On Unintended Consequences: Will the B&B SCOTUS Ruling Encourage Trademark Bullies?

by Winthrop & Weinstine, P.A.
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Last week, while I was preparing for and had the unique opportunity of arguing a real, live TTAB final hearing on the merits, outside the TTAB’s typical oral hearing location (because it was selected by the TTAB to be part of the ABA’s IPLSpring continuing education conference in Bethesda, Maryland), the Supreme Court issued its long-anticipated decision in B&B Hardware, Inc. v. Hargis Industries, Inc. Hopefully this explains my delay. SCOTUSblog coverage is here.

B&B Hardware is the case we sounded the alarm about last June:

“If the U.S. Supreme Court decides to follow the advice it recently sought and received from the U.S. Solicitor General (SG) of the Department of Justice, those of us who care deeply about the enforcement and protection of brands and trademarks could be facing a real paradigm shift.”

Well, the paradigm has now shifted, unless and until Congress steps up to clarify (perhaps at INTA’s urging) that it never intended to have un-appealed TTAB decisions (concerning likelihood of confusion and the right to register a trademark) replace the ability of a federal district court to decide for itself, likelihood of confusion and the right to use, in the context of a later-filed federal trademark infringement action.

The law of the Eighth Circuit before this decision recognized the distinct difference between the right to use a trademark and the right to register a trademark. It was predictable. It was black/white. Under no circumstances would a federal district court ever be bound by an earlier administrative decision of the TTAB. It fully recognized that the lower stakes of defending the right to register are not the same as the higher stakes of defending the right to use as part of a charge of trademark infringement (with the plaintiff’s ability to pursue both injunctive and monetary relief in federal court — remedies the TTAB has never provided and cannot provide, at least under current law, even after B&B Hardware).

In essence, it allowed for a brand owner and trademark applicant to value those distinct rights differently. Under the pre-B&B Hardware law, a brand owner and trademark applicant could put forward a modest defense against an opposer’s challenge to registration, knowing it didn’t need to pull out all the stops in its defense, because the burden remained on the opposer to file suit in federal district court if it actually wanted to threaten the trademark applicant’s right to use. So, until now, at least in the Eighth Circuit, there hasn’t been a risk of questioning the applicant’s modest defense approach in the TTAB — if the losing trademark applicant was later sued for trademark infringement, it could decide then to pull out all the stops, given the significantly higher stakes, and vigorously defend the right to use more like a bet-the-company lawsuit.

After B&B Hardware, however, despite the Court’s attempt to draw a narrow decision and limit the number of actual TTAB cases where preclusion will prevent a federal district court from deciding likelihood of confusion for itself, brand owners will now, ironically, be faced with the potential for a cottage industry of litigation over the now very gray questions of whether preclusion will, in fact, apply in their specific cases and as to what issues.

Over the past several days, many opinions on the groundbreaking decision have been shared, and what has emerged as an overwhelming consensus among, at least, outside trademark counsel for brand owners, are the following observations:

  1. The B&B Hardware decision is an important one and it will definitely impact trademark enforcement strategies going forward;
  2. The stakes involved in TTAB enforcement just went up, a lot — they no longer impact only the right to register, but the right to use too;
  3. The complexity, intensity, size of the record, and cost of seeing a TTAB decision through final hearing just went up;
  4. The losing party at the TTAB is more likely to appeal the adverse decision to federal district court for a de novo review; and
  5. Given all this, more brand owners may opt to suspend TTAB actions while they pursue all their claims in federal district court.

I’m looking more forward to hearing about what in-house, corporate trademark counsel think about the decision and how it will influence their trademark enforcement strategies. . . .

But, in the meantime, what no one seems to be talking about (yet) is how the Supreme Court’s B&B Hardware decision might impact the lingering concerns surrounding trademark bullying. (I haven’t seen anyone talking about Section 18 counterclaims as a creative response strategy either, but we’ll save that topic for another day).

Although trademark bullying concerns were not before the Supreme Court, it seems likely this decision scored a victory for those who might fall into the category of trademark bullies. And, as you may recall, a couple of years ago, the Supreme Court didn’t allow trademark bullying concerns to influence its interpretation of the laws in question there: Supreme Court Upholds Nike’s Promise to “Break the Wrist, and Walk Away”.

Indeed, as to the likely unintended victory scored in B&B Hardware — the greater leverage to trademark opposers — this reality hasn’t gone unnoticed:

“With the Supreme Court’s ruling, companies that oppose another ‘s trademark in the TTAB and prevail on grounds of likelihood of confusion have a much greater chance of summarily running the table in a district court proceeding to enjoin the applicant’s marketplace use of the trademark.  The predicted result? Trademark opposers will have less of an incentive to amicably settle a trademark opposition and trademark applicants may have greater risk of losing the right to use their brand name in commerce.”

The unfortunate, but practical effect of the B&B Hardware decision is that trademark and brand owners who continue to value the right to register less than the right to use will now be more inclined to simply default at the TTAB and not litigate the likelihood of confusion issue at all, in order to avoid the possibility of preclusion, and to keep the onus on a trademark opposer to pursue infringement claims in federal district court if the opposer truly wants to challenge more than the applicant’s right to register. At least for the time being, absent help from Congress, the days are over, of putting in a modest defense in at the TTAB that simply compels the trademark opposer to prove its claims.

While it is true that a brand owner could still put in a modest defense of the TTAB opposition and take a de novo appeal if it miscalculated on the amount and type of evidence needed to convince the TTAB coexistence on the Principal Register is proper, the problem with the paradigm shift is that it puts the burden on the applicant to treat the appeal of a registration decision like a bet-the-company-lawsuit, and even more importantly, the onus has now flipped to the applicant to turn the dispute into a federal district court action, something I don’t believe Congress ever intended.

It seems reasonable to fear this will only embolden those who have a bloated view of their trademark rights. What do you think?

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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