Monday, September 20, 2021

Third Circuit Rules That TTAB Decision Has No Claim Preclusive Effect on "THE EBONYS" Section 43(a) Claim

[Caveat: Marty Schwimmer and Yours Truly represented David Beasley in this appeal]. In a long-running dispute over the band name THE EBONYS, the U.S. Court of Appeals for the Third Circuit reversed the order of the New Jersey district court dismissing David Beasley's Section 43(a) infringement claim on the ground of claim preclusion. The appellate court ruled that because the jurisdiction of the TTAB is limited to the issue of registrability and does not extend to "use" of a mark or allow for broader remedies, the earlier TTAB judgments against Beasley "do not carry claim preclusive effect against subsequent Article III infringement proceedings under section 43(a)." David Beasley v. William H. Howard, 2012 USPQ2d 960 (3rd Cir. 2021) [precedential].

In 1969, David Beasley formed "The Ebonys" in Camden, New Jersey. The Ebonys were one of several bands that offered a style of rhythm and blues dubbed the "Philadephia Sound." William Howard joined the band in the mid-1990s. In 2012, Howard obtained a federal registration for the band name, without Beasley's authorization. In 2013, Beasley filed a pro se petition for cancellation of the registration on the ground of fraud, but he failed to prove his case and the Board dismissed the petition. In 2017, Beasley filed another petition for cancellation, but that was summarily dismissed by the Board on the ground of claim preclusion. [TTABlogged here].

Claim preclusion, sometimes called res judicata, protects a defendant from the risk of "repetitious suits involving the same cause of action" once "a court of competent jurisdiction has entered a final judgment on the merits." The preclusive effect of the prior judgment extends not only to the claims that were brought, but also to claims that could have been raised and decided in the prior action, even if not actually litigated.  

In April 2019, Beasley filed a handwritten, pro se complaint [pdf here] in the U.S. District Court for the District of New Jersey, asserting a claim under Section 43(a). Howard moved to dismiss on the ground of claim preclusion and the court granted the motion, reasoning that Beasley's claim "turned on 'facts and legal theories [that] were actually litigated" in connection with Beasley's 2017 petition for cancellation. [district court order here].

Beasley appealed to the Third Circuit. The appellate court summarized the case and its decision as follows:

Beasley limits this appeal to whether the District Court properly dismissed his section 43(a) infringement claim, so its central issue is whether Beasley’s prior losses in cancellation proceedings before the TTAB preclude his section 43(a) claim before the District Court. We hold that they do not. Despite the factual similarities between Beasley’s petitions for cancellation and the complaint he filed in the District Court, the jurisdictional limits on the TTAB that accompany its role as the primary venue for narrow questions of trademark registration ensure that proceedings before it do not carry claim preclusive effect against subsequent Article III infringement proceedings under section 43(a).

The appellate court rejected Howard's argument that Beasley could and should have pursed his claims in the district court in the first instance, since a cancellation claim could be included in a civil action. The court pointed out that this "would oblige a plaintiff wishing to avoid claim preclusion not only to assert every available claim, but also to choose the forum with the broadest jurisdiction in which to do so."


Granting claim preclusive effect to TTAB proceedings against subsequent infringement suits would penalize trademark holders who promptly oppose or seek to cancel an invalid mark, rather than delay litigation until that party could assert all possible causes of action in the District Court. A rule encouraging such delay would moreover stand in tension with sections 14(1) and 15 of the Lanham Act, 15 U.S.C. §§ 1064(1), 1065, which urge prompt opposition and cancellation petitions by providing that trademark registrations over five years old are generally incontestable and cannot be challenged.

The appellate court observed that, as Beasley conceded, issue preclusion applies to any fraud claim that Beasley may assert in the district court. And so the court affirmed the dismissal of "any claim that Howard defrauded the PTO."

The court also rejected Howard's argument that the district court's dismissal order should be affirmed because Howard's right to exclusive use of the mark is incontestable. The court pointed out that Section 15 of the Lanham Act "makes clear that incontestability only applies 'except to the extent, if any, to which the use of a [registered mark] infringes a valid' state or common law trademark 'continuing from a date prior to the date of registration.'" In other words, incontestability is not a defense against a claim brought by a prior common law user.

And so, the Third Circuit affirmed in part and reversed in part, remanding the case to the district court for further proceedings.

Read comments and post your comment here.  

TTABlogger comment: The Third Circuit noted that its decision aligns with two other circuits: the Ninth Circuit in V.V.V. & Sons Edible Oils Ltd. v. Meenakshi Overseas, LLC, 946 F.3d 542 (9th Cir. 2019) [TTABlogged here], and the Second Circuit in Jim Beam Brands Co. v. Beamish & Crawford Ltd., 937 F.2d 729, 736 (2d Cir. 1991).

Text Copyright John L. Welch 2021.


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