B&B Hardware v Hargis Industries - Supreme Court: TTAB rulings refusing registration on likelihood of confusion grounds may be preclusive: implications for brand owners

Intellectual Property and Technology Alert


The United States Supreme Court has decided an important question of trademark law that has divided the courts of appeals. 

The Court held in B&B Hardware, Inc. v. Hargis Industries, Inc., No. 13-352, 575 U.S. ____, 2015 WL 1291915 (March 24, 2015), that when the Trademark Trial and Appeal Board (TTAB) refuses federal registration of a trademark because it is likely to be confused with an already-registered mark, this determination will preclude the same parties, in a later district court infringement lawsuit involving the same marks, from relitigating the likelihood-of-confusion question, provided that: (1) the ordinary elements of issue preclusion are satisfied; and (2) the plaintiff in the infringement action does not claim use of the registered mark on goods other than those listed in its registration. 

B&B Hardware appears to overrule every prior circuit decision on the issue because the courts of appeals had either refused to give TTAB determinations any preclusive effect, or applied preclusion only where the TTAB’s confusion analysis focused on marketplace uses.  The B&B Hardware decision is likely to affect how future trademark litigation is conducted. For example, mark owners may have to devote more resources to TTAB opposition proceedings, treating them with as much importance as infringement lawsuits; and if they lose at the TTAB level, they will need to consider an appeal or face the risk that a district court will  find the TTAB’s conclusions on confusion to be preclusive.

Both TTAB registration proceedings and infringement lawsuits in federal courts often turn on whether the mark of a trademark applicant or infringement defendant so resembles an already-registered mark as to be likely to cause confusion, mistake or deception if used in connection with the applicant or defendant’s goods. The US Patent and Trademark Office may refuse registration of a mark if it is likely to be confused with an existing registered mark; and, if the mark is approved by the PTO, the owner of the conflicting registered mark can pursue an opposition to registration in the TTAB.1  In deciding whether there is a likelihood of confusion, the TTAB may consider how the registered mark is actually used in the marketplace, but typically limits its analysis to the goods actually listed in the registration or application.  The TTAB usually does not consider actual uses of the mark in commerce, so its confusion analysis will not take into account that a mark may be used on goods not listed in the registration or application, or may be used for only a narrow subset of the goods so listed. In an infringement action, the owner of a registered mark may obtain an injunction against another’s use of a similar mark (registered or unregistered) by showing that the use is likely to cause confusion, mistake or deception.  The infringement defendant often files a counterclaim for an order cancelling the plaintiff’s registration, as a district court also has the power to decide who has the right to register a mark, and the court may also consider likely confusion in this context.

The Supreme Court decision

The B&B Hardware case involved two manufacturers of metal fasteners.  In 1993, B&B registered SEALTIGHT for fasteners, and, in 1996, Hargis applied to register SEALTITE for another type of fastener.  B&B opposed registration, claiming that registration of SEALTITE would create a likelihood of confusion with its SEALTIGHT mark.  The TTAB applied its usual 13-factor test for likelihood of confusion, and denied registration, finding that SEALTITE was likely to be confused with B&B’s mark.  The TTAB considered marketplace evidence such as similarity of trade channels and actual confusion, but limited its confusion analysis to goods listed in the opposer’s registration, not to other usages.  Hargis did not seek judicial review of this decision. 

While the TTAB proceeding was pending, B&B sued Hargis in district court, claiming that use of SEALTITE infringed its registered mark SEALTIGHT.  After the TTAB ruled in B&B’s favor, sustaining the opposition and refusing to register SEALTITE, B&B moved for summary judgment in the infringement action, contending that the TTAB’s unappealed judgment precluded Hargis from contesting that its use of SEALTITE created a likelihood of confusion.  The district court denied the motion, finding that the TTAB decision did not have preclusive effect.  Instead, it submitted the case to a jury, which found no likelihood of confusion and returned a verdict for Hargis.  B&B appealed, but the Eighth Circuit affirmed, holding that there was no preclusion because the TTAB had used factors to analyze likelihood of confusion that were different from the factors required by Eighth Circuit law, and because the TTAB had failed to fully evaluate how the SEALTIGHT mark was used in the marketplace. 

The Supreme Court granted certiorari, reversed the judgment and remanded.  The majority opinion of Justice Samuel Alito closely followed the analysis offered in the government’s amicus brief in favor of reversal.  The Court first held that federal agency decisions may have preclusive effect in later federal court lawsuits, even though agencies are not courts created under Article III of the Constitution.    An agency decision rendered in a judicial capacity, where the parties are given an adequate opportunity to litigate the issues, gives rise to a presumption of preclusive effect in later court litigation, absent some compelling evidence that Congress did not want preclusion. The Court found nothing in the Lanham Act suggesting that Congress intended to deny preclusive effect to all TTAB decisions.  It also rejected the policy-based argument that a broader application of preclusion would require parties to spend too much time and energy in the TTAB and thus bog down the registration process. 

The Court next held that ordinary issue preclusion principles apply to TTAB registration decisions.  While noting that a “great many” registration decisions may not satisfy these principles, the Court stated that this was not a reason to deny preclusion to decisions that do satisfy them.  It found that likelihood of confusion is a single standard applicable to both trademark registration and infringement, and that preclusion can apply even though the TTAB’s confusion analysis uses a different set of factors from those used by federal courts in infringement cases.

The Court next rejected the argument that TTAB adjudications should not be preclusive because the TTAB considers whether the registered and applied-for marks resemble each other, while confusion arising from “use in commerce” is the core issue in an infringement action, and a mark owner may use its mark on goods that are outside of the scope of a registration.  The Court rejected the idea that the TTAB’s likelihood-of-confusion analysis ignores the marketplace entirely (and indeed the analysis applied in the TTAB does take into account marketplace factors such as channels of trade, sophistication of consumers, fame and actual confusion).

The Court agreed that preclusion would not apply where a mark owner in a later infringement action relied on common-law usages of its registered mark on goods that are not within the scope of its registration, as these usages would not have been considered by the TTAB.  However, the Court added an important caveat:  if the infringement case involves usages of the mark that are “materially the same as the usages included in [the plaintiff’s] registration application,” then the likelihood of confusion issue will be the same in the TTAB and the federal court, and the TTAB determination will be preclusive.  “Trivial variations” will not defeat preclusion, nor will an infringement court’s belief that TTAB gave too much or too little emphasis to particular factors in analyzing confusion. 

The Court then held that the procedural differences between TTAB proceedings and federal court litigation do not affect preclusion except in instances where the agency procedures are so limited as to make preclusion fundamentally unfair.  The Court gave several possible examples of this (if the TTAB bars the introduction of material evidence, or if the TTAB’s bar on live testimony materially prejudices a party’s ability to present its case), but it suggested that such instances of unfairness would be rare.  Finally, the Court rejected the argument that preclusion should not apply because the stakes are less in registration contests than in infringement litigation.  It noted that there are substantial benefits to federal registration, which is why Congress permitted de novo review of adverse TTAB decisions.2 Thus, a “registration decision can be weighty enough to ground issue preclusion.” 

The Court remanded the case, with instructions to the lower courts to apply issue preclusion to the TTAB determination if the ordinary elements of issue preclusion are met and the “usages adjudicated by the TTAB are materially the same as those before the district court.”3

Change in circuit law

Prior to the B&B Hardware decision, at least two courts of appeals – the Fifth and Eleventh  –refused to give TTAB determination any preclusive effect in later infringement litigation.  These decisions are overruled by the B&B Hardware decision.  Also undermined is the Federal Circuit law that declines to apply preclusion between a prior trademark infringement action and a later cancellation proceeding involving the same trademark on the grounds that different elements are involved in infringement and cancellation proceedings.

B&B Hardware changes the law even in circuits which have acknowledged that TTAB decisions may potentially have preclusive effect in later federal infringement litigation.  The Second, Seventh and Eighth Circuits had given TTAB determinations issue-preclusive effect only if the TTAB compared both the visual and marketplace uses of the trademarks and gave meaningful weight to marketplace context.  B&B Hardware, in contrast, turns on whether the usages of the plaintiff’s mark raised in the infringement action are materially the same as those adjudicated in the TTAB proceeding.  If the usages are materially the same, then a TTAB determination of likely confusion may well be preclusive even if the TTAB did not give specific attention to the entire marketplace context.

Effects of B&B Hardware on trademark litigation and enforcement

B&B Hardware’s holding on preclusion has the potential to change trademark litigation and enforcement strategies of many mark owners and businesses that are contemplating the use of marks that are similar to registered marks.  For example, it could well make TTAB oppositions more important and more expensive.  Parties have often spent relatively limited resources on TTAB oppositions, saving their money and best arguments for an anticipated infringement action (in general, infringement suits are substantially more expensive to pursue than opposition proceedings).  Now, the TTAB may be the arena where the crucial issue in many infringement cases – likelihood of confusion – is definitively decided.  With the higher stakes, mark owners and applicants will now consider putting their strongest case forward at the TTAB level, because if the TTAB ruling is preclusive, they will not get a chance to introduce new evidence in court.  Opposition proceedings, which in the past have been fairly streamlined and consensual, may evolve into something more like contentious full-scale litigation, with disputes over discovery, including electronic discovery, requests for oral arguments, and similar issues becoming more common.  In addition, losers before the TTAB may be more likely to seek de novo court review of an adverse TTAB determination on confusion.

Brand owners may find it necessary to consider their options at the outset of a trademark dispute more carefully.  For example, an owner may conclude that it has a better chance of establishing confusion in the TTAB than in an infringement action if the goods listed in its registration are similar to the goods listed in the contested application, but the applicant does not actually use the mark on similar goods.  However, where the junior mark is actually being used on similar goods, owners may consider concentrating their firepower on the infringement proceeding, where they can obtain an injunction, damages and an order cancelling any registration of the junior mark.

Registered mark owners who believe their chances of success are greater in federal court may consider following a three-step process: (1) bring an opposition proceeding in the TTAB to prevent an application from maturing into a registration; (2) sue for infringement in federal court before the TTAB addresses the confusion issue; and (3) then immediately move to suspend the TTAB proceeding.  The potential downside is that an infringement action cannot be brought where the applied-for mark has not yet been used in commerce, so this process would not be available for intent-to-use applications prior to their maturing into a registration through use in commerce. 

The types of evidence submitted to the TTAB may also change. Under existing TTAB practice, evidence of actual uses that are different in nature or scope from those listed in a registration may not be considered by the TTAB or may only be given slight weight.4  Likewise, federal courts will not admit surveys in infringement cases unless they present respondents with the marks as actually used in the market place, while the TTAB requires surveys to show marks only as they appear on a registration or application.  Parties may now urge the TTAB to consider marketplace uses and surveys based on how marks are actually used on goods when determining likelihood of confusion. Applicants may also more frequently file counterclaims in opposition proceedings to restrict registrations and applications to the precise scope of marketplace use.  

The exceptions to preclusion identified in B&B Hardware have the potential to create new kinds of disputes in infringement actions.  The loser at the TTAB level may now attempt to avoid preclusion in an infringement action by arguing that TTAB procedures unduly limited its ability to present evidence on likely confusion.  For example, a party may contend that the TTAB’s bar on live testimony prevented it from effectively attacking the credibility of an adverse witness on issues such as intent or fraud; or that the TTAB’s rules requiring unwilling foreign witnesses to be deposed only on written questions through the cumbersome letters rogatory procedure unduly limited the loser’s ability to present material evidence on confusion; or that the TTAB’s inability to impose monetary sanctions on parties that abuse the discovery process made it impossible to obtain material evidence on confusion.

The full impact of B&B Hardware will become clearer as the lower courts and TTAB begin applying the decision, and litigation strategies will evolve accordingly.  In the meantime, mark owners and applicants should carefully analyze their options on a case-by-case basis.  Each mark will present a different set of facts and strategic considerations, and there will not be a one-size-fits-all answer to where likelihood of confusion issues should be litigated.

For more information about this case and its potential impact on your business, please contact the authors.

See the Supreme Court's decision here.

1 For the first five years after registration of a mark, the owner of a senior registered mark may petition the TTAB to cancel the junior mark’s registration on grounds of likelihood of confusion; after the five-year period, incontestability may be a bar to cancellation on such grounds.  The issue preclusion analysis of B&B Hardware would also apply to TTAB decisions in cancellation proceedings.

2 A party adversely affected by a TTAB decision has the option of either appealing to the Federal Circuit, or commencing an action in federal district court for de novo review.  Hargis did neither.

3 Justice Ginsburg concurred, emphasizing her view that issue preclusion will not apply where the TTAB considers confusion between marks in the abstract, rather than as they are used in the marketplace.  Justice Thomas, for himself and Justice Scalia, dissented, not on trademark law grounds, but in disagreement with the Court’s reliance on a 1991 precedent holding that agency decisions are presumed to have preclusive effect in Article III courts.  The dissent argued that this precedent was mere dictum; that at common law agency decisions were not presumed to have preclusive effect; and that the Lanham Act was enacted years before the Court first recognized a presumption of administrative preclusion.  It contended that Congress did not intend the limited determinations of a TTAB registration proceeding to be preclusive in a broader infringement action, and raised constitutional concerns about a government agency adjudicating claims involving “core private rights.”

4 B&B Hardware noted, but did not resolve, the parties’ dispute as to whether, and how much, consideration the TTAB gives to actual uses in the marketplace.