Does the Trademark Trial and Appeal Board’s (“TTAB”) likelihood-of-confusion determination have a preclusive effect in a trademark infringement claim; or, alternatively, should federal courts defer to the TTAB’s findings on likelihood-of-confusion absent strong evidence to rebut the finding?
The Supreme Court’s decision in this case will determine whether a Trademark Trial and Appeal Board (“TTAB”) likelihood-of-confusion finding has preclusive effect in a subsequent trademark-infringement claim. If the Court finds that issue preclusion does not apply, the Court will address whether federal courts should defer to the TTAB’s likelihood-of-confusion determination in the absence of strong contrary evidence. B&B Hardware argues that the concept of “likelihood of confusion” has the same meaning in both TTAB and federal court proceedings and applies equally to both trademark-registration proceedings and trademark-infringement actions. Hargis Industries counters that preclusion is inapplicable because TTAB administrative decisions are not binding on Article III courts. The Court’s ruling will have significant implications for judicial efficiency in TTAB infringement cases before both the TTAB and federal courts, and will potentially also impact consumer confidence in trademarks.
Questions as Framed for the Court by the Parties
- Whether the TTAB’s finding of a likelihood of confusion precludes Hargis from relitigating that issue in infringement litigation, in which likelihood of confusion is an element.
- Whether, if issue preclusion does not apply, the district court was obliged to defer to the TTAB’s finding of a likelihood of confusion absent strong evidence to rebut it.
For over fifteen years, B&B Hardware, Inc. (“B&B”), doing business as Sealtight Technology, and Hargis Industries, Inc. (“Hargis”), doing business as Sealtite Building Fasteners, have been involved in trademark litigation over the similarity of their marks. In 1993, the United States Patent and Trademark Office (“PTO”) granted B&B, the manufacturer and seller of “Sealtight”—a fastener product used in the aerospace industry—a certificate of registration for their “Sealtight” mark. In 1996, Hargis, the manufacturer and seller of “Sealtite”—a self-sealing fastener product used in the metal-building industry—filed an application with the PTO to register its “Sealtite” mark. The PTO denied Hargis’s application because the two marks were “substantially identical” and would thus create a “likelihood of confusion” for consumers.
In 1997, citing abandonment and priority of use, Hargis unsuccessfully appealed to the PTO’s Trademark Trial and Appeal Board (“TTAB”) to cancel B&B’s registered mark. In 1998, B&B filed a trademark infringement claim against Hargis in the U.S. District Court for the Eastern District of Arkansas (“Arkansas district court”) to stay the PTO proceedings.
In 2000, a jury reached a verdict in favor of Hargis, reasoning that B&B’s “Sealtight” mark was “merely descriptive and had not acquired a secondary meaning.” In 2001, the U.S. Court of Appeals for the Eighth Circuit affirmed the Arkansas district court’s decision. Subsequent to the Eighth Circuit’s ruling, Hargis amended its petition to the TTAB to cancel B&B’s mark in order to include the district court’s ruling that the mark was merely descriptive. In 2004, the TTAB rejected the district court’s ruling because the court had not made any findings on the likelihood of confusion. Furthermore, because the mark had already been “registered for more than five years,” the TTAB rejected Hargis’s argument that the mark was “merely descriptive” and should be cancelled.
In 2006, B&B filed a claim alleging trademark infringement in the U.S. District Court for the Central District of California, and later was transferred to the Arkansas district court. The Arkansas district court ruled that the TTAB’s likelihood-of-confusion finding did not have preclusive effect in federal courts. The Arkansas district court also refused to admit the TTAB finding into evidence. In 2013, the Eighth Circuit affirmed both of the Arkansas district court’s decisions.
On July 1, 2014, the Supreme Court granted certiorari to determine whether the TTAB’s likelihood-of-confusion decision precludes Hargis from relitigating the same issue in a trademark infringement action. In addition, the Supreme Court will determine whether the Eighth Circuit correctly applied the law of issue preclusion.
The Supreme Court will determine whether to accord preclusive effect in trademark infringement litigation to the TTAB’s determination of likelihood-of-confusion issues. The Court will also decide whether, absent issue preclusion, district courts must defer to the TTAB absent strong evidence to rebut the TTAB’s findings.
B&B interprets the text of the Lanham Act to regulate a single concept of “likelihood of confusion.” B&B points to the similarities between the tests for registration and infringement to support its proposition that the TTAB’s and the district courts’ analyses are “substantively compatible.”
Hargis counters that the text of the Lanham Act separates the likelihood-of-confusion inquiry in infringement litigation from that of TTAB registration proceedings. Hargis further asserts that the scope of procedural protections afforded litigants in infringement actions is broader than those available before the TTAB; therefore, according to Hargis, the district courts’ assessment of a wider range of evidence suggests that district courts should not defer to the TTAB’s findings.
STATUTORY CONSTRUCTION: DOES THE LANHAM ACT IMPLICATE MULTIPLE LIKELIHOOD-OF-CONFUSION ISSUES?
B&B maintains that the Lanham Act contemplates a single likelihood-of-confusion concept. To support this proposition, B&B cites to the “indistinguishable” wording contained within three of the Lanham Act’s provisions: B&B notes that 15 U.S.C. § 1052(d) (mark registration), 15 U.S.C. § 1114(1)(a) (registered-mark infringement), and 15 U.S.C. 1125(a)(1)(A) (unregistered-mark infringement) impose liability when a particular mark is “likely to cause confusion, or to cause mistake, or to deceive” and is used “on or in connection with . . . goods.” According to B&B, statutory construction dictates “that words repeated in different parts of the same statute generally have the same meaning.” The fact that Congress adopted these three provisions contemporaneously, and in much the same wording as appears in the statute today, leads B&B to reaffirm its belief that these three provisions address a single concept—likelihood of confusion.
B&B further asserts that the Lanham Act confers upon district courts the power to review the TTAB’s decisions directly. According to B&B, because the Lanham Act permits a single district court to examine both infringement and registration claims within a single case, the same standard of review naturally governs likelihood-of-confusion issues in both registration and infringement proceedings. For example, B&B notes that the Lanham Act authorizes courts to cancel a particular mark; in such cases, the courts apply the same standard that governs the TTAB’s cancellation orders. B&B also asserts that when litigants in registration proceedings appeal directly to district courts, the parties often tack on an infringement claim.
Hargis counters that the Lanham Act fashions a sharp distinction between the respective functions of registration and infringement proceedings. According to Hargis, the Lanham Act grants Article III courts (which includes district courts) exclusive jurisdiction over infringement litigation, reflecting Congress’s intent to provide a “full panoply of procedural protections” to parties who seek to shelter their marks from the threat of consumer confusion. Registration proceedings, on the other hand, merely serve a “limited, prophylactic function” under Hargis’s interpretation of the Lanham Act. Specifically, Hargis argues that the sole purposes of registration proceedings are to prospectively reduce infringement litigation between owners of similar marks and to simplify infringement actions when litigation occurs by establishing a certificate of registration as prima facie evidence of the mark’s validity and exclusivity. To that end, Hargis interprets the Lanham Act to provide for “full and fair adjudication” only in infringement actions and “administrative convenience” in registration proceedings.
Finally, Hargis cites to United States v. Delaware & Hudson Co. for the proposition that when a court encounters two plausible statutory constructions, one of which raises “grave and doubtful constitutional questions” and the other of which does not, courts must take the safer course. As applied to the Lanham Act, Hargis contends that B&B’s interpretation of the Act would implicate the Seventh Amendment and Article III of the U.S. Constitution. Hargis adopts an originalist approach to the Seventh Amendment, arguing that the Seventh Amendment’s conferral of a jury trial in infringement cases does not apply to registration proceedings because “administrative adjudication . . . did not exist at the time of the framing.” In regards to Article III, Hargis maintains that the TTAB’s procedures are inadequate to fully adjudicate trademark infringement claim, and consequently only Article III courts may decide these claims.
SCOPE OF INQUIRY: DOES LIKELIHOOD-OF-CONFUSION ANALYSIS DIFFER IN THE DISTRICT COURTS AND THE TTAB?
B&B argues that the TTAB’s test for likelihood of confusion in a registration proceeding is substantively similar to that of a federal court in infringement litigation. To that end, B&B notes that the TTAB may consider any evidence that a district court could consider, and that although the factors that the TTAB and district courts may examine have different labels, the factors are substantively compatible. B&B further alleges that the 1988 revisions to the Lanham Act grant the TTAB the authority to consider marketplace evidence, and thus to consider the same evidence as the district courts. B&B interprets this widened scope of discretion to place the TTAB’s likelihood-of-confusion inquiry on par with that of the courts.
Hargis reasserts that even if the TTAB’s likelihood-of-confusion test for registration is substantively similar to the courts’ likelihood-of-confusion test for infringement, the TTAB’s inquiry is limited to registration submissions. Hargis concedes that some registration submissions may “exactly echo actual usage” by presenting facts relevant to an infringement analysis, but Hargis emphasizes that only the district courts may assess whether those same facts present a confusing “use.” Additionally, Hargis claims that the 1988 revisions to the Lanham Act merely provide for a new remedy—generally, “grant[ing] partial registration or cancellation” of marks—in registration proceedings before the TTAB and do not otherwise expand the scope of the TTAB’s analysis.
DEFERENCE TO THE TTAB: DID THE EIGHTH CIRCUIT EMPLOY THE PROPER STANDARD OF REVIEW?
Regardless of whether issue preclusion applies, B&B believes that federal courts should defer to the TTAB’s findings on the merits with respect to the likelihood-of-confusion issue, regardless of the type of proceeding. B&B notes that, in this case, both the TTAB and the district court considered the same evidence, including marketplace context. According to B&B, the Eighth Circuit was unjustified in comparing how much weight the TTAB gave to each marketplace factor in balancing the evidence. The basic question that issue-preclusion analysis seeks to answer, B&B asserts, is “whether the [TTAB] and the district court asked the same question . . . not whether they would get to the same answer.”
Hargis counters that the only part of the TTAB’s determination that could possibly receive deference in infringement litigation is the TTAB’s factual findings. Hargis acknowledges that “subsidiary findings of fact” in a trademark registration proceeding might overlap with the facts before a jury in an infringement action; however, Hargis warns that according any preclusive effect to these “subsidiary” facts would allow trademark registration proceedings to “dictate the outcome of an infringement action,” an impermissible result given that the two tribunals consider different evidence.
In this case, the Supreme Court will determine (1) whether a TTAB’s likelihood-of-confusion finding receives preclusive effect in federal courts, and (2) in the absence of preclusion, whether federal courts must defer to the TTAB’s likelihood-of-confusion finding in the absence of strong contrary evidence. B&B argues that once a tribunal—either a federal court or the TTAB—makes a likelihood-of-confusion finding, the finding is final and issue preclusion applies. Hargis counters that preclusion does not apply because the TTAB’s administrative decisions are not binding on federal courts. The Supreme Court’s decision will have significant implications for judicial efficiency in trademark infringement cases and for consumer confidence in trademarks.
OPTIMIZING JUDICIAL EFFICIENCY
B&B and the United States argue that the TTAB’s administrative body status does not prohibit its final judgments from having preclusive effect. The United States argues that disregarding administratively adjudicated decisions would be a waste of time, money, and judicial resources. Additionally, the United States claims that a fundamental judicial policy is to prevent the relitigation of substantively identical issues. The Intellectual Property Law Association of Chicago (“IPLAC”) emphasizes that because the TTAB proceedings apply the Federal Rules of Civil Procedure and Federal Rules of Evidence, the TTAB proceedings are as thorough as federal court proceedings. Furthermore, the IPLAC argues that because the TTAB proceedings employ traditional trial and discovery procedures as well as judges with courtroom and trademark experience, the TTAB cases greatly mimic typical civil litigation cases.
Hargis counters that material differences exist between federal courts and the TTAB because administrative tribunals are more limited in scope. The American Intellectual Property Law Association (“AIPLA”) argues that it is important to narrowly apply issue preclusion for TTAB cases because trademark owners do not litigate in the same manner that they do in federal courts. Specifically, AIPLA contends that parties in TTAB cases invest significantly less time, money, effort, and resources into TTAB proceedings than do parties to federal lawsuits involving the same issues. AIPLA is also concerned that a broad application of issue preclusion may incentivize TTAB parties to approach proceedings more aggressively by introducing more evidence from the onset, in turn making TTAB litigation more burdensome and costly.
PROTECTING CONSUMER CONFIDENCE
B&B and the United States argue that instilling consumer confidence and deterring public deception have long been pivotal considerations in trademark law. The United States asserts that applying preclusive effect is especially imperative in trademark law. In trademark law, the United States explains, finality in cases directly impacts consumers by allowing them to quickly identify familiar trademarks and be confident that they are purchasing the right item. Trademarks thus help consumers save money by providing the necessary brand recognition to help expedite informed purchase decision-making. However, the United States warns that a decision in favor of Hargis will inhibit trademark owners’ ability to secure timely final determinations about their trademark rights, and in turn, harm consumer reliance on marks as indicators of product quality. Thus, the United States maintains that a failure to enforce issue preclusion contradicts some of trademark’s most fundamental objectives: to instill public confidence in marks and mitigate consumer confusion.
Hargis and the International Trademark Association (“INTA”) counter that the TTAB procedures do not optimally reflect consumer confidence in marks and thus TTAB rulings are “devoid of preclusive effect.” INTA argues that consumer perception surveys are the best method of measuring consumer confusion. INTA highlights that TTAB proceedings usually do not evaluate consumer perception survey evidence because TTAB cases “have less at stake and are typically litigated with lower budgets.” INTA also claims that even when the TTAB chooses to assess consumer perception surveys, it does so in a significantly different manner than federal courts do. According to INTA, federal courts use consumer perception surveys that realistically reproduce the market whereas the TTAB’s surveys deviate from true market conditions.
The Supreme Court will determine whether a district court must accord preclusive effect to a finding by the TTAB that a particular trademark produces a “likelihood of confusion,” as well as whether federal courts must defer to the TTAB’s decisions on confusion in the absence of strong contrary evidence. The parties dispute whether the issue of “likelihood of confusion” has the same meaning in proceedings before the TTAB as it does in infringement actions in district court. The Court’s ruling will potentially impact judicial efficiency in trademark infringement cases before the TTAB and federal courts as well as consumer confidence in trademarks when purchasing products.
- Andrew Calvaruso: B&B Hardware v. Hargis: Seeking Clarity in the Preclusive Effect of TTAB Decisions, InsideCounsel Magazine (Sept. 15, 2014).
- Thomas G. Field, Jr.: B&B Hardware v. Hargis or Sealtight v. Sealtite, IP Frontline (May 21, 2013).
- Leo Kittay: United States: When A District Court Must Confront A Trademark Trial and Appeal Board Opinion, Monodaq (Aug. 5, 2014).
- Rebecca G. Rudich: The 2014 Term Brings More IP to the Supreme Court, The National Law Review (Oct. 22, 2014).