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On September 17, 2021, in Beasley v. Howard, 14 F.4th 226 (3d Cir. 2021), the Third Circuit joined the Second and Ninth Circuits in ruling that prior trademark cancellation actions in front of the Trademark Trial and Appeal Board (the “TTAB”) did not preclude a later lawsuit in Federal Court for damages for trademark infringement since the TTAB’s jurisdiction is limited only to determining whether a party has the right to register a trademark.
By way of background, two musicians, David Beasley and William Howard were involved in a long-running dispute over the rights to the band name “Ebonys.” Founded in 1969 by Beasley, the Ebonys helped create the “Philadelphia Sound”, a style of rhythm and blues music “which incorporated elements of soul, funk, and disco.” Id at 229. Howard joined the band in the mid-1990s and performed with Beasley for several years before splitting ways. Id. at 230.
Since then, both musicians made their own claim to the “Ebonys” band name. In 2012, Howard was granted a federal registration for THE EBONYS from the Unites States Trademark Office (“USPTO”). Id. Subsequently, in 2013, Beasley filed a petition with the TTAB to cancel the registration on the basis of fraud. Id. The TTAB dismissed the petition the following year, finding that Beasley had failed to submit sufficient evidence. Id.
In 2017, Beasley filed another petition in front of the TTAB again alleging fraud and also asserting priority and likelihood of confusion. Id. The second petition was dismissed on the grounds of claim preclusion since the fraud claim had already been decided and Beasley had foregone his opportunity to assert likelihood of confusion by failing to assert the claim in his original petition. Id.
Dissatisfied with these outcomes, Beasley filed a complaint in Federal Court alleging trademark infringement and asking that the Court vacate Howard’s registration. Id. The District Court dismissed Beasley’s complaint on the grounds of claim preclusion even though Beasley sought damages for trademark infringement, a remedy he had been unable to pursue in front of the TTAB. Id at 231.
Beasley appealed the District Court’s decision only with respect to his infringement claim. Id. Thus, the question for the Third Circuit was limited to whether Beasley’s prior losses in cancellation proceedings before the TTAB precluded his claim in Federal Court for damages for trademark infringement. Id.
The Third Circuit found that although there were factual similarities between the earlier TTAB proceedings and the later Federal Court proceeding, claim preclusion did not apply because the TTAB’s jurisdiction is limited only to determine the right to register a trademark and, therefore, Beasley could not have asserted his infringement claim in the prior TTAB proceedings. Id. at 233. Since the TTAB could never have granted Beasley damages for trademark infringement, he could not be precluded from asserting damages for infringement in a later Federal Court action. Id.
In so ruling, the Third Circuit rejected Howard’s argument that Beasley should have pursued his claim against Howard in Federal Court in the first instance. Id. at 234. The Court reasoned that giving “TTAB cancellation proceedings claim preclusive effect against district court infringement suits would be inconsistent with the federal statutory scheme of the Lanham Act and the TTAB’s role as the principal forum for cancellation actions.” Id. Further, such a rule would penalize trademark holders who promptly oppose or seek to cancel an invalid mark and, instead, encourage parties to delay litigation until they could assert all possible causes of action in Federal Court. Id. at 235. Such a result would be inconsistent with sections the Lanham Act which generally urges prompt opposition and cancellation petitions. Id. at 236.
Accordingly, the Third Circuit joined the Second and Ninth Circuits in reassuring potential litigants that pursuing a petition for cancellation in front of the TTAB will not preclude their right to later assert a claim for damages for infringement in federal court.