March 24, 2015

Supreme Court Decides B&B Hardware, Inc. v. Hargis Industries, Inc.

On March 24, 2015, the Supreme Court decided B&B Hardware, Inc. v. Hargis Industries, Inc., No. 13-352. The question was whether issue preclusion (collateral estoppel) can apply to decisions of the Trademark Trial and Appeal Board (TTAB), thus preventing parties from relitigating factual issues previously decided in a TTAB adjudication. The Supreme Court held that “[s]o 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 a district court, issue preclusion should apply.” The Court added that “[a]lthough many registrations will not satisfy those ordinary elements, that does not mean that none will.”

B&B Hardware used the trademark SEALTIGHT. Hargis Industries tried to register its trademark SEALTITE with the United States Patent and Trademark Office under the Lanham Act. B&B opposed Hargis’ registration.

While the TTAB proceeding was pending, B&B sued Hargis in federal district court for trademark infringement.

The TTAB ultimately agreed with B&B and concluded that Hargis’ mark should not be registered because of the likelihood of confusion. Hargis did not seek judicial review of that decision.

B&B then argued in the federal lawsuit that Hargis could not contest the issue of likelihood of confusion because the TTAB decision had preclusive effect. The district court disagreed on the ground that the TTAB is not an Article III court, and the case proceeded to trial. A jury returned a verdict for Hargis, finding no likelihood of confusion. The Eighth Circuit affirmed the judgment on slightly different grounds, holding that the TTAB’s application of different burdens of persuasion and different factors to determine likelihood of confusion than the Eighth Circuit uses deprived the TTAB’s decision of preclusive effect on the confusion issue.

The Supreme Court reversed. The Court first rejected the district court’s conclusion that agency decisions can never have preclusive effect because they are not Article III courts, observing that preclusion often applies to agency decisions. The Court concluded that issue preclusion applies unless it is evident that Congress does not want it to apply, and nothing in the Lanham Act bars the application of issue preclusion when its ordinary elements are met.

The Court also rejected the Eighth Circuit’s conclusion that issue preclusion did not apply because the TTAB considers different factors than the Eighth Circuit uses to assess likelihood of confusion. The Court remarked: “[I]f federal law provides a single standard, parties cannot escape preclusion simply by litigating anew in tribunals that apply that one standard differently.” The Court concluded that because the same likelihood-of-confusion standard applies to both registration and infringement, TTAB decisions could have preclusive effect. Similarly, the Court held that procedural differences between TTAB proceedings and district court proceedings do not, by themselves, defeat issue preclusion.

Justice Alito delivered the opinion of the Court, joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan. Justice Ginsburg filed a concurring opinion. Justice Thomas filed a dissent, joined by Justice Scalia.

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