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TTAB’s Decision Regarding Trademark Registration Does Not Have Preclusive Effect In Federal District Court

The Eighth Circuit Court of Appeals (“8th Circuit”) held that a USPTO’s Trademark Trial and Appeals Board (“TTAB”) decision regarding likelihood of confusion of a mark subject to a trademark registration procedure has no preclusive effect on a likelihood of confusion issue in a subsequent trademark infringement setting.  B&B Hardware, Inc. v. Hargis Industries, Inc., Case Nos. 10-3137 and 11-1247 (8th Cir. May 1, 2013) (available here).  Plaintiff B&B Hardware sued Hargis Industries, claiming that Hargis’ use of the mark “Sealtite” for “self-drilling and self-taping screws” infringed B&B’s mark “Sealtight” for fasteners used in the aerospace industry.  Hargis counterclaimed under Section 43(a) of the Lanham Act, 15 U.S.C. sec. 1125(a) accusing B&B of false advertising and false association. Earlier in the TTAB, B&B opposed Hargis’ efforts to register the “Sealtite” mark but the TTAB had ruled in favor of B&B, blocking Hargis’ registration and sustaining B&B’s opposition due to a “likelihood of confusion” between the two marks.  Later in federal court, the trial court rejected B&B’s argument that the TTAB’s decision should be given preclusive effect, baring Hargis from re-litigating the “likelihood of confusion” issue.   At trial, the jury verdict found in favor of Hargis and found that B&B’s claims were not actionable.  The trial court, in ruling on B&B’s motion that the TTAB’s finding of “no likelihood of confusion” should be binding on the court, reasoned that the USPTO TTAB was not an Article III court, per the U.S. Constitution.  B&B appealed to the 8th Circuit which affirmed that the TTAB decision DID NOT have preclusive effect in the follow-on federal proceeding, but remanded the matter to the lower court to recalculate Hargis’ claim for attorneys’ fees.

On the “no likelihood of confusion” preclusion issue, the 8th Circuit found because the TTAB was not an Article III court, there is no issue preclusion.  As a result, “[s]ome courts will treat Trademark Board [TTAB] decisions as administrative judgments which carry full preclusive effect as to adjudicated facts, if these are the same facts which are in issue in the later court proceeding. Other courts will not give such judgments preclusive effect, but will give them some weight. Still other courts will recognize such judgments unless the contrary is established with thorough conviction.” 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 32:96 (4th ed. 2012).

There are five elements to be considered when determining if issue preclusion is appropriate: “(1) the party sought to be precluded in the second suit must have been a party, or in privity with a party, to the original lawsuit; (2) the issue sought to be precluded must be the same as the issue involved in the prior action; (3) the issue sought to be precluded must have been actually litigated in the prior action; (4) the issue sought to be precluded must have been determined by a valid and final judgment; and (5) the determination in the prior action must have been essential to the prior judgment.”  Robinette v. Jones, 476 F.3d 585, 589 (8th Cir. 2007).

The problem with B&B’s case was the second element: whether the issues were the same.  The 8th Circuit found that the “likelihood of confusion” issue subject to the TTAB decision was not the same “likelihood of confusion” issue heard by the lower court.  The TTAB examined the likelihood of confusion in relation to Hargis’ attempt to register the mark “Sealtite.”  However, the lower court considered the likelihood of confusion in relation to trademark infringement.  These are two different issues and therefore the second element is not satisfied.  In addition, the two issues were governed by different standards.  “The simple fact that the TTAB addressed the concept of ‘likelihood of confusion’ when dealing with Hargis’s attempt to register its mark does not necessarily equate to a determination of ‘likelihood of confusion’ for purposes of trademark infringement.”  Hargis, Slip Op. P. 7.  The TTAB used only six of the 13 factors from In re E.I. DuPont DeNemours & Co., 476 F.2d 1357, 1361 (CCPA 1973) in analyzing the “likelihood of confusion.”  However, when considering the “likelihood of confusion” issue in a trademark infringement setting, the Eighth Circuit applies a six-factor test from SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir. 1980).  Thus, the standards governing the issues are different.

Furthermore, while the two issues have similar factors to consider, the marketplace context elements are different, preventing issue preclusion.  The TTAB noted that the marketplace context weighed against finding a likelihood of confusion, because the products were different and marketed to different industries, but placed a greater emphasis on appearance and sound of the marks.  “While this approach may be appropriate when determining issues of registration, it ignores a critical determination of trademark infringement, that being the marketplace usage of the marks and products.”  Hargis, Slip Op. Pp. 8-9.

B&B also argued that even if the TTAB’s decision was not preclusive, the lower court should have given the TTAB’s fact-findings deference or admitted the TTAB’s decision into evidence.  The 8th Circuit rejected B&B’s ‘fact-finding” deference argument because B&B relied on only one case to support its argument, but that case’s holding was limited to the facts of that case.  The 8th Circuit then considered whether the trial court had abused its discretion in refusing to admit the TTAB’s decision into evidence.  The lower court had indicated that TTAB’s decision would be highly confusing and misleading to the jury.  The 8th Circuit ruled that the trial court correctly excluded this evidence (granting the motion in limine) because the TTAB and the jury would use different factors to determine the likelihood of confusion.  Lastly, the 8th Circuit remanded to the trial court the issue of the amount awarded Hargis for its attorneys fees. Under the Lanham Act, a court has the discretion to award reasonable attorneys’ fees to the prevailing party in exceptional cases, such as when the plaintiff’s case is in bad faith.

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