In a recent case that will raise the stakes for companies involved in contentious administrative trademark proceedings, the U.S. Supreme Court held that the administrative tribunal, the Trademark Trial and Appeal Board (TTAB), may make decisions which are binding on the parties and courts in later federal court proceedings. Brand owners must now pay close attention to claims being litigated before the TTAB, because the outcome could have a lasting impact on brand rights in the marketplace. Brand owners may no longer be able to fall back on a strategy of getting a second chance to have key elements of their cases decided by a federal district court. The case in question is B&B Hardware, Inc. v. Hargis Industries, Inc., U.S. No. 13-352, decided March 24, 2015.

In this case at the TTAB, B&B Hardware, owner of the SEALTIGHT mark for certain fasteners, objected to the registration and use of the mark SEALTITE for somewhat different fasteners by Hargis. B&B claimed that the marks were confusingly similar as used on the two companies’ products, and the TTAB agreed, denying registration to Hargis. In many countries, “likelihood of confusion” is one of the “relative grounds” for refusal. The TTAB is the body which resolves such disputes within the United States Patent and Trademark Office (USPTO).

Hargis did not appeal the TTAB decision favoring B&B Hardware, although it had the right to do so. Meanwhile, a trademark infringement case involving the two parties was pending at the federal district court level, and eventually the jury in that district court case found in favor of Hargis. B&B objected, arguing that the TTAB’s decision should have settled the issue of likelihood of confusion, which is a key issue in most infringement actions. The district court disagreed, holding that TTAB decisions in general are not binding on other courts.

On appeal of the trial court decision, an intermediate appellate court similarly held that the TTAB decision was not preclusive and that the parties could start over in district court on the key issue of likelihood of confusion.

The Supreme Court overturned the decision of the appellate court, holding that if the usage of the marks as reviewed by the TTAB and trial court are substantially the same, if the proceeding is not procedurally unfair, and if the TTAB decision is not appealed, the determination of the TTAB on that issue should stand. The Court noted that not every TTAB decision will have preclusive effect. But clearly, if the decision had been otherwise, it would have meant that the TTAB process is usually a waste of time (and money).

This case is important because it may inform a company’s decision to oppose or cancel a registration through the TTAB, to go immediately to court to determine particular issues, or to appeal an adverse TTAB ruling. The trademark lawyers at McCarter & English routinely engage in this analysis with their clients to reach the best solutions at the most cost-effective rates.

Litigation in the TTAB is not terribly different from litigation in federal district court, except that only the issue of registration may be decided there. The TTAB does not have the authority to decide which party may use the mark in U.S. commerce, nor may it assess damages or any other monetary award. However, the Federal Rules of Civil Procedure apply as they do in a courtroom setting, and most of the tools of the litigator are present, including discovery of documentary evidence, depositions before a court reporter, and testimony of witnesses and experts. This is quite different from the process in most other countries and has already made the U.S. administrative process more expensive than it is elsewhere.

For litigants like B&B Hardware and Hargis that choose the TTAB process, they may appeal a TTAB decision to a federal district court and have a new trial. This new Supreme Court decision holds that a party choosing to litigate at the TTAB but failing to appeal an adverse decision may be stuck with an important factor already decided before it goes to any court for relief. This will be particularly true when the reason for the opposition is not based on likelihood of confusion, such as a claim that the alleged mark is generic, lacks distinctiveness, or is highly offensive. In those situations, which are often deemed “absolute grounds” in other jurisdictions, a determination of the TTAB may be conclusive if not appealed. Conversely, if the facts surrounding usage of a mark change, the decision of the TTAB may be given less weight by a later court. One example might be if the mark has not yet been used at the time of the TTAB opposition, so that it is clear the TTAB did not look at the same set of facts as those before the federal district court.

Nevertheless, the Supreme Court has now held that a TTAB decision may bind a federal district court in later litigation in which a party seeks to obtain remedies which may only be obtained from the court, such as enjoining use of a mark or recovering damages.