B&B Hardware U.S. Supreme Court Decision: Much Ado About Nothing or A Reason For Discontent

Transcription

1 B&B Hardware U.S. Supreme ourt Decision: Much Ado About Nothing or A eason For Discontent Stephen W. Feingold Kilpatrick Townsend & Stockton LLP SFeingold@kilpatricktownsend.com

2 Establishing Liability: Likelihood of onfusion, Issue Preclusion, and Administrative Law an a determination of the likelihood of confusion between two marks by the Trademark Trial and Appeal Board have preclusive effect in later district court litigation? Yes No Not sure 2

3 Establishing Liability: Likelihood of onfusion, Issue Preclusion, and Administrative Law an a determination of the likelihood of confusion between two marks by the Trademark Trial and Appeal Board have preclusive effect in later district court litigation? Yes. See B & B Hardware, Inc. v. Hargis Indus., 135 S. t (2015). 3

4 The Sky Has Fallen! The prospect that an adverse TTAB ruling may effectively amount to a finding of infringement means that the stakes for the junior user at the Trademark Office are vastly greater than they were before B&B Hardware. Prof. Schecher 4

5 And It s Worse Than We Thought! The stakes involved in TTAB enforcement just went up, a lot they no longer impact only the right to register, but the right to use too. The complexity, intensity, size of the record, and cost of seeing a TTAB decision through final hearing just went up; 5

6 Brand Owners Beware! The losing party at the TTAB is more likely to appeal the adverse decision to federal district court for a de novo review; and Given all this, more brand owners may opt to suspend TTAB actions while they pursue all their claims in federal district court. Stephen Baird 6

7 What was the law before B&B? Fifth, Eleventh, and D.. ircuits held no preclusive effect to TTAB decisions: Aktieselskabet AF 21. Nov v. Fame Jeans Inc., 525 F.3d 8, (D.. ir. 2008) Freedom Sav. & Loan Ass n v. Way, 757 F.2d 1176, (11th ir. 1985) Am. Heritage Life Ins. o. v. Heritage Life Ins. o., 484 F.2d 3, 9-10 (5th ir. 1974) 7

8 Virtually Every ircuit ecognized Possible Preclusive Effect: 2d ircuit TTAB determination of likelihood of confusion could have preclusive effect if the Board looked at the same marketplace factors as those taken into account by a district court. Levy v. Kosher Overseers Ass n, 104 F.3d 38, 42 (2d ir. 1997) 8

9 Issue preclusion was appropriate if the parties had vigorously litigated the same issue in a prior proceeding before the TTAB and the requirements for issue preclusion otherwise were met. Jean Alexander osmetics, Inc. v. L Oreal USA, Inc., 458 F.3d 244, 249 (3d ir. 2006) 9

10 How Did Supreme ourt Frame Issue? Sometimes two different tribunals are asked to decide the same issue. When that happens, the decision of the first tribunal usually must be followed by the second, at least if the issue is really the same. Allowing 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 doctrine of collateral estoppel or issue preclusion is designed to prevent this from occurring. B & B Hardware, 135 S. t. at

11 Elements of Issue Preclusion [W]e look at five elements: (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. B & B Hardware, Inc. v. Hargis Indus., 716 F.3d 1020, 1024 (8th ir. 2013), rev d, 135 S. t (2015). 11

12 B & B Hardware, Inc. v. Hargis Indus., 135 S. t (2015) 12

13 The B & B hronology: 1989: Hargis begins using its SEALTITE mark; 1990: B & B begins using its SEALTIGHT mark; 1993: B & B receives a registration of its mark; 1996: Hargis applies to register its mark but receives a Section 2(d) refusal;

14 The B & B hronology: 1997: Hargis requests the suspension of its application and petitions the Board to cancel B & B s registration; 1998: B & B files an infringement action, in response to which Hargis fails to counterclaim for the cancellation of B & B s registration; 2000: A jury finds B & B s mark descriptive and lacking secondary meaning, and the Eighth ircuit ultimately affirms that finding; (What If.?)

15 The B & B hronology: 2001: Hargis successfully obtains the reinstatement of its application by representing to the examiner that it is believed that the TTAB should cancel eg. No. 1,797,509, registered to B&B Hardware, Inc. ; 2003: B & B opposes Hargis s reinstated application; 2003: Applying the doctrine of claim preclusion, the Board refuses to invalidate B & B s registration in the cancellation action because Hargis failed to pursue that relief from the district court;

16 The B & B hronology: 2006: B & B files another infringement suit based on its now-incontestable registration; 2007: The Board determines in the opposition proceeding that confusion is likely between the parties marks; ( Unusual case where Opposer can stop registration but not use.)

17 The B & B hronology: 2010: A jury finds no likelihood of confusion between the parties marks after the district court: refuses to give the prior Board determination preclusive effect because the Board isn t an Article III court; and excludes the Board order from evidence as confusing and unfairly prejudicial;

18 The B & B hronology: 2013: The Eighth ircuit affirms the district court on the alternative ground that its test for likely confusion differs from that applied by the Board

19 The B & B hronology: [W]e look at five elements: (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. B & B Hardware, Inc. v. Hargis Indus., 716 F.3d 1020, 1024 (8th ir. 2013), rev d, 135 S. t (2015). 19

20 The B & B hronology: 2014: The Supreme ourt grants B & B s cert. petition, which contains two questions presented

21 Questions Accepted for ertiorari 1. Whether the TTAB s finding of a likelihood of confusion precludes [the defendant] from relitigating that issue in infringement litigation, in which likelihood of confusion is an element. 2. 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. Petition for writ of certiorari, B&B Hardware, Inc. v. Hargis Indus., No , 82 USLW 3195, at *i (U.S. Sept. 18, 2013). 21

22 The elated (and Still Open Issue) Applicant refused registration or losing party in TTAB proceeding can either - Appeal to the Federal ircuit as normal appeal or Appeal to district court for de novo trial. What is de novo trial? 22

23 De Novo Trial ight to introduce new evidence. But what about issues for which no new evidence? Standard very confused both in case law and in Lanham Act. 23

24 Opposition No : Applying 2d or 3d ircuit ase Law [Opposer s President] could not identify any customers that used its fasteners for metal building construction. Applicant contends that its fasteners may cost 2 cents a piece while opposer s fasteners may cost cents a piece. 24

25 Opposition No : Applying 2d or 3d ircuit ase Law It is sufficient that respective goods of the parties would or could be encountered by the same persons under circumstances that could, because of the similarity of the marks, give rise to the mistaken belief that they originate from the same producer. 25

26 Opposition No : Applying 2d or 3d ircuit ase Law The fastener industry is not monolithic. There are separate and distinct market segments. However, the fact that the products at issue are fasteners is sufficient to establish that the products are intrinsically related, albeit for different purposes. onsumers encountering different fasteners under the substantially similar marks in the case sub judice may believe that the products are related. 26

27 Opposition No : Applying 2d or 3d ircuit ase Law We find that the products of the parties move in different channels of trade. 27

28 Opposition No : Applying 2d or 3d ircuit ase Law Despite opposer s testimony, it seems implausible that someone using fasteners in high tech applications, such as the aerospace, fluid power, or marine industries (such as NASA, Boeing, and aytheon), where preventing liquid or gas leaks is essential, would not exercise a high degree of care in his or her purchasing decision. It seems equally implausible that persons who specialize in purchasing fasteners would have little knowledge regarding the fasteners specifications or the different sources for purchasing different types of fasteners. 28

29 Opposition No : Applying 2d or 3d ircuit ase Law It is not unusual for Fastenal, or other customers, to call applicant seeking a product that applicant does not sell. In fact, applicant admits that on occasion we will have a customer call and identify a B&B product that they want to purchase. 29

30 Opposition No : Applying 2d or 3d ircuit ase Law Although the specific fasteners of the parties are different and they are marketed to different industries, the anecdotal evidence of actual confusion lends support to our finding that when the fasteners of the parties are marketed under similar marks, consumers will mistakenly believe that they emanate from the same source. 30

31 What Do You Think? Was this a reasoned opinion (regardless of whether you agree)? Yes No Sort of 31

32 What Do You Think? Would a district court have considered additional factors? Most likely Probably not Hard to say 32

33 What Do You Think? Is this typical of TTAB opinions? Yes No Not sure 33

34 The Supreme ourt Holding So long as the other ordinary elements of issue preclusion are met, when the usages adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply. B & B Hardware, 135 S. t. at

35 Dicta Supreme ourt emphasized that issue preclusion applies even if second court believes first court was wrong. Distinguish between appeal and taking second bite of apple. 35

36 What Does It Mean? Key takeaways from the Supreme ourt s opinion: the Eighth ircuit properly concluded that some decisions of non-article III tribunals can have preclusive effect; but the Eighth ircuit improperly concluded that likelihood-of-confusion determinations by the Trademark Trial and Appeal Board in particular can never have that preclusive effect. 36

37 Limited Holding Board likelihood-of-confusion determinations can have preclusive effect because: the tests for likely confusion under Section 2(d) and Section 32 are the same; [j]ust because the TTAB does not always consider the same usages as a district court does, it does not follow that the Board applies a different standard to the usages it does consider, 135 S. t. at 1308; if federal law provides a single standard, parties cannot escape preclusion simply by litigating anew in tribunals that apply that one standard differently, id. at 1307; 37

38 Important That Trademark Bar Does Not Over eact! Board likelihood-of-confusion determinations can have preclusive effect because: the Board s practice of not hearing live witnesses does not render its proceedings incompatible with those of Article III courts: [p]rocedural differences, by themselves..., do not defeat issue preclusion, id. at 1309; [r]ather than focusing on whether procedural differences exist they often will the correct inquiry is whether the procedures used in the first proceeding were fundamentally poor, cursory, or unfair, id.; and 38

39 Implications Board likelihood-of-confusion determinations can have preclusive effect because: the parties to a Board proceeding have sufficient incentives to litigate their cases vigorously: [t]he benefits of registration are substantial, id. at 1310; and ongress creation of [the] elaborate registration scheme, with so many important rights attached and backed up by plenary review, confirms that registration decisions can be weighty enough to ground issue preclusion. id. 39

40 Here is the Paragraph to emember and Quote Over and Over [I]f a mark owner uses its mark in ways that are materially unlike the usages in its application, then the TTAB is not deciding the same issue. Thus, if the TTAB does not consider the marketplace usage of the parties marks, the TTAB s decision should have no later preclusive effect in a suit where actual usage in the marketplace is the paramount issue. B & B Hardware, 135 S. t. at 1308 (internal quotation marks omitted). 40

41 Needless to say,... if the TTAB has not decided the same issue as that before the district court, there is no reason why any deference would be warranted. B & B Hardware, 135 S. t. at

42 What About Other Issues Decided by TTAB? The Board decides many issues other than likelihood of confusion using the same doctrinal tests as those applied by federal courts, including but not limited to: use in commerce; abandonment; genericness; functionality; deceptiveness; deceptive misdescriptiveness; primarily geographically deceptive misdescriptiveness; and immorality, scandal, and potential disparagement. 42

43 Who Benefits From B&B? The ourt s holding favors senior users where the likelihood-of-confusion inquiry is concerned. Because of the different methodology followed by the TTAB, which includes the acceptance of survey stimuli in the form of marks typed out on white cards, it is often easier to prove likely confusion before that tribunal than before a federal district court. If immediate injunctive relief is not necessary or if the availability of that remedy is in question, a senior user might rationally choose to pursue relief only before the Board and not do anything creating an actionable case and controversy that might support a declaratory judgment action for noninfringement. 43

44 Who Benefits From B&B? Assuming the senior user prevails before the Board, its victory might well give it an insurmountable advantage if it later resorts to an infringement action for injunctive and monetary relief. If a Board proceeding is not going well, plaintiff should consider filing an infringement action and requesting suspension. 44

45 Who Benefits From B&B? Particularly if the nature of the goods or services at issue means that a Board determination will appear to turn on a real world assessment of likelihood of confusion, potential defendants defending against allegations of likely confusion now have an incentive to get those disputes before federal district courts, which take real-world considerations into account in the liability inquiry and which more closely manage their dockets. 45

46 Thank You Stephen W. Feingold Kilpatrick Townsend & Stockton LLP