In 2015, the Supreme Court, in its decision in B&B Hardware, Inc. v. Hargis Industries, Inc. (“B&B”), held that sometimes issue preclusion should apply to prior Trademark Trial and Appeal Board (“TTAB”) decisions. 135 S. Ct. 1293 (2015). Under this directive, if the TTAB decides the issue of “likelihood of confusion” when making a determination of trademark registrability in the context of an opposition or cancellation proceeding, such decision will, under certain circumstances, prevent further litigation of that issue in the future, including in a later federal court litigation. The practical effect of B&B – i.e, the circumstances under which issue preclusion will be applied – is still being refined. The Southern District of New York (“SDNY”) recently added to this refinement in Cesari S.R.L. v. Peju Province Winery, L.P (“Cesari”).

In Cesari, the SDNY applied B&B to hold that the TTAB’s finding, in an opposition proceeding, that a likelihood of confusion existed between Cesari’s trademark LIANO for wines and Peju Province’s trademark application LIANA for wines precluded Peju Province, but not its affiliates, from defending against Cesari’s federal court claim that confusion was likely for the same marks as applied on the parties’ goods in the marketplace.  

The Cesari Facts

Cesari is a winery based in San Pietro, Italy, and the owner of a U.S. federal registration for LIANO for wine. Peju was a family-operated winery in Northern California. In 2003, Peju Province filed a trademark application to register the mark LIANA for wine. Cesari opposed that application, which initiated the first proceeding between the parties—an opposition proceeding before the TTAB.

In that proceeding, the TTAB held on summary judgment that Peju Province’s applied-for mark LIANA was likely to cause confusion with Cesari’s registration for LIANO. In reaching that conclusion, the TTAB reasoned that the marks LIANO and LIANA were “almost identical” and that there was no genuine issue that the goods (i.e., “wines”) were “identical.” Peju Province’s attempts to distinguish the parties’ goods based upon the types that were actually sold in the marketplace (i.e., that Cesari’s wine was an Italian red Sangiovese/Cabernet Sauvignon and Peju Province’s wine originated from Napa Valley and was a late harvest Chardonnay Dessert wine) was rejected. Registrability, unlike infringement in federal court, the TTAB reasoned, must be decided on the basis of the identification of the goods set forth in the application – in this case, wine – regardless of the particular nature of the parties’ goods as used in the marketplace.

Peju Province did not appeal the TTAB’s decision nor did it attempt to file a new application with a narrower description of goods. Instead, Peju Province merely continued to produce its dessert wine under the LIANA mark.

A number of years later, in 2016, Peju Partnership (an entity that Cesari argued was under common control with Peju Province), filed a new trademark application to register LIANA for all alcoholic beverages except for beer. In response, Cesari again filed an opposition proceeding with the U.S. Trademark Office as well as a trademark infringement suit in the SDNY against Peju Province, Peju Partnership and another allegedly related entity, Peju Corporation. The opposition proceeding was stayed pending the federal court litigation.

The Cesari Litigation

In the federal litigation, Cesari moved for judgment on the pleadings on the issue of “whether defendants are precluded from relitigating the TTAB’s determination that the LIANA mark is likely to cause confusion with Cesari’s mark, LIANO.” Judge Buchwald converted Cesari’s motion into one for partial summary judgment and granting it in Cesari’s favor as to defendant Peju Province, which was the entity that was party to the first TTAB proceeding, but not as to the other Peju entities.

In reaching that conclusion as to Peju Province, the court noted the procedural differences between TTAB proceedings and district court litigation. Specifically, in a trademark infringement action, a court determines likelihood of confusion between the parties’ marks by looking at their actual use of the marks at issue in commerce. In a TTAB proceeding, the Board looks only at the trademark applications and registrations at issue and not to any common-law rights in usages not included in them. Thus, a TTAB decision by its nature will not resolve the likelihood of confusion issue with respect to any usages that are not disclosed by the applications and registrations at issue.

In its analysis of whether issue preclusion applied, the SDNY looked to whether there were any “non-disclosed” usages presented in the litigation based on Cesari and Peju’s marketplace usages that were not materially the same as the usages adjudicated by the TTAB.  The court found that the narrower marketplace usages proffered by defendants in the litigation as distinct (i.e., wines from grapes grown in Northern California, wines purchased by sophisticated customers, new world wines, wines at a certain price point, and wines sold on specific websites and at specific wineries) were actually encompassed within the usages considered by the TTAB (i.e., wines). Thus, the issue decided by the TTAB was materially the same as that before the district court. Because the other issue preclusion factors were present, issue preclusion was applied to prevent Peju Province from re-litigating the likelihood of confusion issue in federal court. However, because Peju Partnership and Peju Corporation were not parties to the TTAB proceeding, offensive collateral estoppel would not apply pending further factual development.

Guided by B&B and its legacy, the stakes of TTAB proceedings have risen and should be managed with consideration that the issues before the TTAB have the possibility of standing as the last word on the issues decided there.