SCOTUS Decision in B&B Hardware Has Significant Implications for TM Applicants (and Owners)

On March 24, 2015, the Supreme Court of the United States held, in B&B Hardware, Inc. v. Hargis Indus., Inc., that administrative proceedings before the Trademark Trial and Appeal Board of the United States Patent and Trademark Office may have preclusive effect in trademark infringement suits before a district court.

This decision represents a drastic shift in trademark law. Until today, if a party applied to register a trademark and was refused because of a likelihood of confusion with a prior registration, the junior user might still decide to use the brand in the marketplace and take a gamble on whether it would be sued for infringement. (In many cases, a senior user might want to keep the register “clean” and oppose confusingly similar marks, but might be willing to tolerate some co-existence in the real world, and therefore not bring a corresponding federal court infringement action.) In the event of a lawsuit, the senior user would have the burden of proving likelihood of confusion for a second time. After B&B Hardware, however, if a junior user loses an opposition proceeding on the ground of likelihood of confusion, then it will likely lose an infringement lawsuit brought in federal court.

The Supreme Court’s decision raises the stakes for any party seeking to register a trademark. In cases where a clearance search reveals that there may be a likelihood of confusion with a senior user of the same or a confusingly similar trademark, the junior user must now consider whether to abandon use of the mark, or whether to use the mark and risk the possibility of being a respondent in an opposition proceeding, which could impact the outcome of an infringement lawsuit. In some cases, a junior user might choose not to apply to register a mark at all, and instead rely on common law trademark rights.

As with any decision that causes a shift in the law, there will likely be subsequent litigation over the application of this decision. Even so, the Supreme Court’s holding immediately incentivizes trademark owners to file more opposition proceedings: establishing a likelihood of confusion in connection with a TTAB proceeding is less expensive than doing so in connection with a federal lawsuit. And trademark applicants must carefully weigh whether or not the benefit of owning a trademark registration outweighs the risk of losing an opposition proceeding – which could now have grave consequences.

Briefly, the facts of B&B Hardware, Inc. were as follows…

B&B owned the mark SEALTIGHT, and opposed Hargis Industries’ application to register the mark SEALTITE in an administrative proceeding before the Trademark Trial and Appeal Board of the United States Patent and Trademark Office. The TTAB concluded that Hargis’ SEALTITE could not be registered on the ground of likelihood of confusion with B&B’s earlier registered SEALTIGHT mark. Hargis did not appeal this decision.

An infringement lawsuit followed, because Hargis continued to use the mark despite its loss before the TTAB. A jury determined that Hargis’ SEALTITE mark did not infringe the SEALTIGHT mark, notwithstanding the TTAB’s earlier decision. B&B appealed, arguing that the TTAB’s decision should have been binding on the district court.

The majority of the Supreme Court agreed with B&B, finding that although there are minor variations in the likelihood of confusion analyses applied by the TTAB and federal courts, the essence of the test is the same. The Supreme Court further held that agency decisions can trigger issue preclusion.

The full impact of the decision will play out over the coming months and years. In the meantime, trademark applicants must now consider that an unfavorable TTAB decision could be binding in a later district court infringement action.