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Intellectual Property Litigation Alert >> The Supreme Court Comes Out Swinging In 2015 with Important Trademark Decision

March 5, 2015

The Supreme Court has already made one ruling this year on an important trademark case and there is another on the way. In January, the Supreme Court took on the issue of trademark tacking in Hana Financial, Inc. v. Hana Bank. And later this year, the Court is expected to render a decision on the precedential value of Trademark Trial and Appeal Board (TTAB) decisions in B&B Hardware, Inc. v. Hargis Industries, Inc.

Hana Financial, Inc. v. Hana Bank
Hana Financial addressed whether trademark tacking is an issue of fact to be decided by a jury or a legal issue to be decided by the judge. In the United States, trademark rights accrue upon the use of the mark in connection with the sale of goods or services. The date of the first use of the mark is thus critical in determining whether a trademark owner has priority over others using the same or confusingly similar mark. The doctrine of trademark tacking refers to the right of a trademark owner to change its mark over time without losing the priority of the first use date of the original mark if the marks are “legal equivalents.”

In order for two marks to be “legal equivalents,” there must be a continuing commercial impression between the trademarks such that consumers think of the marks as the same. When tacking on rights, the first use date of the original mark is “tacked” onto the new, modified mark, and the new mark is deemed to have been first used by the trademark owner on the first use date of the original mark.

Without tacking rights, the modified mark would be deemed a new mark and may be found to infringe upon another mark that was used prior to the new mark, but after the original mark’s first use. Accordingly, the issue of whether tacking rights are to be granted is an important one for trademark owners who have modified their marks over time.

Hana Financial Decision
In Hana Financial, the Supreme Court found the issue of tacking to be an inherently factual inquiry that turns on whether consumers perceive the new mark and the original mark as the same. Accordingly, the Court held that tacking is a question of fact to be resolved by the jury, and not a question of law to be decided by the judge. The Court’s ruling, however, is limited to cases where a jury trial has been requested. A judge may still determine the issue of tacking in a bench trial or on a motion for summary judgment, which would require a finding that there was no genuine issue of a material fact with respect to the tacking issue.

Another Decision on the Way
Later this year, in B&B Hardware, Inc. v. Hargis Industries, Inc., the Supreme Court will also render a decision on another trademark issue in a case that could change the way parties litigate trademark disputes. There are currently two federal forums in which a trademark owner can bring a trademark action.

It can bring an action before the TTAB, an independent administrative tribunal within the U.S. Patent and Trademark Office (USPTO), to prevent or cancel registration of the mark. Alternatively, if the mark is already in use, a trademark owner may initiate a civil lawsuit for trademark infringement or dilution before a federal court, which may enjoin usage of the infringing mark and award monetary damages if appropriate. Both proceedings address whether there is a “likelihood of confusion” between the marks at issue, but from a different perspective. Simply put, the TTAB decides the issue based on how the products or services are described in the trademark application or registration, while a federal court decides the issue based on how the products or services are used in the marketplace.

There are advantages and disadvantages to both options. An administrative proceeding before the TTAB is generally far less expensive than a judicial action for trademark infringement. However, a TTAB proceeding has its limitations. The TTAB does not hear live testimony and the scope of admissible evidence is limited. Additionally, the TTAB, in considering whether a likelihood of confusion exists between two marks, decides only whether a mark can be federally registered. The TTAB does not decide questions of use and it cannot issue injunctions. Nor may it award monetary damages or attorneys’ fees. Moreover, TTAB rulings do not preclude litigation of the subject marks in federal court. In other words, a party that is unhappy with a TTAB ruling may still move forward with an action in federal court. When that occurs, the issue is the weight the court gives to the TTAB’s findings.

B&B Hardware, Inc. v. Hargis Industries, Inc.
In B&B Hardware v. Hargis Industries, Inc., B&B Hardware brought an action before the TTAB to prevent Hargis Industries from registering the mark SEALTITE for screws used in the metal-building industry, on the basis that SEALTITE was likely to cause confusion with B&B Hardware’s existing mark SEALTIGHT for industrial fasteners used in the aerospace industry. The TTAB found a likelihood of confusion between the two marks, and denied Hargis Industries’ application to register the SEALTITE mark. B&B Hardware then sued Hargis for trademark infringement in an Arkansas federal district court. However, the jury in the district court found no likelihood of confusion between the two marks, and the court dismissed the case. B&B Hardware appealed the dismissal to the Eighth Circuit on the ground that the TTAB’s findings should have been given preclusive effect – that the federal court and jury should have been bound by the TTAB’s decision on likelihood of confusion.

The Eighth Circuit disagreed, holding that the TTAB’s decision on the issue of the likelihood of confusion was not entitled to preclusive effect or even deference by the federal district court, and that it was not error for the federal court to have instructed the jury that it could choose to entirely disregard the TTAB’s decision. The Eighth Circuit’s decision reflects one of many different approaches currently taken by federal courts of appeal. The Third and Seventh Circuits give preclusive effect to TTAB rulings regarding likelihood of confusion, provided that they concern the same issues. The Second Circuit gives preclusive effect only where the TTAB has determined the likelihood of confusion “in the entire marketplace context.” Other circuits, including the Fifth and Eleventh Circuits, do not give preclusive effect to the TTAB rulings, but afford varying degrees of deference to them. The Supreme Court, in B&B v. Hargis, has been asked to resolve this split and is expected to render its decision in the first half of 2015.

The Bottom Line

2015 will continue to be an active year for the Supreme Court in deciding trademark issues.  In Hana Financial, the Court resolved the split over who decides the issue of tacking, and in B&B v. Hargis, it will resolve the split over the precedential value of the TTAB’s decisions.  Whether the Court will take on even more trademark issues in 2015 is yet to be seen, but trademark and brand owners should keep their eye on B&B v. Hargis, as, depending upon its outcome, it could dramatically change what is at stake when challenging a new mark.