Litigation before trademark appeal board just got real

On Tuesday, the U.S. Supreme Court raised the stakes for litigants in proceedings before the U.S. Patent and Trademark Office's Trademark Trial and Appeal Board (TTAB) when it held that decisions of the TTAB may have a preclusive effect on subsequent trademark litigation in federal courts.

A TTAB proceeding determines whether a mark may be federally registered, whereas a federal court proceeding determines whether use of a mark is infringing. In B&B Hardware Inc. v. Hargis Industries Inc., the Supreme Court held that a TTAB finding of likelihood of confusion could have preclusive effect in later federal court litigation.

The Case

B&B Hardware, maker of the "Sealtight" metal fastener, filed a TTAB opposition against Hargis Industries' trademark application for its "Sealtite" fasteners. At the same time, the parties were litigating a similar dispute in federal court. Both proceedings ask the same ultimate question: whether a likelihood of confusion exists between the parties' marks.

The TTAB refused to register Hargis' mark based on a likelihood of confusion with B&B Hardware's mark. B&B Hardware then asserted in district court that the TTAB's finding should be given preclusive effect in determining infringement. The district court disagreed, and found no likelihood of confusion.

The 8th U.S. Circuit Court of Appeals affirmed, holding that TTAB decisions should not have a preclusive effect in federal court because each venue uses a different standard for determining likelihood of confusion, and the parties' respective burdens of proof differ in each venue.

In a 7-2 decision, Justice Samuel Alito's opinion reversed the 8th Circuit, finding that TTAB decisions can have preclusive effect in federal court. Alito focused on three questions.

First, the court evaluated whether an agency decision can ever ground issue preclusion, and held that preclusion frequently applies where a single issue is before a court and an administrative agency.

Second, the court addressed whether there is an "evident" reason why Congress would not want TTAB decisions to have preclusive effect, and found nothing in the Lanham Act to that effect. Although TTAB decisions are reviewed de novo by district courts, the court concluded that an unchallenged adverse decision can have preclusive effect in other cases, even if that adverse decision would have been reviewed de novo.

Finally, the court analyzed whether registration decisions of the TTAB can ever have preclusive effect in federal court infringement litigation, and held that in some cases, decisions of the TTAB may have preclusive effect. Acknowledging that the TTAB considers different factors than district courts to assess likelihood of confusion, the court nevertheless held that "likelihood of confusion for purposes of registration is the same standard as likelihood of confusion for purposes of infringement." The court recognized, however, that if the TTAB does not consider the parties' use of their respective marks in the marketplace, then any resulting TTAB decision should not have a preclusive effect in later litigation.

Next, the court found that procedural differences between TTAB and district court proceedings do not defeat issue preclusion. Finally, the court disagreed that the stakes for registration are substantially lower for infringement such that issue preclusion should never apply to TTAB decisions; instead, the court reasoned that because the benefits of registration are substantial, litigants in a TTAB proceeding would "take the matter seriously."

Raising the Stakes

The decision raises the stakes of a TTAB decision beyond whether a mark may be registered to whether a mark may be used. While a TTAB proceeding merely determines whether a trademark may be registered, a federal court can now give the TTAB decision preclusive effect in determining whether a party may use the mark. Parties engaged in a TTAB proceeding should consider that the outcome of that tribunal decision could ultimately determine their ability to use the mark.

Because they may not have another opportunity to litigate "likelihood of confusion," parties to a TTAB proceeding should seriously consider all avenues for discovery, including written discovery, depositions, and expert testimony. Traditionally, parties to TTAB proceedings spend less money than they would in similar federal litigation - discovery efforts are often kept to a minimum. As Alito said, "[f]ew ... litigants would spend $50,000 to defend a $5,000 claim." Yet, because TTAB decisions may now have a preclusive effect on federal courts, TTAB litigants may increase efforts and spending in connection with TTAB proceedings.

Venue and Evidentiary Considerations

Parties should consider the pros and cons, as well as relative chances of success, in federal court and before the TTAB prior to filing a complaint in either forum. While the decision is not strictly binary, a party's decision to have likelihood of confusion determined by the TTAB could later prevent it from having a federal court make this determination.

Given that TTAB decisions could be given preclusive effect, parties who can present better evidence in federal court may consider filing their complaint there first. Conversely, strategy may favor a TTAB decision of likelihood of confusion prior to any federal court litigation.

Litigants should consider that acceptable survey methods for determining likelihood of confusion differ in TTAB proceedings and federal court. In TTAB proceedings, a survey must show the parties' respective marks in the applied-for or registered format on blank cards. In federal court, a survey must show the parties' marks as they are actually used in connection with products or services. These two methods could produce different results that could make or break a case. Parties should consider the likely outcome of these two types of surveys before choosing a venue.

As always, litigants should file complaints in federal court where they are concerned that the other party's use is causing confusion, and need a quick injunction. The only remedy available in a TTAB proceeding is to stop the other party's mark from registering. If a plaintiff waits for a TTAB decision before suing in federal court, they could waste several years and may no longer be entitled to a preliminary injunction. Sometimes, such as where a defendant has filed a trademark application based on intent to use and has not yet begun using the mark, it may make more sense and be less expensive to have the TTAB decide the case.

Appeal Considerations

Parties should thoroughly consider whether to appeal a TTAB decision. The Lanham Act allows a party to appeal a TTAB decision to federal court, which then reviews the case de novo. Some argue this is inconsistent with the concept that a federal court may give preclusive effect to a TTAB decision. Following B&B Hardware, parties who lose at the TTAB and are concerned about the preclusive effect of that decision in subsequent litigation should consider appealing the TTAB decision in federal court. If they forego the appeal, then they face the possibility that a federal court in subsequent litigation could hold that the TTAB's decision has a preclusive effect as to use of the mark, and not be afforded a de novo review.

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B&B Hardware may raise the stakes for parties who litigate trademark disputes before the TTAB since federal courts could now give TTAB decisions preclusive effect, and could limit actual use of a trademark based on the TTAB's findings. Trademark owners should consider how this development may affect their decision whether to adjudicate their disputes before the TTAB or federal court, as well as how to litigate a dispute before the TTAB and whether to appeal a TTAB decision - understanding that it could have far reaching effects.

Jocelyn M. Belloni and Sharoni S. Finkelstein are associates in K&L Gates LLP's San Francisco office.