Argument preview: Justices will use rare look at trademark law to consider broad and narrow conceptions of trademarks
on Dec 1, 2014 at 10:05 am
It has been almost ten years to the day since the Supreme Court’s last substantive attention to trademark law. So it’s a big deal for the trademark bar that the Court will hear trademark cases on consecutive days in the first week of the December argument session. What is even more surprising is that both cases, at bottom, are likely to turn on a single fundamental question of trademark law: the extent to which rights in trademarks rest primarily on the image of the mark itself or are influenced by broader considerations of market attributes and consumer perception.
B&B Hardware v. Hargis Industries
The first case (on Tuesday, December 2) is B&B Hardware v. Hargis Industries. To an IP lawyer, the simplest way to situate the case is describe it as calling for an extension of Kappos v. Hyatt to trademark law. The question in Kappos was how much deference a district court owes to determinations that examiners in the Patent and Trademark Office (commonly known as the PTO) make in the course of deciding whether the PTO should issue a patent. With a few twists, this case raises an analogous question for trademark law: how much deference does a district court owe to determinations that the PTO makes in determining whether to register a trademark?
For a Court so accustomed to IP disputes involving cutting-edge technologies like software and genetic engineering, B&B Hardware presents a refreshingly old-economy battle involving, I kid you not, bolts. B&B is a California firm that sells self-sealing fasteners to companies in the aerospace industry, under the trademark “Sealtight,” which it registered with the PTO in 1993. [It appears that B&B does not sell the self-sealing stem bolts so familiar to Star Trek fans.] Hargis, by contrast, is based in Texas, and sells sheeting screws for use in construction under the name “Sealtite.” The fasteners attach sheet metal to wood or steel building frames.
The two firms have been litigating over the respective names for almost twenty years; because the case involves preclusion, some understanding of the procedural history is crucial. The firms apparently came to each other’s attention in 1996, when Hargis’s attempt to register the “Sealtite” mark came to B&B’s attention. B&B promptly sued Hargis for trademark infringement; a jury ruled against B&B in 2000, concluding that the mark was so “descriptive” that it had not acquired the “secondary meaning” necessary for trademark protection. At that point, the parties returned to the Trademark Trial & Appeal Board (a component of the PTO commonly known in trademark circles simply as the Board), where Hargis sought to cancel B&B’s mark and register its own. Eventually, the Board refused to cancel B&B’s mark or to register the Hargis mark, concluding that the Hargis mark was so similar to the long-registered B&B mark that it would cause confusion.
At this point, we finally get to the proceeding that has ended up in the Supreme Court. B&B, having prevailed before the Board in preventing Hargis from registering its “Sealtite” mark, returned to federal district court, where it sued Hargis for trademark infringement. After a trial, a second jury ruled against B&B, this time concluding (contrary to the Board’s finding) that there was no likelihood of confusion between the B&B and Hargis marks.
At that point, B&B sought judgment in its favor notwithstanding the verdict, arguing that the Board’s ruling in its favor and against Hargis precluded further litigation on the question of confusion. After the district court and the Eighth Circuit rejected its arguments, the Court granted B&B’s petition for review.
To put the dispute in context, a few words about trademark law are in order. For reasons rooted in the Supreme Court’s narrow conception of the Commerce Clause in the nineteenth century, trademark rights arise under state law – for the most part, state common law. Specifically, when a mark is used to identify products with sufficient regularity that the mark acquires “secondary meaning” – as an identifier of the business providing goods and services – then the party using the mark acquires the right to exclude other uses of the mark that would confuse consumers.
While all of that happens under state law, the federal Lanham Act provides a process for registering marks and federal jurisdiction over litigation about them. Generalizing a topic of some technicality, and putting to the side developments like “intent to use” applications, the traditional test for Lanham Act registration requires the user to establish that it has used the mark sufficiently to establish secondary meaning under the common-law system described above. If the user can demonstrate secondary meaning, then the PTO ordinarily will register the mark unless it is confusingly similar to some previously registered mark. The principal advantage of Lanham Act registration is that the rights to use the mark immediately extend nationwide; common law rights are limited to the markets in which use has established secondary meaning. At the same time, the federal district courts are open to resolve disputes about trademark infringement, which tend to turn on whether the defendant’s use is confusingly similar to the plaintiff’s mark.
So B&B presents the Court with the juxtaposition of two proceedings. The first is the Board’s “opposition” proceeding – in which the Board decides whether a mark proposed for registration “so resembles [an already-registered mark] as to be likely . . . to cause confusion.” The second is the federal district court action under the Lanham Act, in which the court decides if the defendant’s “use in commerce” of its mark “is likely to cause confusion.”
B&B’s case hinges on the likelihood of “confusion” that is a topic common to both proceedings. With considerable force, William Jay at Goodwin Procter (for B&B) argues that the Board’s determination of the likelihood of confusion between the marks, made in a proceeding in which both parties participated, should resolve the question once and for all. It relies heavily on the availability of appeal to federal district court: because Hargis had every opportunity to challenge the Board’s adverse ruling in the Federal Circuit or in a federal district court, its failure to do so should bring the litigation to a conclusion at last.
I suppose it is predictable that the Solicitor General would appear in support of B&B: providing institutional support for the PTO and the Board, which presumably would resonate more generally to give federal administrative rulings more preclusive effect in general, the Solicitor General argues that the Board’s rulings are entitled to preclusive effect when the Board considers the same question as the district court. Because the Board proceeding in this case turned on the likelihood of confusion, the Board’s ruling on that question, the federal government urges, should preclude further litigation of that question, at least with regard to the uses at issue before the Board.
The response from Neal Katyal (on behalf of Hargis) is telling. Where B&B emphasizes the commonality of confusion to both proceedings, Hargis emphasizes the difference between the types of confusion at issue: the Board is considering similarity of the marks, while the court is considering similarity of use. In the terms of the Lanham Act, the Board is considering the likelihood that a proposed mark “so resembles” an existing mark that it is likely to cause confusion; the court addressing the Lanham Act claim considers whether the defendant’s “use in commerce . . . is likely to cause confusion.”
The distinction might sound technical at first, but Hargis uses it effectively. The Board is deciding whether a party can register its mark – a question that turns almost entirely on the visual attributes of the mark itself. The court is considering whether a party can use its mark – a question much more likely to be influenced by the circumstances of the relevant markets, the likelihood of customer overlap, packaging, and the like. And on those points Hargis can show a wealth of evidence highly relevant to the court’s determination about confusing “uses,” evidence that is largely irrelevant in the Board proceeding. B&B’s products are sold in the aerospace industry; its customers are large agglomerated defense contractors like NASA, Boeing, and Raytheon. Hargis’s customers are in the construction industry – I imagine contractors in East Texas driving five-ton pickups on dirt roads. The likelihood that the mark would confuse those disparate groups seems remote. And that is even before you learn that Hargis normally sells its products identified as “Sealtite Building Fasteners”; the reference to “building fasteners” should alleviate any possibility of confusion by the purchasing agents for the large defense contractors that buy from B&B. By emphasizing those critical facts, their obvious relevance in one proceeding, and their apparent irrelevance in the other, Hargis makes it seem quite hard to swallow the idea that the administrative proceeding should preclude the judicial one. B&B can (and does) counter that Hargis’s discussion of the facts is one-sided, but the detail of B&B’s counterpresentation only underscores the richness of evidentiary detail that can be important in these cases.
The briefs include a wealth of other information which buttresses that perspective. For example, first-rate amicus briefs by the American Intellectual Property Law Association and the International Trademark Association document the stark differences between the truncated proceedings before the Board and conventional proceedings in federal court. Some of the differences are quite persuasive. My favorite was a Board rule requiring that surveys to be presented to to it must present the marks to respondents on a white card with no surrounding background – ensuring that the respondents would have NO chance of evaluating the mark in its actual use. To a Court so swayed by the “total package” in last year’s decision in POM Wonderful v. The Coca-Cola Company, that will underscore the impoverished nature of the Board’s determination. That is not to criticize the Board; as taxpayers we all should be glad that its administrative procedures are streamlined to emphasize the narrow statutory questions within its mandate. Again, the detailed on-the-ground discussion of conventional procedures that these amici provide has the potential to open up to the Justices the very different purposes that the processes serve.
This is the second preview in a row in which I’ve been strongly influenced by amicus briefs filed in support of neither party – true “friend of the court” briefs. [The previous brief was the brief filed by Thomas Goldstein M&G Polymers v. Tackett, argued on November 10.] Perhaps it reflects the small sample of cases in which I’m studying the briefs with care, but an increase in this sort of filing certainly would be a fine thing for the Court’s processes – facing ever more withering criticism for its use of dubious extra-record information gleaned on its own.
Hana Financial, Inc. v. Hana Bank
When you see a case name like Hana Financial, Inc. v. Hana Bank, it should be no surprise that the case is a trademark dispute. This one will send the Justices back to the basics, because it involves an area of trademark law that the Court has not considered in almost ninety years: the last opinion on the subject was by Justice Holmes!
The case involves the trademark doctrine of tacking: the ability of a trademark user to “tack” the priority of an early mark onto the priority of a later mark, which has the effect of giving the later mark priority over an intervening mark of a third party. If that sounds a little abstract, consider the three central occurrences that produced this case. The first events occur in July 1994, when respondent Hana Bank (a Korean financial institution) sent advertisements into the United States, advertising financial services for Korean expatriates. The advertisements were almost entirely in Korean; they included an English-language reference to the “HANA Overseas Korean Club” and a Korean-language reference to “Hana Bank.” The second events occur in 1996, when petitioner Hana Financial (a California corporation incorporated late in 1984 after the Hana Bank advertisements) registered its “Hana Financial” trademark under the Lanham Act. The third event, which sparked the litigation, was Hana Bank’s operations in New York since 2002 under the name “Hana Bank.”
Since 2007, the parties have been litigating the question whether Hana Bank’s 1994 advertisement (which referenced the Korean Overseas Club in English and the Bank in Korean) gives it priority for its later English-language use of “Hana Bank” over Hana Financial’s intervening adoption of its “Hana Financial” mark. The specific question before the Court is an oddly narrow one. The Court has not agreed to answer the substantive question – whether Hana Bank has priority over Hana Financial. Rather, the question on which the Court granted review is whether “tacking” is a question of law (for the court) or a question of fact (for the jury).
The issue arises because the latest stage of the litigation involved a jury trial, in which the jury concluded that because “Hana Bank” conveyed the same “commercial impression” as the brands in the 1994 advertisement, Hana Bank has priority in the mark over Hana Financial. Hana Financial argues that the jury verdict should be set aside because the issue is purely a question of law.
Because the Supreme Court has not discussed the problem since before the presidency of Calvin Coolidge, the parties have a lot of leeway in constructing arguments to present to the Court – decades of decisions by the courts of appeals. Although the parties agree that the central issue is whether the old and new marks create the same “continuing commercial impression,” Hana Financial (represented by Court veteran Charles Rothfeld of Mayer Brown) seizes forcefully on the common statement that tacking is appropriate only if the marks are “legally equivalent.” It seems obvious, you would think, that determinations of “legal equivalence” are questions of law. Hana Financial argues that because the disputes turn at bottom on the visual similarity of the marks, there is no need for jury intervention: judicial assessment of visual similarity should ensure consistency of outcome.
Carlo Van den Bosch (of Sheppard Mullin) tenders a devastating response on behalf of Hana Bank. Although the brief presents several well-crafted legal arguments, the most striking point for me, by far, was the side-by-side presentation of the images of the old mark used in the 1994 advertisements and the new mark challenged by Hana Financial. The old mark was a so-called “dancing man” logo, followed by the words Hana Bank in the Hangul script commonly used in Korea; the new mark uses a substantially identical logo, followed by the words Hana Bank in English lettering, with the words in English script appearing in substantially the same size and color as the Hangul script in the 1994 advertisement.
Learning from Hana Bank that the initial Hangul characters are pronounced “Hana” (meaning one, first, unity, etc.) and that the subsequent Hangul characters represent Eunhaeng, the Korean word for “Bank,” it seems plain that the later mark is nothing more than an English translation of the first mark, using, so far as possible, the styling of the original Hangul mark. When you add to that the little background fact that the audience of the original advertisement was largely if not entirely Korean-speaking it starts to be hard to understand how Hana Bank could lose.
But what makes the presentation elegant is the way Hana Bank ties the compelling image into its legal argument. Hana Financial’s brief presses hard on the idea that the question of tacking should be purely legal because it turns almost entirely on the comparison of images. Hana Bank, by contrast, emphasizes that the “commercial impression” an image creates necessarily depends on the perspective of the consumer – after all, the secondary meaning out of which trademark rights arise depends fundamentally on the perspectives of affected consumers. So if the question turns on consumer perspective, it makes much more sense to let a factfinder decide than a judge, whose expert, elitist perspective well might differ markedly. The presentation of the actual images crystallizes the point in a way words alone could not: if the question is what the Korean-speaking individuals who looked at these ads would have thought about the Hangul text “Hana Eunhaeng” as opposed to the English text “Hana Bank,” it certainly seems almost quintessentially factual.
If you’ve read all the way from the top of the post then you will share the sense of déjà vu I encountered here: Hana Bank’s presentation about the richness of evidentiary presentation relevant to determining whether the actual use of two marks in the marketplace would seem confusing to a consumer calls to mind Hargis’s presentation about the richness of the record appropriate for assessing the likelihood of confusion. The juxtaposition of those points, surely coincidental, suggests to me that when the Justices come to the argument in Hana Financial Wednesday morning, they’ll be thinking back to the arguments they heard in B&B Hardware the preceding day.
One final point: while I’m mentioning effective amicus briefs, I should mention the International Trademark Association brief in Hana Financial. The ITA presents a series of images of the Morton Salt marks, which display the evolution over the decades of the little girl carrying an umbrella with the phrase “when it rains it pours.” The series of changes from decade to decade seem slight, obviously not shifting the commercial impression. The power of the brief, however, is in its argument that the process of evaluating the importance of those changes is inherently factual, because it turns on what an ordinary person thinks when they look at the image. Another great contribution, matching their contribution (discussed above) in B&B Hardware.
So if you’re an IP lawyer, you’ll want to follow up on what the Justices think about these cases when they turn to trademark law for the first time in a decade.