On Sept. 17, 2021, the Third Circuit Court of Appeals became the latest Circuit Court to limit the preclusive effect of Trademark Trial & Appeal Board (“TTAB”) decisions. In 2015, the Supreme Court, in B&B Hardware,[1] decided in a 7-2 vote that issues decided in TTAB proceedings may have preclusive effect if the elements of issue preclusion are met. Since then, several Circuits have addressed the preclusive effects of TTAB decisions. Here, the Third Circuit, in Beasley v. Howard,[2] considered both claim and issue preclusion with respect to two separate TTAB decisions and a district court action. The Court held that the prior TTAB decisions did not preclude the appellant’s trademark infringement claim but would have precluded a relitigation of the fraud issue decided by the TTAB.

In Beasley v. Howard, two former bandmates each tried to claim prior rights in their group name, THE EBONYS. According to Beasley, he founded a band called The Ebonys in 1969, which performed off and on for decades. Howard joined the group in the 1990s. In 1997, Beasley obtained a New Jersey state trademark registration for THE EBONYS. Beasley and some of his original bandmates performed with Howard until eventually parting ways years later. Despite the breakup, Howard sought and obtained federal registration of THE EBONYS in 2012, listing himself as the sole owner of the mark.[3]

In 2013, Beasley filed to cancel Howard’s registration before the TTAB on the grounds that Howard defrauded the U.S. Patent & Trademark Office (the “Trademark Office”) to obtain the registration. In its decision dismissing the case, the TTAB held that Beasley’s evidence was insufficient to show Howard defrauded the Trademark Office.[4] In 2017, Beasley again filed to cancel Howard’s registration, asserting fraud but also that the registration was likely to cause confusion with Beasley’s common law rights in THE EBONYS. The TTAB dismissed Beasley’s second petition on the ground of claim preclusion, namely that the petition was based on the same facts as the original petition and that Beasley failed to raise (and should have raised) the likelihood-of-confusion claim in the original petition. The merits of the likelihood-of-confusion claim were never reached.

Persistent, Beasley filed a lawsuit in the New Jersey District Court which was liberally construed as alleging a trademark infringement claim under Section 43(a) of the Lanham Act. The District Court eventually granted Howard’s motion to dismiss Beasley’s complaint on the grounds of both claim and issue preclusion. Beasley was barred from asserting claims based on the facts and legal theories litigated in Beasley’s second TTAB petition or which could have been raised in the original TTAB petition. Beasley, this time with the assistance of competent legal counsel, appealed the dismissal of his trademark infringement claim.

The Third Circuit first addressed the District Court’s decision based on claim preclusion. Claim preclusion in the Third Circuit requires three elements: (1) a final judgment on the merits, (2) the same parties (or parties in privity) and (3) a subsequent action based on the same cause of action from the prior action. The Third Circuit also noted that the final judgment on the merits must have been issued by a court of competent jurisdiction. The Third Circuit also pointed out that in rare instances, a court may have limited subject matter jurisdiction such that claim preclusion could not apply. In such instances, a plaintiff may not be able to rely on a certain theory or obtain a certain remedy because of the limited subject matter jurisdiction of that court.

The TTAB is one such limited jurisdiction “court.” The TTAB does not determine whether a party can use a mark. The TTAB can only determine the parties’ rights with respect to federal registration of trademarks. Because of this limited jurisdiction, parties cannot obtain remedies like injunctive relief or monetary damages in the TTAB.

In the instant action, the Third Circuit found that Beasley’s claims for monetary damages could not have been brought before the TTAB. The Third Circuit held that claim preclusion is not appropriate in actions for damages or injunctive relief in district courts following a TTAB decision on cancellation claims. In deciding on these grounds, the Third Circuit joined the Second[5] and Ninth Circuits,[6] which previously decided similar cases on similar grounds.

In response to Howard’s argument that Beasley should have pursued his infringement claim in the district court before litigating the cancellation proceeding in the TTAB, the Third Circuit soundly rejected this argument. It reasoned that the TTAB is the principal forum for cancellation actions and provides an “expedited vehicle” for doing so. Litigants should therefore not be required to pursue district court proceedings prior to bringing TTAB proceedings.

Finally, the Third Circuit touched on issue preclusion. Howard tried arguing a concern about relitigation of claims already decided. The Third Circuit disagreed, explaining that the doctrine of issue preclusion will prevent relitigation of claims. Thus, issues actually litigated and decided in prior actions, including TTAB proceedings, rather than those decided on procedural grounds only, will be given preclusive effect in later federal court proceedings. Because Beasley’s fraud claim was previously litigated and decided by the TTAB, this issue was precluded. His appeal therefore ultimately related only to his infringement claim.

After the Supreme Court’s 2015 decision in B&B Hardware, 573 U.S. 957, there was a real concern, mostly by the trademark bar, about the preclusive effects of TTAB proceedings on subsequent district court proceedings. Fortunately, with this decision, the Third Circuit joined the Second and Ninth Circuits, holding that such preclusive effects are limited to only those issues actually decided on the merits in the TTAB and for which the TTAB has jurisdiction to decide –namely the right to register rather than the right to use. Thus, petitioners and opposers before the TTAB need not fear an inability to later bring trademark infringement actions in the federal courts, particularly those that seek monetary and injunctive relief, neither of which are available in the TTAB. But they should be wary of raising issues, such as fraud, in subsequent federal courts actions that may have been decided on the merits in their TTAB proceedings.

Finally, if filing a subsequent action in district court is a strategic consideration because the issue of use and not just registration is important, petitioners and opposers may want to file a district court proceeding, which includes injunctive and/or monetary relief, along with issues of use, before issues are finally decided in the TTAB proceedings. Although district court proceedings are not typically stayed pending the outcome in the TTAB, such proceedings will put both the TTAB and the opposing party on notice of the additional claims that are being raised, including relief not available in the TTAB.

[1] B&B Hardware, Inc. v. Hargis Industries, Inc., 573 U.S. 957 (2015), available at https://www.supremecourt.gov/opinions/14pdf/13-352_3204.pdf

[2] A copy of the decision can be found here: https://www.govinfo.gov/content/pkg/USCOURTS-ca3-20-01119/pdf/USCOURTS-ca3-20-01119-0.pdf.

[3] U.S. Reg. No. 4,170,469.

[4] It is to be noted that Beasley represented himself in the 2013 TTAB proceeding without any apparent help from legal counsel.

[5] Jim Beam Brands Co. v. Beamish & Crawford Ltd., 937 F.2d 729, 736 (2d Cir. 1991).

[6] V.V.V. & Sons Edible Oils Ltd. v. Meenakshi Overseas, LLC, 946 F.3d 542 (9th Cir. 2019).