Much has been written regarding the recent US Supreme Court decision in B&B Hardware v. Hargis. For a detailed background and analysis of the opinion, check out the SCOTUS blog summary. In short, the Court held that a US Trademark Trial and Appeal Board (TTAB) decision could give rise to issue preclusion in a later federal court case if the typical issue preclusion factors are met.

Issue Preclusion?

Here’s an example of issue preclusion in this context. You, Good Guys, Inc., petition to cancel a trademark registration for the mark BAD GUYS by Bad Guys, Co. based on likelihood of confusion with your prior registered mark, GOOD GUYS. The TTAB cancellation proceeding reaches a decision on the merits and the TTAB finds in your favor. The TTAB cancels the registration for BAD GUYS because there is a likelihood of confusion between the marks.

Neither party appeals the TTAB decision and, since the TTAB can’t grant you any other remedies, you file an action in federal district court. You seek damages for infringement and an injunction against continued use of the BAD GUYS mark, again alleging likelihood of confusion. You also argue that the TTAB finding that a likelihood of confusion exists between the marks precludes the district court from analyzing this issue. In other words, since Good Guys and Bad Guys litigated the issue of likelihood of confusion before the TTAB and the TTAB decided that the marks were likely to be confused, the court can’t reach a different decision on that issue—it must accept the TTAB’s finding.

Are you right? It depends. The Court in B&B didn’t say that issue preclusion will result from decisions from the TTAB; it only said that issue preclusion could apply. The district court, in the example above, must decide whether the typical issue preclusion factors are met to determine if the TTAB’s finding of likelihood of confusion precludes them from looking at that issue anew. So, courts will need to ask themselves whether the issue before them in an infringement case is materially identical to one decided previously by the TTAB.

As the Supreme Court recognized (and Justice Ginsburg reiterated in her concurrence), “for a great many registration decisions issue preclusion obviously will not apply.” That’s a line you can expect to see quoted in many a brief arguing against issue preclusion in a federal court. Not only will issue preclusion not apply in most district court cases following a TTAB decision, but the Supreme Court said it will obviously not apply in a great many cases. There are a number of reasons why this is true.

First, as the Court discussed, the TTAB considers only the applications and registrations before it, not marketplace uses which can differ significantly. For example, if an application is filed for a standard character mark (with no particular color, font, or design elements), arguments that confusion isn’t likely because of how the mark is actually displayed on products will not be persuasive at the TTAB. By contrast, federal courts will consider such marketplace facts in an infringement action. Parties might consider taking steps in TTAB proceedings to further distinguish the issue that the TTAB decides from that which a court might decide.

Second, the vast majority of TTAB cases don’t reach a decision on the merits (about 98% as of 2010). Issue preclusion doesn’t arise out of a settlement agreement between the parties. And default judgments aren’t typically considered “final” judgments, which might give rise to issue preclusion. So in most cases before the TTAB, there won’t be an issue decided that would bind a court in a later suit.

Third, at the request of either party, TTAB decisions can be appealed to the federal circuit or reviewed by a federal district court. In the B&B decision, the Court clearly confirmed that issue preclusion would not apply when a TTAB decision was on appeal or review. If the TTAB decides an issue unfavorably, parties can appeal or file for review in federal court for a fresh look at the issue.

Practical Effects of B&B

The Supreme Court didn’t say issue preclusion would always apply and it didn’t give much guidance on when courts should apply it. Rather, this decision is a narrow one – there is no bright line rule against applying issue preclusion from a TTAB decision in federal court. There are a number of open questions that will have to be ironed out before we have clear guidance on when issue preclusion will apply. As the Court noted within the B&B decision, that won’t be the case very often.

For now, TTAB proceedings remain a viable tool in a trademark enforcement program. It’s a cost-effective method of preventing or narrowing registration of a mark during the application process. And TTAB proceedings can still serve as an economic vehicle to broader settlement negotiations in a forum that regularly grants suspensions to encourage such negotiations. The possibility of issue preclusion flowing from a TTAB decision is just one of the factors that must be considered in developing your strategy for resolving a trademark dispute.