B&B Hardware, Inc. v. Hargis Industries, Inc. – U.S. Supreme Court Holds TTAB Decisions Can Have Preclusive Effect on District Courts

By: Kollin J. Zimmermann

On March 24, 2015, the U.S. Supreme Court issued its long-awaited decision in the case of B&B Hardware, Inc. v. Hargis Indus., Inc. B&B Hardware owned the federally registered trademark SEALTIGHT for use in connection with fasteners and related hardware in the aerospace industry. Hargis filed an application with the United States Patent and Trademark Office (“USPTO”) to register SEALTITE for use in connection with fasteners and related hardware in the construction trade. B&B opposed Hargis’ registration and the two parties began litigating the matter before the Trademark Trial and Appeal Board (“TTAB”). While the TTAB proceeding was ongoing, B&B also filed a trademark infringement lawsuit against Hargis in federal court. In both the TTAB proceeding and the district court case, the primary issue was whether a likelihood of confusion exists between B&B’s SEALTIGHT mark and Hargis’ SEALTITE mark.

Before the district court case went to trial, the TTAB sided with B&B and held that there was a likelihood of consumer confusion between the two marks, and denied Hargis’ registration application. B&B then argued that the TTAB’s decision should be binding on the district court, based on the doctrine of “issue preclusion.” The district court disagreed, the case went to trial, and the jury found in favor of Hargis – i.e., no consumer confusion and therefore no liability for trademark infringement. B&B appealed to the Eighth Circuit, arguing that the district court erred by not giving preclusive effect to the TTAB’s decision. But the Eighth Circuit affirmed the district court’s decision. B&B then appealed to the Supreme Court, who reversed and remanded the case.

As the Supreme Court explained, the general rule for determining issue preclusion is “when an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.”

The first issue the Court addressed is “whether an agency decision can ever ground issue preclusion.” Hargis argued that it could not because only an Article III court’s decision could be given preclusive effect, and an administrative agency is not an Article III court. But the Supreme Court disagreed, stating that “Both this Court's cases and the Restatement make clear that issue preclusion is not limited to those situations in which the same issue is before two courts. Rather, where a single issue is before a court and an administrative agency, preclusion also often applies.”

The Court then turned to the more particular issue of “whether there is a categorical reason why registration decisions [i.e., TTAB decisions] can never meet the ordinary elements of issue preclusion.” The Court held that there is no such categorical reason, and explained that “Although many registrations will not satisfy those ordinary elements, that does not mean that none will.”

One of Hargis’ main arguments against giving preclusive effect to TTAB decisions was that the TTAB considers different factors when determining the issue of consumer confusion than district courts do. But the Supreme Court rejected that argument, stating that the “factors are not fundamentally different, and minor variations in the application of what is in essence the same legal standard do not defeat preclusion.”

Hargis also argued that issue preclusion should not apply to TTAB decisions because the stakes for registration are so much lower than for infringement, so the parties in a TTAB proceeding would not have the same motivation to expend their resources and fully advocate their position, for example, through the use of experts and survey evidence. But the Supreme Court disagreed, stating that “When registration is opposed, there is good reason to think that both sides will take the matter seriously” because “[t]he benefits of registration are substantial.”

Notably, the Court did not ultimately hold that all TTAB decisions should be given preclusive effect by district courts. The Court merely held that “So 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 the district court, issue preclusion should apply.”

Another important caveat is that this rule would only apply when the TTAB proceeding and the district court litigation were both independently initiated. In other words, if the two parties argued the issue before the TTAB, and then the losing party appealed the TTAB’s decision to a district court, the district court would not be precluded from determining the issue de novo. Only where, as in B&B v. Hargis, the TTAB proceeding was fully resolved and the district court case was separately and independently initiated, would issue preclusion even be possible.

The Supreme Court’s ruling has important consequences to future trademark litigation, both before the TTAB and in district courts. Parties in TTAB proceedings should be keenly aware that if they concurrently file a lawsuit in district court, the determinations made by the TTAB could be binding on the district court, which could have significant consequences to the arguably more important district court litigation. In most instances, seeking to stay the TTAB proceeding pending a determination of the district court litigation would likely be the safest and most efficient course of action.