B&B Hardware: Beyond Nuts and Bolts

SealtiteI’d promised I’d wait on this, but I couldn’t, and you’ll see why.  Here’s my take on today’s Supreme Court decision in B&B Hardware v. Hargis Industries Inc., which — notwithstanding my reluctance to be accused of being that hammer to which everything looks like a nail — may very well have implications for some of the pending litigation involving that popular topic of late, Section 2(a) of the Lanham Act.

First, the analysis of the main holding.

I was struck by the court’s point that Congress could not have been too concerned about making efficiency or cost-effectiveness a priority in the registration process when it authorized de novo challenges of TTAB decisions under 15 U. S. C. §1071(b).  Having established that there was nothing in the Lanham Act that made TTAB decisions different from other agency determinations for purposes of issue preclusion principles, the court then stated that preclusion based on TTAB determination could be applied following those principles.  In other words, there is preclusion where “the issues in the two cases are indeed identical and the other rules of collateral estoppel are carefully observed.”

What the Eighth Circuit had said, of course, was that under these principles, preclusion did not apply, because the “rules” were not be the same: different standards are applied in evaluating likelihood of confusion in inter partes proceedings as opposed to District Court actions.

Certainly I agree with the Supreme Court that the different circuits’ formulations of the likelihood of confusion standards and the way likelihood of confusion is understood and applied in the PTO do not constitute different “rules”; practitioners know these are all essentially different formulations of the same test – they certainly should be!

My concern was far more with the procedural differences between the two kinds of proceedings.  The B&B decision deals with this issue in rather cursory fashion, stating that

The ordinary law of issue preclusion, however, already accounts for those “rare” cases where a “compelling showing of unfairness” can be made.

This formulation is problematic, because, while there may be (I hope) exceptions, there are few times a court is going to be inclined to find “compelling unfairness” in a TTAB determination.  Moreover, the argument, after all, is not about unfairness, but differentness.  Under the Supreme Court’s analysis, however, there’s no room for that; if there’s preclusion, it’s presumptive, and you need that “unfairness” level of badness to uproot the TTAB’s ruling.  That’s a problem.

As the court says, however, there is a solution for a party worried about how a TTAB finding on likelihood of confusion might affect its rights:  De novo review of TTAB decisions in the District Court, with full evidentiary submissions — with all the expense that entails.  The only alternative appears to be amendment of the Lanham Act, which is probably one thing that should be considered to establish a streamlined, economical quality of PTO proceedings the Supreme Court has determined is not a policy of the Act now.

So… what was I saying about Section 2(a)?  Right, I did mention Section 2(a).  Well, read this bit at the end of B&B Hardware (emphasis added):

Hargis also contends that the stakes for registration are so much lower than for infringement that issue preclusion should never apply to TTAB decisions. Issue preclusion may be inapt if “the amount in controversy in the first action [was] so small in relation to the amount in controversy in the second that preclusion would be plainly unfair.” Restatement (Second) of Judgments §28, Comment j, at 283–284. After all, “[f]ew . . . litigants would spend $50,000 to defend a $5,000 claim.” Wright & Miller §4423, at 612. Hargis is wrong, however, that this exception to issue preclusion applies to every registration. To the contrary: When registration is opposed, there is good reason to think that both sides will take the matter seriously.

The benefits of registration are substantial. Registration is “prima facie evidence of the validity of the registered mark,” 15 U. S. C. §1057(b), and is a precondition for a mark to become “incontestable,” §1065. Incontestability is a powerful protection. See, e.g., Park ’N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U. S. 189, 194 (1985) (holding that an incontestable mark cannot be challenged as merely descriptive); see also id., at 193 (explaining that “Congress determined that . . . ‘trademarks should receive nationally the greatest protection that can be given them’” and that “[a]mong the new protections created by the Lanham Act were the statutory provisions that allow a federally registered mark to become incontestable” (quoting S. Rep. No. 1333, 79th Cong., 2d Sess., 6 (1946))).

The importance of registration is undoubtedly why Congress provided for de novo review of TTAB decisions in district court. It is incredible to think that a district court’s adjudication of particular usages would not have preclusive effect in another district court. Why would unchallenged TTAB decisions be different?  Congress’ creation of this elaborate registration scheme, with so many important rights attached and backed up by plenary review, confirms that registration decisions can be weighty enough to ground issue preclusion.

Get it?  Registrations are substantial, not merely ministerial…

Get it?

UPDATE:  Back to the main issue — comprehensive analysis, pungent commentary by the Master, and learned comments over at the The TTABlog®.

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Ron Coleman

I write this blog.