TTAB Default Judgment Has No Collateral Estoppel Effect, Says E.D. California District Court

In December 2019, the U.S. Court of Appeals for the Ninth Circuit reversed (in part) the district court's dismissal of a civil action for unfair competition, trademark dilution, and trademark infringement involving Defendant Meenakshi's three IDHAYAM marks registered for sesame seed oil. The district court had dismissed the claims as to one of the marks (the "'654 mark") on the ground of claim preclusion, based upon the TTAB's entry of judgment by default on Plaintiff VVV's petition for cancellation of the registration for that one mark. The court of appeals, however, ruled that claim preclusion did not apply because VVV was entitled to seek remedies in the district court that were not available at the TTAB. [TTABlogged here]. Now back at the district court, Defendant Meenakshi dubiously moved to dismiss VVV's claims on the ground of collateral estoppel (issue preclusion). The district court denied the motion because no issue was "actually litigated" before the TTAB. V.V.V. & Sons Edible Oils Limited v. Meenakshi Overseas, LLC, No. 2-14-cv-02961-TLN-CKD (E.D. CA. January 24, 2022).

Meenakshi contended that VVV lacked standing and/or failed to state a claim upon which relief can be granted because the only mark at issue was the '654 mark and VVV was collaterally estopped from pursuing that claim in view of the TTAB default judgment.

The court observed that collateral estoppel applies to issues that have been actually litigated and decided in a prior proceeding. The doctrine does not apply to a default judgments unless actually litigated before the judgment was entered, or the defaulting party used deliberate and dilatory tactics. Here, VVV "did not substantially participate in the proceedings before the judgment was entered."

Plaintiff's only involvement was filing the Notice of Opposition. As previously noted, on May 29, 2009, Plaintiff filed the 2009 Opposition with the TTAB requesting that it refuse Mr. Gandhi's application for '654 mark due to Plaintiff's prior use of IDHAYAM. (ECF No. 7-3 at 1-4.) Plaintiff alleged Mr. Gandhi had "never manufactured or marketed sesame oil products under the IDHAYAM brand in the United States or anywhere" (ECF No. 7-1 at 5), and Mr. Gandhi subsequently denied the allegation in his December 28, 2009 Answer but did not specify his use of the mark (ECF No. 7-4 at 2). On January 3, 2011, the TTAB issued a default judgment dismissing the case with prejudice solely because of the Plaintiff's lack of response to TTAB's November 15, 2010 "order to show cause based on opposer's apparent loss of interest in this case" (ECF No. 7-5).

Defendant Meenakshi made no showing that VVV used deliberate and dilatory tactics, and no showing that VVV participated in discovery or other facets of litigation prior to the entry of default judgment. Therefore, collateral estoppel did not apply.

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TTABlogger comment: The Third Circuit in its recent Beasley v. Howard decision [TTABlogged here] joined the Ninth Circuit' (in VVV v. Meenakshi) in "recognizing the limited preclusive effect of TTAB proceedings."

Text Copyright John L. Welch 2022.