3rd Circuit Rules TTAB Trademark Cancellation Proceedings Do Not Preclude Infringement Claims in Federal Court

In an opinion filed on September 17, 2021, the United States Court of Appeals for the Third Circuit issued a precedential decision that TTAB Trademark Cancellation proceedings do not preclude infringement claims in federal district court. In Beasley v. Howard, No. 20-1119 (3d Cir. 2021), the Third Circuit – in a decision that affirmed in part, reversed in part, and remanded the case to the District Court of New Jersey for further proceedings – held that the TTAB “properly considers only narrow questions and grants only narrow remedies: It hears challenges litigants pose as to whether a trademark meets the Lanham Act’s criteria for registration, and cannot dispense relief beyond whether or how the PTO registers a mark” (Beasley v. Howard, 2021 at 14). Furthermore, TTAB proceedings do not carry preclusive effect against subsequent Article III Federal Court proceedings under Section 43(a) of the Lanham Act.

Background Facts

The “Ebonys” was a soul band formed in Camden, NJ in 1969 by Plaintiff David Beasley. The Ebonys achieved a minor level of commercial success in the 1970s, and William Howard joined the band in the mid-1990s. In 1997, Beasley secured a trademark under New Jersey law. After Beasley and his other bandmates separated from Howard, both Beasley and Howard believed they had rights to the name. In 2012 Howard registered the “Ebonys” mark with the USPTO. Beasley alleges that Howard’s registration of Ebonys and Howard’s alleged actions prevented Beasley from obtaining the “Ebonys” domain name, booking music concerts under the “Ebonys” name, and royalty collection disputes. Beasley filed an unsuccessful cancellation petition against Howard’s USPTO registration with the TTAB. After Beasley’s failed petitions to cancel Howard’s USPT, Beasley filed a suit in the United States District Court of New Jersey under the Lanham Act, alleging an infringement claim against Howard.  

We thus have made clear that even though a federal district court “has concurrent power to order cancellation,” “a petition to the [TTAB] is the primary means of securing a cancellation” (Beasley at 16) (citing Ditri v. Coldwell Banker Residential Affiliates, Inc., 954 F.2d 869, 873 (3d Cir. 1992).

Conclusion

The Third Circuit expounded that the TTAB is a forum of limited jurisdiction. The Court explained that even though a federal district court “has concurrent power to order cancellation,” “a petition to the [TTAB] is the primary means of securing a cancellation” (Beasley v. Howard, 2021 at 16) (citing Ditri v. Coldwell Banker Residential Affiliates, Inc., 954 F.2d 869, 873 (3d Cir. 1992)). 

The cancellation provision in the Lanham Act section 14(c) does not create an independent basis for a plaintiff to sue for cancellation in federal district court (Beasley at 16) (citing Windsurfing Int’l Inc. v. AMF Inc., 828 F.2d 755, 758 (Fed. Cir. 1987)). A plaintiff like Beasley could not have selected the District Court as a forum to raise any invalidity arguments against Howard unless he could have maintained a trademark infringement claim in the District Court at the same time. The Court reasoned that to give the TTAB proceedings, preclusive effect “against subsequent infringement suits would penalize trademark holders who promptly oppose or seek to cancel an invalid mark, rather than delay litigation until that party could assert all possible causes of action in the District Court” (Beasley at 17). Furthermore, the Court refused to adopt a position for claim preclusion that would encourage Plaintiff to “sit on their claims and undermine the Lanham Act’s adjudicative mechanisms.

We will not apply claim preclusion in a way that encourages litigants to sit on their claims and undermine the Lanham Act’s adjudicative mechanisms. As a result, we reject Howard’s invitation to force plaintiffs to choose between expeditiously petitioning the TTAB and vindicating eventual infringement claims in federal court. We, therefore, will not apply claim preclusion to Beasley’s infringement claims here. (Beasley at 17).