SCOTUS Says Trademark Ruling Blocks Litigation

(CN) - The Supreme Court on Tuesday held that under specific circumstances decisions by the the Trademark Trial and Appeal Board prevent the parties from relitigating the same issues before a trial court.

The case, B&B Hardware Inc. v. Hargis Industries, is the first trademark case to reach the high court in almost a decade, and the 7-2 decision by the justices reverses an earlier ruling by the 8th Circuit.

B&B Hardware Inc. has been engaged in litigation with Hargis Industries Inc. for 16 years regarding the similar sounding names of their respective products. B&B has a fastener called Sealtight that is used predominantly in the aerospace industry, while Hargis makes a line of self-drilling and self-taping screws called Sealtite that is used in the construction of metal buildings.

The 8th Circuit weighed in on the case at least four times, it's last ruling coming after a trial court rejected B&B's trademark infringement and unfair competition claims. On appeal the three-judge panel affirmed the lower court's ruling, rejecting B&B's claim that the trial court failed to give preclusive effect to findings by the Trademark Trial and Appeal Board.

The Supreme Court granted B&B a writ of certiorari in July 2014, and heard the case last December.

Tuesday's opinion, written by Justice Samuel Alito Jr., states that so long as other ordinary elements of issue preclusion are met, when the trademark uses adjudicated by the TTAB are materially the same as those before a district court, issue preclusion should apply.

The concept of issue preclusion is based on premise that once a court has decided an issue, the matter is forever settled between the parties. The question before the justices was whether an agency decision can ever have such weight.

Alito and a majority of his fellow justices concluded 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," Alito wrote. "Indeed, this Court has explained that because the principle of issue preclusion was so 'well established' at common law, in those situations in which Congress has authorized agencies to resolve disputes, 'courts may take it as given that Congress has legislated with the expectation that the principle [of issue preclusion] will apply except when a statutory purpose to the contrary is evident."

Hargis had argued against such a finding, maintaining that it would only come back to haunt the court later when "grave and doubtful" questions would likely be raised about the constitutionality of the Lanham Act, which establishes the procedures for waging trademark disputes.

A majority of the justices rejected that position.

"As to the Seventh Amendment, for instance, the Court has already held that the right to a jury trial does not negate the issue preclusive effect of a judgment, even if that judgment was entered by a juryless tribunal," Alito wrote.

"It would seem to follow naturally that although the Seventh Amendment creates a jury trial right in suits for trademark damages, ... TTAB decisions still can have preclusive effect in such suits," he continued.

To conclude otherwise, adopting Hargis' view, "would dramatically undercut agency preclusion, despite what the Court has already said to the contrary," Alito wrote. "Nothing in Hargis' ... argument is weighty enough to overcome these weaknesses."

"[p]reclusion applies where 'the issues in the two cases are indeed identical and the other rules of collateral estoppel are carefully observed," the majority said.

In a concurring opinion, Justice Ruth Bader Ginsburg said she was joining the majority because it recognized that issue preclusion does not apply in every case.

"That is so because contested registrations are often decided upon 'a comparison of the marks in the abstract and apart from their marketplace usage,'" she said. "When the registration proceeding is of that character, 'there will be no [preclusion] of the likelihood of confusion issue ... in a later infringement suit."

But Justice Clarence Thomas saw no such reasonableness in the majority's opinion. In a dissent in which he was joined by Justice Antonin Scalia, Thomas said the majority failed to consider several important factors relevant to trademark disputes.

"The majority does not address the distinction between private rights and public rights or the nature of the power exercised by an administrative agency when adjudicating facts in private-rights disputes," Thomas wrote. "And it fails to consider whether applying administrative preclusion to a core factual determination in a private-rights dispute comports with the separation of powers."

"I would hold that the TTAB's trademark-registration decisions are not entitled to preclusive effect in a subsequent infringement suit," Thomas wrote. "The common law does not support a general presumption in favor of administrative preclusion for statutes passed before this Court's decision in Astoria, and the test, structure, and history of the Lanham Act provide no support for such preclusion."

Thomas was referring to Astoria Fed. Sav. & Loan Assn. v. Solimino, in which the court held that when Congress authorizes agencies to resolve disputes, "courts may take it as given that Congress has legislated with the expectation that [issue preclusion- will apply except when a statutory purpose to the contrary is evident."

"I disagree with the majority's willingness to endorse Astoria's unfounded presumption and to apply it to an adjudication in a private-rights dispute, as that analysis raises serious constitutional questions," Thomas concluded.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit