On Tuesday, December 2nd, 2014, the Supreme Court heard oral arguments from the parties in B&B Hardware vs. Hargis on whether the Trademark Trial & Appeal Board’s findings on the issue of likelihood of confusion should preclude the parties from re-litigating the issue in federal court. This ruling could have major implications on the weight and attention given to trademark opposition and cancellation proceedings before the Trademark Trial & Appeal Board.
Issue: (1) Whether the Trademark Trial and Appeal Board’s finding of a likelihood of confusion precludes respondent from relitigating that issue in infringement litigation, in which likelihood of confusion is an element;
and (2) whether, if issue preclusion does not apply, the district court was obliged to defer to the Board’s finding of a likelihood of confusion absent strong evidence to rebut it.
Background & Lead Up to the Supreme Court
The Petitioner, B&B Hardware, uses and owns a federal registration in the mark SEALTIGHT for fasteners in the aerospace industry. The Respondent, Hargis Industries, sells self-sealing fasteners under the mark SEALTITE in the construction industry. The two parties have been involved in trademark litigation for the last 15 years over these two marks. In 2003, the USPTO published Hargis’s SEALTITE mark for opposition and B&B opposed based on its SEALTIGHT registration. The TTAB found that Hargis’s SEALTITE mark was confusingly similar to B&B’s SEALTIGHT mark and sustained B&B’s opposition.
In 2006, B&B sued Hargis for trademark infringement. The district court held that the TTAB’s finding of a likelihood of confusion did not have preclusive effects in district court and refused to allow the TTAB’s findings into evidence.
The Eighth Circuit affirmed the district court’s findings.
The issue before the Supreme Court is whether the TTAB’s finding of a likelihood of confusion during an administrative proceeding has preclusive effects before federal courts. Likelihood of confusion is one of the most integral parts of a trademark infringement claim and is decided based on a multi-factor test that varies slightly from circuit to circuit. Whether these factors are called the Du Pont factors, like at the TTAB and Federal Circuit, or the Polaroid factors, like in the Second Circuit, the factors are weighed in their entirety with no single factor being dispositive of a likelihood of confusion.
During the trademark registration process, a trademark examining attorney searches the primary register for marks that are confusingly similar to the applied-for mark. The examiner uses the Du Pont factors in his or her analysis but, as opposed to a district court case, the examiner only looks to the “four corners of the application,” not how it is used by the parties in the marketplace. For example, if the application is for “olive oil” and a similar mark exists on the register for “cooking oil” the examiner will not consider actual market usage when issuing a 2(d) likelihood of confusion refusal. Therefore, even if the olive oil is a specialty item that sells for $45 a bottle and the other oil is sold for $5 a jug, the examiner will still only look at the goods and services listed. However, in an inter partes proceeding, as B&B pointed out in its argument, some TTAB decisions analyze the market conditions outside of the “four corners of the application.”
All of this points to the crux of the issue the Supreme Court will analyze: whether, despite the differences, the TTAB’s procedure and analysis is substantively similar to that of a district court’s. B&B argues that, in its case, the TTAB looked at evidence of actual use of both parties. It also argued that no substantive evidence was added to the record by either party before the district court. Hargis, on the other hand, argues that the TTAB is fundamentally different in scope than federal litigation.
There are procedural differences and, some might argue, practical differences between the TTAB and the district court. The TTAB does not allow for any live witness testimony and discovery is limited in TTAB proceedings when compared to district court litigation. There are also practical differences. For example, while a likelihood of confusion survey is all but required in trademark litigation, it is rarely used in an inter partes proceeding before the TTAB.
One likely outcome of this case is that the Supreme Court will adopt a “sometimes but not always” standard for TTAB issue preclusion which will allow for a preclusive effect only in very narrow circumstances. This will be a delicate balance for the Court because B&B’s situation appears to be extremely rare. B&B presented an unusually large amount of evidence during the opposition proceeding and the TTAB’s decision analyzed the actual market conditions in which the two marks were used. In addition, the parties’ federal litigation did not appear to involve any new substantial evidence. It even used video depositions before the TTAB, a practice allowed no longer allowed. If the Supreme Court adopts a “sometimes but not always” view of TTAB issue preclusion, the facts of this case will likely make it difficult for the Court to decided when the TTAB’s holdings will have a preclusive effect on federal litigation.
In deciding this case, the Supreme Court will likely resolve a potential circuit split. As shown in this case, the Eighth Circuit does not give any preclusive effect to TTAB likelihood-of-confusion analysis. The Fifth and Eleventh Circuits do not give preclusive effect to TTAB decisions, but defer to them absent contrary evidence. The Second Circuit allows issue preclusive if there is evidence that the TTAB analyzed the marks in the marketplace, and the Third and Seventh Circuit which accord preclusive effect to TTAB likelihood-of-confusion decisions.
ONE. If the Supreme Court accepts TTAB likelihood-of-confusion issue preclusion in some cases, it will likely be limited to cases with no new evidence before the district court and where the TTAB looked at market evidence in its likelihood-of-confusion analysis.
TWO. The Supreme Court may resolve a circuit split on whether a TTAB likelihood-of-confusion holding precludes the issue from being re-litigated in district court.
THREE. Compared to district court, the TTAB does not allow live witness testimony and generally affords limited discovery to the parties.