The Supreme Court held yesterday that when the Trademark Trial and Appeal Board decides in a trademark registration proceeding that one mark is likely to be confused with another, that decision precludes a court from deciding the issue anew in a trademark infringement case, at least where the TTAB has considered the actual marketplace usage of the parties’ marks. As explained below, this decision has critical implications for mark owners who attempt to register their marks and who find themselves defending against a challenge to registration.
By way of background, the parties in B&B Hardware, Inc. v. Hargis Industries, Inc. both manufactured metal fasteners. B&B registered its SEALTIGHT mark in 1993, and Hargis attempted to register SEALTITE as its own mark in 1996. B&B opposed registration on the basis that Hargis’s mark was confusingly similar, and the TTAB agreed. In the meantime, B&B and Hargis were also engaged in a lawsuit in federal court, the former alleging trademark infringement against the latter. The two proceedings overlapped in the sense that in both a registration proceeding and an infringement lawsuit, the factfinder must determine whether there is a likelihood of confusion between the two marks. Thus, B&B argued to the court that the TTAB’s finding that there was a likelihood of confusion was binding in the infringement lawsuit, such that Hargis could no longer contest that its mark was likely to confuse consumers. The federal district court nonetheless allowed the case to proceed to a jury trial, and the jury rendered a verdict in favor of Hargis that it had not infringed upon B&B’s mark. Thus, while B&B had succeeded in preventing registration of Hargis’s mark, it suffered a seemingly contradictory result in the infringement litigation.
The Supreme Court held that decisions of the TTAB can be binding in related litigation. The Court applied the doctrine of issue preclusion, which provides that once an issue has been actually litigated between two parties and determined by a final judgment, the same parties cannot subsequently re-litigate the issue. Although it acknowledged that the TTAB and the federal court employed different factors in determining whether there was a likelihood of confusion between two marks, the Supreme Court found that “likelihood of confusion” under the Lanham Act is the same standard for both registration and for infringement, notwithstanding differences in the factors that tribunals may apply in determining whether the standard has been met.
The Court further acknowledged that the registration inquiry differs from the infringement inquiry in that the former considers the mark as reflected in the trademark application, whereas the latter considers the mark as actually used in commerce. For this reason, the Court limited its holding: “If a mark owner uses its mark in ways that are materially the same as the usages included in its registration application, then the TTAB is deciding the same likelihood-of-confusion issue as a district court in infringement litigation.” In such as case, the TTAB’s decision is binding in any infringement litigation between the parties. By contrast, if the TTAB does not consider the marketplace usage of the marks (because the actual use is materially different than the uses listed in the registration application), then the TTAB’s decision has no preclusive effect in a lawsuit where the issue is actual marketplace use.
This case underscores the importance of trademark registration disputes. As the Court pointed out in its decision, the benefits of registration are legion. Registration constitutes evidence of the validity of the owner’s ownership of the mark, and creates the possibility of the mark becoming incontestable and immune to challenge by competitors. However, as Hargis itself argued, many participants to a registration challenge consider it to be a low-stakes affair, at least relative to an infringement lawsuit. The Court’s decision demonstrates the opposite to be true.
If you attempt to register a mark and find yourself defending against a challenge to its registration, and if the TTAB finds that your mark is confusingly similar to a preexisting mark and therefore cannot be registered, such a finding may expose you to significant liability in a trademark infringement suit by the party that challenged your registration. In the event that the challenging party brings an infringement suit, you may not even be entitled to the opportunity to defend against an accusation that your mark is confusingly similar, on the basis that the TTAB has already decided the issue against you. Thus, at least where the TTAB has considered use in commerce as part of the registration challenge proceeding, it would be prudent to think of the registration proceeding as one that doubles as a defense to a potential infringement claim, and to allocate resources accordingly.