• Federal Court Denies Preclusion for Trademark Ruling
  • June 14, 2013 | Author: Timothy J. Lockhart
  • Law Firm: Willcox & Savage, P.C. - Norfolk Office
  • A divided panel of the U.S. Court of Appeals for the Eighth Circuit has held that rulings by the Trademark Trial and Appeal Board (TTAB) are not necessarily entitled to preclusive effect. B & B Hardware, Inc. v. Hargis Industries, Inc., --F.3d--, 2013 WL 1810614 (8th Cir. May 1, 2013). With the judges voting 2-1, the court held that because the TTAB is not an Article III court under the U.S. Constitution, a TTAB finding that one mark is likely to be confused with another is not preclusive with respect to the issue of trademark infringement raised between the mark’s owners.

    B & B Hardware (B & B) manufactures and sells a fastener branded SEALTIGHT that is used primarily in the aerospace industry, and Hargis Industries (Hargis) manufactures a line of self-drilling and self-tapping SEALTITE screws used primarily to construct metal buildings. The parties have been litigating over their respective marks for more than 15 years.

    In 2007 the TTAB ruled that, because SEALTITE was likely to be confused with SEALTIGHT, Hargis was not entitled to register SEALTITE with the U.S. Patent and Trademark Office. In a trial of B & B’s allegations against Hargis for trademark infringement and unfair competition, the district court rejected B & B’s arguments and found in favor of Hargis on its counterclaims, awarding Hargis its attorneys’ fees.

    On appeal, B & B argued that the district court should have given preclusive effect to the TTAB’s earlier ruling as to the likelihood of confusion, which would have entitled B & B to prevail on its infringement claim. B & B relied heavily on Flavor Corp. of America v. Kemin Industries, Inc., 493 F.2d 275 (8th Cir. 1974). In Flavor, the Eighth Circuit upheld the district court’s ruling that affirmation by the U.S. Court of Customs and Patent Appeals (CCPA, predecessor to the U.S. Court of Appeals for the Federal Circuit) of a TTAB likelihood-of-confusion decision precluded Kemin from challenging the CCPA’s affirmation in an infringement action.

    The B & B Hardware appellate court distinguished Flavor by noting that they are an Article III court. The CCPA had ruled on the likelihood-of-confusion issue, not merely the TTAB. In addition, the court said that although there might be instances where TTAB decisions should be given preclusive effect (also known as "collateral estoppel"), B & B Hardware was not one of them because the TTAB had used a likelihood-of-confusion test different from that used by the district court. For example, in comparing SEALTITE to SEALTIGHT the TTAB used some (but not all) of the thirteen factors laid out in In re E.I. DuPont DeNemours & Co., 476 F.2d 1357 (CCPA 1973), the district court used the six factors established by the Eighth Circuit in SquirtCo v. Seven-Up Co., 628 F.2d 1086 (8th Cir. 1980).

    The Eighth Circuit found differences among the two tests’ factors, although slight, to be compelling. “Although some of the E.I. DuPont factors are the same or comparable to the SquirtCo factors, ‘for collateral estoppel to apply, the [TTAB] must have examined the “entire marketplace context”’ as is done in trademark infringement actions.” B & B Hardware, at * 8 (citations omitted). The court said the TTAB had focused on the similar appearance and pronunciation of the SEALTIGHT and SEALTITE marks and had found that the evidence of market context “weighed against a finding of likelihood of confusion.” Id.

    The court also held that the district court had properly refused to allow B & B to admit the TTAB’s decision into evidence. No one had challenged the TTAB’s decision, the court said, and admitting it would have confused the jury, especially given that the jury has seen much of the same factual evidence on the likelihood-of-confusion issue as the TTAB.

    However, the Eighth Circuit partially granted B & B’s appeal of the award of attorneys’ fees to Hargis. The Trademark Act permits courts in “exceptional cases [to] award reasonable attorney fees to the prevailing party [note: not only the plaintiff].” 15 U.S.C. § 1117(a). The Eighth Circuit held that because B & B had “manufacture[d] evidence,” B & B’s “claim of trademark infringement is groundless and unreasonable,” B & B Hardware, at * 11, thereby justifying the award of attorneys’ fees to Hargis. But because B & B’s prior appeal resulted in a ruling in its favor, that appeal was not groundless or unreasonable, and so the Eighth Circuit remanded the case to the district court with directions to deduct the attorneys’ fees awarded for the prior appeal.

    The dissenting judge argued that the district court should have given the TTAB’s decision preclusive effect. As a general matter, he noted that the U.S. Supreme Court “recently emphasized that ‘giving preclusive effect to administrative factfinding serves the value underlying general principles of collateral estoppel: enforcing repose.’” Id., at * 13 (citation omitted).

    Next he argued that the differences between the TTAB’s and the district court’s infringement tests were too slight to justify dispensing with collateral estoppel. Then he noted that the majority’s drawing a distinction between the TTAB’s analysis of likelihood of confusion for registration purposes and a court’s analysis of that issue for infringement purposes “is tantamount to holding that a finding of the [TTAB] on likelihood of confusion will never be preclusive in an infringement action.” Id., at * 15. Finally, he argued that although the majority might disagree with the TTAB’s decision, the doctrines of claim preclusion and issue preclusion “‘prevent relitigation of wrong decisions just as much as right ones,’” else “‘the doctrines would have no effect and be useless’” Id. (citation omitted).