

On March 24, 2015 the U.S. Supreme Court held there could be Trademark Trial and Appeal Board (TTAB) decisions warranting a preclusive effect on judgments by federal district courts, reversing the Eighth Circuit’s decision and remanding the matter for further proceedings. Attorneys and litigants alike were eagerly awaiting this U.S. Supreme Court decision. This decision is significant because it will impact a trademark owner’s decision-making process when determining whether to utilize the administrative dispute resolution tribunal of the United States Patent & Trademark Office (known as the TTAB) or to initiate an action before a federal district court. See our blog post entitled, Should Federal Courts Be Bound By TTAB Rulings, where we review the prior proceedings of B&B Hardware, Inc. v. Hargis Industries, Inc. in detail and provide background information leading up to the U.S. Supreme Court Decision.

A brief summary of the prior proceedings is necessary to fully understand the meaning of the current U.S. Supreme Court decision. B&B Hardware Inc. (“B&B”) filed a Notice of Opposition before the TTAB against Hargis Industries Inc.’s (“Hargis”) trademark application. The TTAB refused to register Hargis’s mark on the grounds of likelihood of confusion. B&B then sued Hargis in federal court and argued that Hargis was precluded from contesting the issue of likelihood of confusion due to the TTAB’s decision. Both the district court and the Eighth Circuit disagreed.

The Eighth Circuit held that preclusion was not justified because the TTAB and the court utilized different factors when analyzing likelihood of confusion. B&B petitioned the U.S. Supreme Court for certiorari and the Supreme Court granted the petition. The U.S. Supreme Court held that if the usages adjudicated by the TTAB were materially the same as the trademark uses before the district court, and the common elements of issue preclusion are satisfied, then preclusion should apply. The Court further held that issue preclusion may apply to an agency decision. The U.S. Supreme Court acknowledged that many TTAB decisions would not satisfy the ordinary elements of issue preclusion, but some may and for those cases preclusion will be implemented.

The Supreme Court relies on the Restatement of Judgments for the rule for implementing issue preclusion. The general rule is that “[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” See Restatement (Second) of Judgments §27, p. 250 (1980).

The Supreme Court held that the same standard is utilized for purposes of registration and infringement. It emphasized that simply because different factors are used to analyze that standard does not alter the fact that a single standard is used by both the TTAB and the federal district courts. The Supreme Court’s decision seems to be motivated by public policy. The court stated 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 policies of issue preclusion and collateral estoppel were created to deter forum shopping.

The U.S. Supreme Court decision also pointed out a difference in the two proceedings. When determining if the use of the subject mark will cause confusion as to source, the TTAB is restricted to the language used to identify the goods or services in the trademark application or registration; while the federal district courts are permitted to consider the full range of the mark’s usages in the marketplace. The take away is that trademark owners must observe whether a mark owner uses its mark in ways that are materially the same as the usages included in its application or registration and if so, then the TTAB is deciding the same likelihood-of-confusion issue as a district court in infringement litigation. And if the usages are materially different than those identified in the trademark application or registration, then the federal court will not apply issue preclusion.

It is likely that there may be some disagreement between the parties as to whether the usages are materially the same or materially different from those identified in the trademark registration. If you need assistance with your trademark dispute, specifically making a strategic decision pertaining to forum selection (weighing the pros and cons of litigating before the TTAB or in federal district court), please feel free to contact our office for a courtesy consultation