In 2015, U.S. courts provided trademark practitioners with several issues to discuss and debate. Identified and summarized below are the top five most discussed issues.
1. The Effect of TTAB Decisions on District Court Actions
Will the 2015 U.S. Supreme Court B&B Hardware v. Hargis1 decision affect strategies for handling trademark opposition and cancelation proceedings in the Trademark Trial and Appeal Board (TTAB) of the U.S. Patent and Trademark Office (USPTO)?
Assume you file an application seeking to register a trademark. A competitor opposes your application and the TTAB eventually rules in favor of your opponent, finding that your mark is likely to cause confusion with your opponent’s mark and cannot be registered.
The TTAB does not have the power to enjoin your use of the mark, but if your opponent decides to sue you for infringement in the U.S., will the adverse TTAB decision be binding in court? Before 2015, different circuits handled the issue in different ways.
The Court held that the TTAB determination of likelihood of confusion could preclude re-litigation of the issue in a federal court infringement action, so long as the other ordinary elements of issue preclusion are met,2 and the trademark usages adjudicated by the TTAB are materially the same as those before the district court.
On the other hand, the Court also recognized that if the TTAB did not consider the marketplace usage of the parties’ marks, the TTAB decision should “have no later preclusive effect in a suit where actual usage in the marketplace is the paramount issue.”
So what does this mean? If you are familiar with TTAB practice, you know that most TTAB cases settle. You also know that TTAB decisions are based on comparing the marks as they are identified in the applications or registrations at issue, which can differ from how the marks are actually used in the marketplace. Packaging, house marks, trade dress, or limits on the channels of trade that are not reflected in the applications or registrations are not part of the TTAB analysis in most cases. Where these issues will affect the infringement analysis, the TTAB decision should not have preclusive effect.
Before taking a TTAB case to final decision, an assessment should be made as to whether the TTAB is likely to consider any evidence presented regarding marketplace use; if so, would you be better off in court?
2. Proving Irreparable Harm
Has the Supreme Court decision in the patent case eBay v. MercExchange3 changed what it takes to secure an injunction in a trademark or false advertising case?
In eBay, the Supreme Court rejected the Federal Circuit’s rule automatically granting injunctive relief for patent infringement. Instead, four traditional equitable factors are to be assessed before an injunction issues: (1) will the plaintiff suffer an irreparable injury?; (2) are the remedies available at law, such as monetary damages, inadequate to compensate for that injury?; (3) considering the balance of hardships between the plaintiff and defendant, is a remedy in equity warranted?; and (4) would the public interest be disserved by the injunction?4
For years, the standard rule throughout the country was that proof of likely success on the merits of a trademark infringement or false advertising claim meant that irreparable harm was presumed, and an injunction most likely would issue.
Now assume that you are in litigation and your opponent wants to enjoin your use of the mark at issue. At the moment, due to the ongoing debate about eBay’s applicability to trademark actions, where the suit is brought can affect how likely your opponent is to secure an injunction.
If you are sued in the Ninth Circuit, you have an advantage as the defendant. The Ninth Circuit has fully applied the eBay analysis to trademark cases. “Gone are the days” when establishing likely confusion creates a presumption of irreparable harm in trademark cases; to secure an injunction, a plaintiff will need evidence, not “platitudes.”5
If you are sued in the Fifth Circuit instead, the plaintiff may have an advantage. The presumption of irreparable harm may still apply: “All that must be proven to establish liability and the need for an injunction against infringement is the likelihood of confusion—injury is presumed.”6
If you are sued in the Third Circuit, both plaintiff and defendant can point to recent cases supporting their cause. The plaintiff will point to the Groupe SEB case and argue that loss of control of reputation, loss of trade, and loss of goodwill are sufficient evidence of harm.7
The defendant will point to Ferring and argue that eBay dictates that there are no “presumptions.”8
If you have a choice, consider the current treatment of the eBay decision in each available circuit before filing suit. And, no matter where the suit is brought, the parties should be prepared to address the irreparable harm issue with evidence, not just speculation. Plaintiffs should include witness testimony supporting the various ways that the defendant’s activities will lead to a loss of reputation and goodwill. Defendants should be quick to point out any such missing evidence.
3. Who Decides: Jury or Judge?
Does the Supreme Court Hana Bank decision, requiring issues of trademark “tacking” to be decided by a jury in jury trial cases, have any broader implications for trademark litigation in general?
The tacking doctrine allows a trademark owner to “tack” together use of older and newer versions of a mark in order to get priority over a challenger. For tacking to apply, the older and newer marks must be “legal equivalents.” This means that the versions of the mark “create the same, continuing commercial impression” such that consumers viewing the older and newer marks would believe that, although the mark had changed, the source is still the same.9
Because the relevant question is how an ordinary person or community would make the assessment of the marks at issue, the Supreme Court held that the issue was one for the jury. The jury is generally the decision-maker that ought to provide the fact-intensive answer involving a judgment made by an ordinary consumer, not by a legal expert.10
Tacking comes up rarely in trademark cases. However, the Court’s rationale in the Hana Bank decision could be applied to an issue litigated in nearly all trademark infringement cases: the assessment of likelihood of confusion. If a jury is better equipped than a judge to assess how an ordinary person or community would assess the commercial impression created by versions of a mark, wouldn’t a jury also be better equipped to assess whether one mark is likely to cause confusion with another? The Second, Sixth and Federal Circuits previously treated both tacking and likelihood of confusion as questions of law. Since the Supreme Court has now said tacking is not a pure legal issue and instead is one for the jury, will those circuits now approach likelihood of confusion in a different way?
4. Attorney Fee Awards
Will the Supreme Court Octane Fitness decision, relaxing the standard for awarding fees in patent cases, apply to trademark cases?
The Patent Act allows for fee awards in “exceptional” cases. In Octane Fitness, the Supreme Court dispensed with the Federal Circuit’s Brooks Furniture test which allowed fee awards only in two limited circumstances: “when there has been some material inappropriate conduct,” or when the litigation is both “brought in subjective bad faith” and “objectively baseless.” Instead, under the new Octane Fitness test, the party seeking fees in a patent case now need only show that the case “stands out from others” with respect to the substantive strength of the parties’ litigating positions (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.11
Like the Patent Act, the Lanham Act also provides for fee awards only in “exceptional” trademark and false advertising cases. Courts are now extending the rationale of Octane Fitness to trademark cases and dispensing with other tests that generally required some sort of showing of culpability or bad faith for fees to be awarded, in favor of a more general “stands out from others” assessment of whether a case is “exceptional.” The winning party in a trademark action may find it easier to secure recovery of fees.
5. “Disparaging” Marks
Is Section 2(a) of the Lanham Act, which prohibits registrations of marks deemed to be disparaging, unconstitutional?
Section 2(a) provides:
No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it—
(a) Consists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute . . .
The Washington Redskins have been litigating the issue of whether the REDSKINS marks are disparaging to Native Americans for more than a decade. The latest case is an appeal from a TTAB decision canceling several REDSKINS registrations. The District Court for the Eastern District of Virginia affirmed the TTAB decision earlier in 2015, denying the football team’s claim that the disparagement statute was unconstitutional:
“Nothing about Section 2(a) impedes the ability of members of society to discuss a trademark that was not registered by the PTO. Simply put, the court holds that canceling the registrations of the REDSKINS marks does not implicate the First Amendment as the cancelations do not burden, restrict, or prohibit [the team’s] ability to use the marks.” 12
The court also found Section 2(a) to be government speech, relying on the Supreme Court ruling in Walker v. Texas that license plates issued by the State of Texas bearing the Confederate flag are “government speech exempt from First Amendment scrutiny.”13 The football team has appealed and next the Fourth Circuit will weigh in on the issue.
Meanwhile, the Federal Circuit, in a case involving the efforts of an Asian American band to register the mark THE SLANTS, has declared that Section 2(a) is unconstitutional. The Federal Circuit, acting sua sponte, first vacated a panel opinion that relied on a 1981 case to find that Section 2(a) was constitutional, ordered the case to be heard en banc, invited amicus briefs on the issue and heard oral argument on October 2, 2015.14 The Federal Circuit said:
“The government cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks. It cannot refuse to register marks because it concludes that such marks will be disparaging to others. The government regulation at issue amounts to viewpoint discrimination, and under the strict scrutiny review appropriate for government regulation of message or viewpoint, we conclude that the disparagement proscription of § 2(a) is unconstitutional. Because the government has offered no legitimate interests justifying § 2(a), we conclude that it would also be unconstitutional under the intermediate scrutiny traditionally applied to regulation of the commercial aspects of speech. We therefore vacate the Trademark Trial and Appeal Board’s (‘Board’) holding that Mr. Tam’s mark is unregistrable, and remand this case to the Board for further proceedings.”15
Will the Fourth Circuit follow the Federal Circuit? Stay tuned!
Author: Kathleen E. McCarthy, Partner, New York, +1 212 556 2345, kmccarthy@kslaw.com.
1 B & B Hardware, Inc. v. Hargis Industries, Inc., 135 S. Ct. 1293 (2015).
2 Issue preclusion applies when an issue is actually litigated and determined by a valid and final judgment and the determination is essential to the judgment; in those circumstances, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim. Restatement (Second) of Judgments §27.
3 547 U.S. 388 (2006).
4 Id. at 391.
5 Herb Reed Enters., LLC v. Fla. Entm't Mgmt., 736 F.3d 1239, 1250 (9th Cir. 2013), cert. denied, 135 S.Ct. 57 (2014).
6 Abraham v. Alpha Chi Omega, 708 F.3d 614 (5th Cir. 2013).
7Groupe SEB USA, Inc. v. Euro-Pro Operating LLC, 774 F.3d 192, 195 (3d Cir. 2014) (affirming injunction where literally false statements mentioned the plaintiff by name).
8 Ferring Pharms., Inc. v. Watson Pharms. Inc., 765 F.3d 205 (3d Cir. 2014) (vacating preliminary injunction).
9 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 16:1 (4th ed. 2008).
10Hana Financial, Inc. v. Hana Bank, 135 S.Ct. 907 (2015).
11 Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014).
12 Pro-Football, Inc. v. Amanda Blackhorse, et al., Case No. 1:14-cv-01043 (E.D.Va. July 8, 2015).
13 Walker v. Tex. Div., Sons of Confederate Veterans, 2015 U.S. LEXIS 4063, *7-8 (U.S. June 18, 2015).
14In re Tam, 114 USPQ2d 1469 (Fed. Cir. 2015), citing In re McGinley, 660 F.2d 481, 484. (C.C.P.A. 1981).
15 In re Tam, Appeal No. 2014-1203 (Fed. Cir. December 22, 2015).
