Incontestable - July/August 2009 - B&B Hardware, Inc. v. Hargis Indus., Inc.

Finnegan's monthly review of essential decisions, key developments, evolving trends in trademark law, and more.

July/August 2009 Issue

Civil Cases

B&B Hardware, Inc. v. Hargis Indus., Inc.,
91 USPQ2d 1001 (8th Cir. June 22, 2009)

ABSTRACT
Because the jury in a previous litigation between the parties determined only that plaintiff’s mark SEALTIGHT was descriptive and had not acquired secondary meaning, the jury did not address the second element of the infringement claim, namely, whether there was a likelihood of confusion with defendant’s SEALTIGHT mark. After plaintiff brought this action based on the same marks, the district court dismissed on collateral-estoppel grounds. The appeals court reversed, holding that the change in status of plaintiff’s trademark registration from contestable to incontestable constituted a significant intervening factual change, making the application of collateral estoppel inappropriate as there had been no final decision in the first proceeding on the now relevant issue of likelihood of confusion.

CASE SUMMARY

FACTS
In 1990, Plaintiff B&B Hardware, Inc. (“B&B”) began manufacturing and selling fastener products sold to the aerospace industry under the SEALTIGHT trademark. B&B was granted a U.S. trademark registration for its SEALTIGHT mark in 1993. In 1992, Defendant Hargis Industries, Inc. (“Hargis”) began manufacturing and selling self-drilling and self-taping screws used in the metal-building industry under the SEALTIGHT mark. Hargis’s application to register its SEALTIGHT mark was refused based on B&B’s prior registration.

B&B filed a trademark-infringement action against Hargis in 1998. The jury returned a verdict in favor of Hargis, determining that B&B’s SEALTIGHT mark was merely descriptive and had not acquired secondary meaning. The Eighth Circuit Court of Appeals affirmed.

In 2003, B&B filed an opposition to Hargis’s application to register its SEALTIGHT mark. Hargis argued that the prior federal action, which determined that there was no trademark infringement, should be given preclusive effect by the TTAB. The TTAB rejected this argument, holding that the jury in the federal trademark action had not made any findings concerning likelihood of confusion. The TTAB also held that Hargis was barred in its attempt to cancel B&B’s registration on the ground that the mark was merely descriptive, because B&B’s mark had by this time been registered for more than five years. In 2006, B&B filed, and the PTO accepted an affidavit of incontestability.

B&B then proceeded to file the present action against Hargis, alleging trademark infringement, dilution, and related claims. The district court granted Hargis’s motion to dismiss on the basis of collateral estoppel. B&B appealed, arguing that the district court erred in granting the motion to dismiss on collateral-estoppel grounds. In particular, B&B contended that the jury in the prior action did not reach the question of likelihood of confusion because it held that B&B’s SEALTIGHT mark was merely descriptive and had not acquired secondary meaning.

ANALYSIS
The appellate court stated that because a plaintiff is required to prove different elements in establishing a descriptive mark’s validity than in proving likelihood of confusion, these are distinct elements for purposes of applying collateral estoppel. The district court had relied upon the Fifth Circuit's decision in Test Masters Educational Services, Inc. v. Singh, 428 F.3d 559 (5th Cir. 2005), which held that “[t]he only recognized exception to issue preclusion for trademark infringement is a material change in the trademark’s strength over an extended period of time” and that “mere passage of time as a factor [does not] permit[ ] relitigation of a previously failed claim.” However, the appeals court here found that it was not concerned with the mere passage of time. Instead, it was faced with the question of whether a change in a mark’s validity from contestable to incontestable bars application of collateral estoppel. The court concluded that a change in a mark’s validity from contestable to incontestable bars application of collateral estoppel in this case, because this change constitutes a significant intervening factual change.

The court reasoned that in the prior action, the jury determined only that B&B’s mark was descriptive and had not acquired secondary meaning. With this determination, there was no need to address the second element of a trademark-infringement claim—whether there was a likelihood of confusion between the marks. Accordingly, the court found that it was not appropriate to apply collateral estoppel to the current trademark-infringement action because the jury in the prior litigation never determined the likelihood-of-confusion issue, a different and distinct issue from whether the mark was valid and protectable.

The appellate court reversed the district court’s grant of dismissal and remanded the case for further proceedings.

CONCLUSION
The court of appeals held that the change in the status of a trademark registration from contestable to incontestable saved the mark from challenges that it was merely descriptive and lacked secondary meaning, and thus application of collateral estoppel of a decision going only to the strength of the mark, not to likelihood of confusion, was inappropriate.