Jean Alexander Cosmetics, Inc. v. L'Oreal Usa

Decision Date14 August 2006
Docket NumberNo. 05-4321.,05-4321.
Citation458 F.3d 244
PartiesJEAN ALEXANDER COSMETICS, INC., Appellant v. L'OREAL USA, INC.; Redkin 5th Avenue, N.Y.C.
CourtU.S. Court of Appeals — Third Circuit

James Cirilano, (Argued), Jennifer M. Haven, Cirilano & Associates, McKees Rocks, PA, for Appellant.

Robert L. Sherman, (Argued), Paul, Hastings, Janofsky & Walker, New York, NY, for Appellees.

Before RENDELL and VAN ANTWERPEN, Circuit Judges, and ACKERMAN,* District Judge.

OPINION OF THE COURT

RENDELL, Circuit Judge.

In proceedings before the Trademark Trial and Appeal Board ("TTAB" or "Board"), the predecessor in interest of L'Oreal USA, Inc. ("L'Oreal") argued that a registered trademark used by Jean Alexander Cosmetics, Inc. ("Jean Alexander") was likely to be confused with two of its marks and that the registration should therefore be cancelled. The TTAB denied the petition to cancel, holding, among other things, that there was no likelihood of confusion as between the marks. In the instant action for trademark infringement, Jean Alexander seeks to revisit the Board's finding with respect to likelihood of confusion.

The District Court held that Jean Alexander was precluded from relitigating the TTAB's determination that there was no likelihood of confusion, and we agree. The issue was actually litigated and previously decided in the cancellation proceedings. Although the TTAB's conclusion on likelihood of confusion was not its only basis for denying the cancellation petition, it was one of two independently sufficient grounds on which the Board resolved the case. Under these circumstances, we will apply the doctrine of issue preclusion and affirm the District Court's dismissal of Jean Alexander's complaint.

I.

Sometime in 1988, L'Oreal's predecessor in interest began using the mark "Shades EQ" and associated design for certain hair care products.1 In 1990, Jean Alexander began using its "EQ System" mark and design and, in 1993, it registered this mark with the Patent and Trademark Office ("PTO"). In 1996, L'Oreal attempted to register a modernized version of its Shades EQ mark that it had begun using in 1992. The examiner at the PTO rejected the application for registration of the modernized Shades EQ mark because it was likely to be confused with Jean Alexander's EQ System mark. All three marks are reproduced as an appendix to this opinion.

After the PTO rejected L'Oreal's application to register its mark, L'Oreal filed a petition to cancel Jean Alexander's registration for the EQ System mark. L'Oreal alleged that it had used its original Shades EQ mark prior to Jean Alexander's use of the EQ System mark and that, if there was a likelihood of confusion between the two marks, Jean Alexander's registration should be cancelled. In addition, L'Oreal alleged that the original and modernized versions of its Shades EQ mark were "legal equivalents" and that it could therefore tack the date of first use of the original version of the mark onto the modernized version, giving the modernized version priority over Jean Alexander's EQ System mark as well.

In its answer to L'Oreal's petition to cancel, Jean Alexander denied that L'Oreal's marks had priority over its trademark or that there was a likelihood of confusion between its EQ System mark and L'Oreal's Shades EQ marks. It also raised the latter claim as an affirmative defense.

During more than four years of proceedings, the parties created an extensive record that included depositions and trial testimony of several of the parties' executives. On June 28, 2001, the TTAB dismissed L'Oreal's petition to cancel the registration of Jean Alexander's EQ System trademark. The TTAB held that the original Shades EQ mark had priority over the EQ System mark, but found that the modernized Shades EQ mark was not a legal equivalent of the original version. Consequently, L'Oreal could not establish the priority of its modernized Shades EQ mark over Jean Alexander's EQ System mark.

Having resolved the question of priority, the TTAB examined likelihood of confusion. Because L'Oreal's original Shades EQ mark had priority over Jean Alexander's EQ System mark, it was necessary for the Board to determine whether there was a likelihood of confusion between these two marks. However, "solely for the sake of completeness," the TTAB also considered the likelihood of confusion between the EQ System mark and the modernized Shades EQ mark. The TTAB did this "in case upon further review, it is determined that [L'Oreal's] original and modernized marks are legal equivalents," a finding that would give the modernized version priority over the EQ System mark. (App.79a.)

The Board concluded that there was no likelihood of confusion between Jean Alexander's mark and either the original or modernized versions of L'Oreal's mark. In addition to noting the basic differences between the marks, the TTAB relied on (1) testimony from L'Oreal's assistant vice president for marketing to the effect that there was "some possibility of confusion," but not a likelihood, (2) testimony from L'Oreal's former senior vice president of marketing and advertising that there was no likelihood that the modernized Shades EQ mark would be confused with the EQ System mark, (3) testimony from Jean Alexander's chief executive officer that the public was not likely to be confused by the marks, and (4) the fact that neither party offered evidence of any instances of actual confusion. Taken as a whole, this evidence convinced the Board that there was no likelihood of confusion.

Instead of appealing the TTAB's decision in the cancellation action, L'Oreal reasserted its request with the PTO to register its modernized Shades EQ trademark. Relying on the TTAB's finding that there was no likelihood of confusion between the modernized Shades EQ mark and the EQ System mark, the PTO withdrew its refusal to register L'Oreal's mark. The modernized Shades EQ mark was approved for publication in the Official Gazette on October 10, 2002, which entitled third parties to oppose its registration. See 15 U.S.C. § 1063.

Jean Alexander timely filed a notice of opposition to the registration of the modernized Shades EQ mark, arguing that it would likely be confused with the EQ System mark. The TTAB held that the likelihood of confusion between the two marks had been fully and decisively litigated in the cancellation proceedings. It noted that

the Board made detailed and specific findings in its determination of both priority and likelihood of confusion, and the determination of no likelihood of confusion in the market place was necessary to the final judgment. This is not a case where the Board made incidental determinations on an issue which was not before it. The issue of likelihood of confusion was the focus of the parties' pleadings and was fully litigated before the Board.

(App.63a.) Because Jean Alexander was precluded from relitigating likelihood of confusion, the TTAB granted summary judgment in favor of L'Oreal.

Thereafter, Jean Alexander filed a complaint against L'Oreal in the District Court alleging trademark infringement of its EQ System mark and specifically averring likelihood of confusion. The District Court dismissed the complaint, holding that the doctrine of issue preclusion, also known as collateral estoppel, prevented Jean Alexander from relitigating likelihood of confusion and foreclosed its claim for trademark infringement. Jean Alexander timely appealed. The District Court had subject matter jurisdiction under 28 U.S.C. § 1338 and we have appellate jurisdiction under 28 U.S.C. § 1291.

II.

Before turning to the merits, we must first determine the proper standard of review. We note that "different panels of our Court have applied different standards of review where collateral estoppel is in issue." Nat'l R.R. Passenger Corp. v. Pennsylvania Pub. Util. Comm'n, 288 F.3d 519, 524-25 (3d Cir.2002); see also Witkowski v. Welch, 173 F.3d 192, 198 n. 7 (3d Cir.1999). In some cases we have reviewed the application or nonapplication of issue preclusion for abuse of discretion, while in others we have applied plenary review. Compare Raytech Corp. v. White, 54 F.3d 187, 190 (3d Cir.1995) (reviewing district court's decision to apply collateral estoppel for abuse of discretion), Temple University v. White, 941 F.2d 201, 212 n. 16 (3d Cir.1991) (same), and McLendon v. Continental Can Co., 908 F.2d 1171, 1177 (3d Cir.1990) (same), with Szehinskyj v. Att'y Gen. of the United States, 432 F.3d 253, 255 (3d Cir.2005) (applying plenary review to application of issue preclusion), Dici v. Commonwealth of Pennsylvania, 91 F.3d 542, 547 (3d Cir.1996) (same), and Arab African Int'l Bank v. Epstein, 958 F.2d 532, 534 (3d Cir.1992) (same). We have not offered a clear rationale for adopting one standard of review over another.

These cases can be reconciled. The general rule is that we exercise plenary review over the application of issue preclusion. See Szehinskyj, 432 F.3d at 255 (applying plenary review to application of mutual offensive collateral estoppel); Delaware River Port Authority v. Fraternal Order of Police, 290 F.3d 567, 572 (3d Cir.2002) (exercising plenary review over decision of whether to apply defensive collateral estoppel); Greenleaf v. Garlock, Inc., 174 F.3d 352, 357 (3d Cir.1999) (same); Dici, 91 F.3d at 547 (same); Arab African Int'l Bank, 958 F.2d at 534 (same). The only cases in which we have reviewed for abuse of discretion are those in which a nonparty to a previous proceeding has asserted issue preclusion against a defendant, that is, in cases involving "non-mutual offensive collateral estoppel." See Smith v. Holtz, 210 F.3d 186, 199 n. 18 (3d Cir.2000) (reviewing use of non-mutual offensive collateral estoppel under an abuse of discretion standard); Raytech Corp., 54 F.3d at 190 (same); Temple University, 941 F.2d at 212 & n. 16 (same); McLendon, 908 F.2d at 1177 (same).2

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