Strauss v. Abercrombie & Fitch Trading Co.

• Decision Date: 18 June 2013
• Docket Number: Nos. 2012–1495,2012–1496.,s. 2012–1495
• Parties: LEVI STRAUSS & COMPANY, Appellant, v. ABERCROMBIE & FITCH TRADING CO., Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

719 F.3d 1367

LEVI STRAUSS & COMPANY, Appellant,

v.ABERCROMBIE & FITCH TRADING CO., Appellee.

Nos. 2012–1495, 2012–1496.

United States Court of Appeals,Federal Circuit.

June 18, 2013.

Gregory S. Gilchrist, Kilpatrick Townsend and Stockton LLP, of San Francisco, CA, argued for appellant. With him on the brief was Gia L. Cincone.

J. Michael Keyes, K & L Gates LLP, of Spokane, WA, argued for appellee. With him on the brief was Whitney J. Baran. Of counsel was Bryan J. Sinclair, of Palo Alto, CA.

Before LOURIE, O'MALLEY, and TARANTO, Circuit Judges.

TARANTO, Circuit Judge.

Abercrombie & Fitch Trading Co. created a stitching design to use on clothing as a brand-identifying trademark. It sought to register the design with the Patent and Trademark Office for use on a wide range of clothing. It also began to use the new mark on one line of clothing. Levi Strauss & Co., which has used a trademark stitching design on the pockets of its jeans for a hundred years, challenged Abercrombie's mark in two forums. It sued Abercrombie in district court, alleging that the use Abercrombie was then making of its new mark infringed and diluted Levi Strauss's old stitching-design mark. Levi Strauss also challenged Abercrombie's registrations at the PTO as covering uses likely to cause confusion with and dilution of Levi Strauss's mark.

After the district-court litigation ended, the PTO's Trademark Trial and Appeal Board dismissed Levi Strauss's registration challenges on the ground that the result of the district-court litigation barred the challenges in the PTO based on issue preclusion. Levi Strauss now appeals, and Abercrombie defends the Board's dismissal as justified by issue preclusion or, in the alternative, by claim preclusion. We reverse the dismissal. Ultimately because the registrations at issue in the PTO cover a much broader range of uses of the Abercrombie mark than were the subject of the district-court litigation, the results of the district-court case do not preclude Levi Strauss's challenges in the PTO. We remand for further proceedings.

Background

Since 1873, Levi Strauss has stitched the back pocket of its jeans with two connecting arches that meet in the center of the pocket. Levi Strauss holds multiple federally registered trademarks on this “Arcuate” (bow-shaped) design and has extensively advertised products displaying the trademark for over a hundred years. Levi Strauss actively monitors use of competing stitching designs and enforces its trademark rights against perceived infringers.

In 2005, Abercrombie sought to register a “mirror image stitching design” for use on “[c]lothing, namely, jeans, skirts, pants and jackets.” U.S. Trademark Application Serial No. 78766368 (filed Dec. 5, 2005). The registration stated no other limitations on the goods' nature, type, channels of trade, or class of purchasers. Id. Abercrombie subsequently divided the application. One, the parent, covered jackets and sought registration on the Principal Register; the other, the child, covered the remaining categories of clothing and sought registration on the Supplemental Register. After the parent application was published for opposition, Levi Strauss initiated Opposition Proceeding No. 91175601. The child application progressed into Supplemental Registration No. 3451669 without opportunity for Levi Strauss's opposition. Levi Strauss petitioned to cancel that registration, leading to Cancellation Proceeding No. 92049913. In both proceedings, Levi Strauss alleges that registration of Abercrombie's mirror-image design should be barred because the design, in the range of uses covered by the registration, is likely to cause confusion with and dilute the Levi Strauss Arcuate mark. See15 U.S.C. § 1052(d) (likely confusion), § 1125(c) (dilution).

On July 20, 2007, after learning that Abercrombie was selling products that used the mirror-image design—the “Ruehl” line of jeans—Levi Strauss sued Abercrombie in the Northern District of California. Levi Strauss alleged, inter alia, that Abercrombie's use of the mirror-image design infringed the Levi Strauss Arcuate mark (15 U.S.C. §§ 1114–1117, 1125(a)) and was likely to dilute the Arcuate mark (15 U.S.C. § 1125(c)).¹ The PTO then stayed the opposition and cancellation proceedings pending disposition of the civil action.

The district court held a jury trial in December 2008, with the jury to render a decision on the infringement claim and an advisory opinion on the dilution claim (as to which Levi Strauss sought only injunctive relief). At trial, a significant aspect of Abercrombie's defense was that its Ruehl line of jeans and Levi Strauss products were sold in such different channels and at such different prices that the former could not cause the alleged kinds of harm to the latter. See, e.g., Dec. 22, 2008 Trial Transcript at 613, Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., No. 07–03752, 2008 WL 5521308 (N.D.Cal. Dec. 22, 2008), ECF No. 350 (“[Y]ou don't have the same channels. Ruehl jeans are sold in Ruehl stores. No Levi's are sold in Ruehl stores. Levi's are sold in Kohl's, Penney's, Macy's.”); Dec. 18, 2008 Trial Transcript at 52, Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., No. 07–03752 (N.D.Cal. Dec. 18, 2008), ECF No. 338 (arguing that the prices are “just different for these types of jeans”).

In December 2008, the jury returned a verdict that Abercrombie's Ruehl-line uses of its mirror-image design did not infringe the Arcuate mark. In April 2009, the district court, deciding the dilution claim after the jury's advisory verdict on that claim, ruled that Levi Strauss failed to prove dilution by blurring of its Arcuate mark. On April 22, 2009, the district court entered judgment in favor of Abercrombie on both claims—which it is useful to describe as two judgments: the 2009 Judgment on Infringement and the 2009 Judgment on Dilution.

Levi Strauss did not appeal the 2009 Judgment on Infringement, which therefore became the final judgment on infringement in the case. Levi Strauss did appeal the 2009 Judgment on Dilution. In 2011, the Ninth Circuit “reversed” that judgment, and remanded the case. Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., 633 F.3d 1158, 1175 (9th Cir.2011). The Ninth Circuit held that dilution by blurring does not require identity or near identity of the marks at issue (id. at 1162–73) and that the district court's reliance on that erroneous requirement “affected its dilution determination” and so was not harmless (id. at 1174).

While the Ninth Circuit appeal was pending, Abercrombie announced that it was shutting down the Ruehl brand and would close the Ruehl retail locations and online operations. About the same time, Abercrombie filed a new trademark-registration application with the PTO, which is not part of the present appeal, seeking to register its mirror-image design on “clothing, namely bottoms,” and disclosing use of the design on denim shorts sold under a different Abercrombie brand name, Gilley Hicks. Abercrombie would sell its Gilley Hicks products at different prices, and through different channels, from those it had adopted for its Ruehl line. For example, whereas Abercrombie had sold Ruehl jeans at a higher price than most Levi Strauss products sold for, it sold Gilley Hicks products at prices much closer to the prices Levi Strauss set for its main products.

After returning to the district court on the remand regarding its dilution claim, Levi Strauss asked Abercrombie to agree to amend the pleadings or to augment the record (to address the Gilley Hicks line) or to stipulate that any injunction obtained by Levi Strauss based on the current record would extend to the Gilley Hicks line; but Abercrombie refused. When Levi Strauss sought leave to amend its complaint to include the Gilley Hicks products, the district court declined, without explanation. Shortly thereafter, Levi Strauss moved to voluntarily dismiss its dilution claim under Fed.R.Civ.P. 41(a)(2), and on May 31, 2011, the district court entered judgment against Levi Strauss dismissing its claim for dilution with prejudice. The 2011 Judgment on Dilution was the final judgment on the dilution claim in the case.

Back at the PTO, the opposition and cancellation proceedings then resumed. Abercrombie filed motions for summary judgment arguing that claim preclusion and issue preclusion barred Levi Strauss's challenges in the proceedings. The Board ruled that claim preclusion did not apply because of the “significant differences” between the “transactional facts required to establish infringement in a district court, and cancellation of a registration at the Board.” Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., Opposition No. 91175601 & Cancellation No. 92049913, slip op. at 10 (TTAB Mar. 29, 2012). Nevertheless, the Board granted summary judgment dismissing both proceedings on the ground of issue preclusion, holding “that there is no genuine dispute of material fact that the elements of issue preclusion exist and thus operate to bar [Levi Strauss's] dilution and likelihood of confusion claims” in the opposition and cancellation proceedings. Id. at 17. Levi Strauss appeals. This court has jurisdiction pursuant to 28 U.S.C. § 1295(a)(4)(B).

Discussion

Neither party identifies a disputed underlying issue of fact that is material to the preclusion questions presented. Whether preclusion applies to bar a particular action is an issue of law, which this court decides de novo. See Foster v. Hallco Mfg. Co., 947 F.2d 469, 475 (Fed.Cir.1991). We hold that neither issue nor claim preclusion bars Levi Strauss's challenges to Abercrombie's registrations in the PTO.

I

Both doctrines preclude certain attempts at second litigation chances, but only in defined circumstances, reflecting the need to avoid depriving litigants of their first chances. For purposes of this case, we recite only certain necessary conditions for preclusion. Because we find certain...