Monday, June 24, 2013

CAFC Reverses TTAB Dismissal, Finding No Issue or Claim Preclusion from Levi's Failed "Stitch Design" Lawsuit

The U.S. Court of Appeals for the Federal Circuit reversed a TTAB decision (here) that had dismissed, on the ground of issue preclusion, an opposition and a cancellation proceeding brought by Levi Strauss over a stitching design created by Abercrombie & Fitch. After the TTAB proceedings were commenced, Levi sued Abercrombie for trademark infringement and dilution. In 2009, both claims were dismissed in separate judgments, but the dilution ruling was later overturned by the Ninth Circuit Court of Appeals, and in 2011 Levi opted to dismiss that claim. The CAFC ruled that neither issue preclusion nor claim preclusion was applicable to the TTAB proceedings. Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., 107 USPQ2d 1167 (Fed. Cir. 2013).

Abercrombie & Fitch

In the district court action, the jury found that Abercrombie's design, appearing only on a line of jeans sold in Ruehl stores, did not infringe Levi's trademark, and the district court then ruled against Levi on the dilution claim. Levi appealed only from the dilution ruling, and the Ninth Circuit overturned that ruling on the ground that the district court had applied the wrong standard.

While the Ninth Circuit appeal was pending, Abercrombie shut down the Ruehl brand, but announced that it would use the design on a new brand, Gilley Hicks. After remand to the district court, Abercrombie refused to agree to add the Gilley Hicks line to the lawsuit, and the district court declined to allow Levi to amend its complaint to add that line. Levi then moved to voluntarily dismiss its dilution claim, and judgment was so entered in 2011.

When the proceedings resumed at the TTAB, Abercrombie moved for summary judgment on the grounds of both claim and issue preclusion. The TTAB ruled that claim preclusion was inapplicable because of the "significant differences" between the facts required to establish infringement in court, and those required for cancellation at the TTAB. However, the Board entered summary judgment on the issue preclusion ground.

The CAFC ruled that, as to dilution, because the district court's original 2009 judgment was reversed on appeal it could not support either claim or issue preclusion. The only existing judgments were the court's 2009 ruling of no infringement and its 2011 judgment dismissing the dilution claim on Levi's motion.

Levi Strauss

Issue Preclusion: The 2011 judgment on dilution was "only a voluntary dismissal with prejudice," and therefore has no issue-preclusive effect. It was not dependent on any findings that supported the later-overturned 2009 dilution judgment. It did not decide any issue at all.

So the only possible basis for issue preclusion was the court's 2009 judgment on infringement, "[b]ut that judgment cannot bar Levi Strauss's challenged in the opposition and cancellation proceedings ....The PTO proceedings involve a much broader set of issues than were presented to, or therefore adjudicated in, that court." The district court focused on whether the Ruehl-line of products was likely to cause confusion vis-a-vis Levi's mark. The only findings adverse to Levi "were findings that the specific Ruehl-line uses - on particular products, which Abercrombie sold in particular ways at particular prices - were not infringing."

An opposition or cancellation proceeding "requires consideration not only of what the applicant has already marketed or has stated the intention to market, but of all the items for which registration is sought." Mayer/Berkshire, 424 F.3d at 1233. Because Abercrombie seeks to register a broad class of goods—“clothing, namely, jeans, skirts, shorts, pants and jackets”—without providing further limitations, the scope of the registrations at issue exceeds what the parties litigated in the district court.

Claim preclusion: The CAFC concluded that Board's decision could not be affirmed on the alternative ground of claim preclusion because the TTAB proceedings and the district court action do not involve the same transactional facts, "pragmatically judged."

As to the 2009 infringement judgment, the CAFC's decisions in Jet and Mayer/Berkshire are right on point: both cases held that the "array of differences in transactional facts conclusively demonstrates that claim preclusion cannot serve to bar" the TTAB proceedings. However, the 2011 dilution judgment is not "squarely covered" by those two precedents because they did not involve an earlier dilution claim.

The CAFC observed that, in deciding a dilution claim, a court may consider all relevant factors. "Under that standard, even if (as we need not decide) a dilution case brought in district court might try to cover the same full set of transactional facts relevant to a registration proceeding, a dilution case need not be so broad." In fact, Levi's dilution claim was understood to challenge only the stitching design on the Ruehl line of clothing, not the full range of possible uses that Abercrombie sought to cover in its trademark application and registration.

Just as the "actual confusion" inquiry under Section 2(d) can change as uses change, so can the dilution inquiry, and particularly the "association" and "intent" inquiries required by Section 43(c).

The pragmatic policies of claim preclusion do not support ignoring such differences. Nor do they justify inviting a two-stage strategy by a rival hoping to dilute a famous mark—start with a use that is hardest to prove dilutive, defeat the famous-mark owner’s challenge to that use, and then introduce more obviously dilutive uses of the very same mark with an impunity given by claim preclusion. For such reasons, the judgment on Levi Strauss’s dilution claim in district court does not preclude the PTO challenges any more than the judgment on its infringement claim does.

And so the appellate court reversed the TTAB's decision.

Read comments and post your comments here.

TTABlog note: You may recall that last year, a divided panel of the CAFC affirmed a TTAB dismissal on the ground of issue preclusion, in a case involving ownership of rights in the Winnie-the-Pooh marks. TTABlogged here.

Text Copyright John L. Welch 2013.


Post a Comment

<< Home