Recently, a District Court judge issued a scathing rebuke to the United States Patent and Trademark Office in Board of Trustees of the University of Alabama et al. v. Houndstooth Mafia Enterprises LLC, (N.D. Alabama February 23, 2016).  Judge Proctor’s memorandum opinion upbraided the USPTO’s Trademark Trial and Appeal Board (“Board”) for ignoring his earlier-issued order to vacate the Board’s self-declared “precedential decision,” and also denied as untimely the USPTO’s motion to intervene.  The memorandum opinion exposed a rare clash between the Board and a reviewing court.

Background

In December 2007, William Pitts Jr. and Christopher Blackburn – two fans of the University of Alabama and its beloved Coach Paul “Bear” Bryant – filed an application with the USPTO to register the trademark HOUNDSTOOTH MAFIA & Design for clothing:

Defendant Houndstooth Mafia Enterprises, LLC and its founders William Pitts Jr. and Christopher Blackburn used the phrase Houndstooth Mafia on apparel they were selling to friends and fellow football fans. The term “Houndstooth Mafia” referred to a group of football fans who attended games and tailgated together, according to court documents.  Coach Bryant famously wore a fedora made of hound’s-tooth fabric.

The University of Alabama and Paul W. Bryant, Jr. opposed the trademark application, asserting that they owned common law trademark rights to hound’s-tooth, and that the defendants’ use and registration of the applied-for mark would likely cause confusion as to the source or sponsorship of the defendants’ goods, and also falsely suggest a connection with Coach Bryant.

In 2013, the Board issued a 78-page “precedential” decision.  The Board found that, although Coach Bryant was recognized for wearing hounds-tooth fedoras at the University’s football games, that fact did not endow either Coach Bryant (including his estate) or the University with trademark rights in gross to hound’s-tooth patterns or the word “hound’s-tooth.” Concerning the false association claim, the Board found no basis for concluding that the “HOUNDTOOTH MAFIA & Design” mark closely approximated the identity of Bryant or the University. The Board dismissed plaintiffs’ opposition, finding that hound’s-tooth was a known fabric pattern available to the general public and the university can hold no special claims to it.

Appeal and Consent Order

Section 107 of the Lanham Act, 15 U.S.C. § 1071 permits a litigant to appeal a Board ruling either to the Federal Circuit Court of Appeals or to file a civil action challenging the Board’s ruling in a federal district court. The University of Alabama and Coach Bryant’s heirs elected the latter approach, bringing the case home to Alabama District Court.

During the course of that litigation, the parties reached a settlement. Pursuant to the terms of that settlement, the defendants assigned to the university all right, title, and interest in the HOUNDTOOTH MAFIA & Design mark.  Also pursuant to the settlement, all parties acknowledged and agreed that the Board’s 2013 decision should be vacated.  Judge Proctor approved the parties’ settlement, and entered the Final Consent Judgment in May 2014.   As Judge Proctor later noted:

It is important to understand the parties’ respective reasons for reaching their settlement. Defendants pursued a settlement because they “wanted to get what they could,” and their attorneys “couldn’t afford to do free work on an appeal as they had on a hearing before the TTAB [Board] (citations omitted).  Plaintiffs were amenable to settlement with one non-negotiable condition: they required with respect to any resolution of the dispute.  They were only willing to settle if the TTAB’s 2013 decision was vacated.  Plaintiffs insisted on this condition because they are repeat players before the TTAB, and were concerned with the precedential effect of the TTAB’s 2013 decision (citations omitted).  Thus, Plaintiffs made it clear that there would be no settlement unless the parties agreed to vacatur of the TTAB’s unfavorable (and, in Plaintiffs’ view, incorrect) decision as part of a resolution.

(Slip Op. at 4)

After the court entered its Final Consent Judgment, plaintiffs filed the relevant documents with the Board to effect the dismissal and vacatur of the Board’s 2013 decision. The Board, however, took no action for nearly a year and a half.

Board Rejection of Court’s Final Consent Judgment

Finally, in June 2015, the Board announced that it would not adhere to the court’s order and wipe out its own ruling – that the University of Alabama has no trademark rights in a hounds-tooth pattern – on the grounds that the court’s decision had no real justification, but rather arose from a private settlement. The Board therefore viewed it as not an appellate ruling on the merits that would warrant vacatur of its substantive findings on legal trademark ownership of hounds-tooth.  Plaintiffs returned to Judge Proctor and filed a motion asking him to enforce his 2014 order.

Memorandum Opinion

The key issue in this proceeding was whether the Board was required to vacate its 2013 in compliance with the Order. As noted above, the Lanham Act allows a party dissatisfied with a Board ruling the opportunity either to file an appeal with the Court of Appeals for the Federal Circuit or to bring a civil action in a federal district court.  Judge Proctor noted that, in such an action, the district court “is an appellate review of facts found by the TTAB and is also a fact-finder,” provided that such evidence is submitted to the court. Slip Op. at 5.

The USPTO’s main argument was that it should not vacate a precedential decision based on a private agreement between the parties. “It is an issue of first impression whether private parties, in an action seeking judicial review of an agency adjudicative decision, may by agreement obtain a consent judgment ordering vacatur of the agency’s decision, where the reviewing court was not presented with the administrative record,” the USPTO wrote.  The USPTO contended that the case U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994) stood for the proposition that a district court had no power to vacate an agency decision based on the parties’ private settlement.

Judge Proctor disagreed and distinguished U.S. Bancorp.  In U.S. Bancorp, the creditor made a request to vacate, but the debtor opposed it.  There was no provision in the U.S. Bancorp settlement where the parties agreed to ask the court to vacate the circuit court’s decision.   The question in that case concerned whether the mere settlement of a case on appeal was enough to a reviewed court to vacate the civil judgment.

Judge Proctor noted that the closest case on point was Major League Baseball Properties, Inc. v. Pacific Trading Cards, Inc., 150 F.3d 149 (2d Cir. 1998).  That case, like the case at hand, involved a plaintiff – an owner of important sports-related trademarks and frequent trademark litigator – who lost its trademark claim in the preliminary injunction stage because the judge held that it was unlikely to prevail on the merits, appealed, and during the pendency of the appeal reached a settlement with the defendant in which the defendant agreed to a vacatur of the lower court’s judgment.  Just like in the case at hand, the defendant in Major League Baseball Properties agreed to this term – and to the settlement in general – because it could no longer afford the litigation.  Slip Op. at 12.  As the Second Circuit recognized in Major League Baseball Properties, “[t]he only damage to the public interest from such a vacatur would be that the validity of MLB’s marks would be left to future litigation.”  Slip Op. at 12.

The Board argued that Major League Baseball Properties was distinguishable because it vacated a non-final, non-binding, interlocutory order, and that the Board’s 2013 decision in this matter cannot be vacated because it had been designated as “precedential.”  However, Judge Proctor was unimpressed with the agency’s self-designation of its own decisions as precedential. “Such an agency decision holds no more legal weight than an Article III court’s decision.”  Slip Op. at 13.  Judge Proctor emphasized that the Board misapprehended its position in relation to a district court’s appellate review pursuant to Section 107, allowing a district court to review Board decisions “not the other way around.”  Slip Op. at 16.  “Administrative agencies are not free to ignore a court’s mandate. (Citations omitted).  Appellate court orders are not merely ‘pieces of paper’ that a court (much less an Article II administrative agency) may choose to disregard, even after taking a substantial period of time to mull it over.” Slip Op. at 17.

* * *

Although the District Court needed to resolve what should be an uncontroversial proposition – that a government agency is not at liberty to decide for itself whether to abide by district court orders – the result is that a wealthy trademark oppose can take comfort in the result in this case. The Board decision rejected the University’s claim of common law rights to the hound’s-tooth pattern.  Not only has that result been vacated – although it can be revisited again – the University now, as a result of settlement, owns the registered mark at issue (even if it paid for that in the settlement).  The University is now in a better position to pursue future trademark litigation than the position it would have been in had it prevailed before the TTAB.