Jet v. Sewage Aeration Systems

• Decision Date: 23 August 2000
• Citation: Jet v. Sewage Aeration Systems, 223 F.3d 1360 (Fed. Cir. 2000)
• Parties: (Fed. Cir. 2000) JET, INC., Appellant, v. SEWAGE AERATION SYSTEMS, Appellee. 99-1518 CORRECTED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1360

223 F.3d 1360 (Fed. Cir. 2000)

JET, INC., Appellant, v.SEWAGE AERATION SYSTEMS, Appellee.

99-1518

United States Court of Appeals for the Federal Circuit

CORRECTED: AUGUST 23, 2000

DECIDED: August 23, 2000

Appealed from: Patent and Trademark Office Trademark Trial and Appeal Board

Roger P. Furey, Arter & Hadden LLP, of Washington, DC, argued for appellant.With him on the brief were Thomas H. Odom, and Gregory S. Feder.Of counsel wasCaroline A. Leonard.

Jeffrey D. Harty, Zarley, McKee, Thomte, Voorhees & Sease, P.L.C., of Des Moines, Iowa, argued for appellee.With him on the brief was Edmund J. Sease.

Before MAYER, Chief Judge, CLEVENGER, and GAJARSA, Circuit Judges.

Opinion for the court filed by Circuit Judge CLEVENGER.Dissenting Opinion filed byChief Judge MAYER.

CLEVENGER, Circuit Judge.

Jet, Inc. appeals the dismissal by the United States Patent and Trademark Office Trademark Trial and Appeals Board of its petition for cancellation of Sewage Aeration Systems' federally registered trademark, AEROB-A-JET.SeeCancellationNo. 25,587, slip op. at 3-4(1997).Because we conclude that the Trademark Trial and Appeals Board erred in dismissing the petition on the grounds of claim preclusion, we reverse and remand for further proceedings.

I

Jet, Inc.("Jet") and Sewage Aeration Systems ("SAS") manufacture sewage and waste-water treatment devices for homes.Jet registered the trademark JET AERATION, Reg. No. 676,471, in March 1959, and registered JET, Reg. No. 881,991, in December 1969.SAS was issued a federal registration, Reg. No. 1,739,664, for the mark AEROB-A-JET on December 15, 1992.

In December 1994, Jet filed suit for trademark infringement in the United States District Court for the Northern District of Ohio, alleging that SAS's use of AEROB-A-JET on home waste-water treatment devices was likely to cause confusion with the JET and JET AERATION marks used on Jet's similar products.In June 1996, Jet sought to amend its complaint to, inter alia, add a claim for cancellation of the AEROB-A-JET mark.The district court denied the amendment.Thereafter, in October 1996, Jet filed this action for cancellation with the United States Patent and Trademark Office.In November 1996, Jet, by consent of SAS, amended its complaint in the district court, deleting all references to the JET AERATION mark.

The upshot of these events was that the litigation proceeded in the district court with Jet asserting infringement of only the JET trademark.The cancellation proceeding in front of the Trademark Trial and Appeals Board("Board") asserted that cancellation of AEROB-A-JET was required on the basis of both JET and JET AERATION.The Board stayed the cancellation proceeding during the pendency of the infringement litigation.SeeCancellationNo. 25,587, slip op. at 2-3(Jan. 14, 1997)(order).

In May 1997, the district court entered judgment in favor of SAS, ruling that the simultaneous use of JET and AEROB-A-JET was not likely to cause confusion in the marketplace.SeeJet, Inc. v. Sewage Aeration Sys., No. 1:94CV2490, slip op. at 1(N.D. Ohio1997)(order).Jet appealed this decision to the United States Court of Appeals for the Sixth Circuit, which affirmed the district court's judgment that there was no likelihood of confusion between JET and AEROB-A-JET.SeeJet, Inc. v. Sewage Aeration Sys., 165 F.3d 419, 424, 49 USPQ2d 1355, 1359(6th Cir.1999)("[A] reasonable jury could not conclude that the marks JET and AEROB-A-JET are confusingly similar, and the very high degree of care [that purchasers in the market] can be expected to exercise eliminates virtually any possibility that SAS's use of AEROB-A-JET will cause confusion.").

After receiving notice of the Sixth Circuit decision (and a request for dismissal from SAS), the Board dismissed the cancellation action, reasoning that "[a]n examination of the identified proceedings and the parties is all that is required to make a determination of whether [Jet] is barred under the doctrine of res judicata from proceeding in this matter."CancellationNo. 25,587, slip op. at 2.The Board held that the infringement litigation involved the same claims as would be involved in the cancellation proceeding, and therefore that Jet was barred from pursuing the cancellation of AEROB-A-JET on the basis of either JET or JET AERATION.Accordingly, the Board dismissed the action.Seeid., slip op. at 3-4.

This appeal followed, vesting this court with jurisdiction pursuant to 28 U.S.C. § 1295(a)(4)(B)(1994).

II

The Board concluded that SAS was "entitled to judgment as a matter of law,"seeCancellationNo. 25,587, slip op. at 4, a legal determination, seeConroy v. Reebok Int'l, Ltd., 14 F.3d 1570, 1575, 29 USPQ2d 1373, 1377(Fed. Cir.1994), that we review de novo.See5 U.S.C. § 706(2)(A)(1994)("The reviewing court shall hold unlawful and set aside agency . . . conclusions found to be . . . not in accordance with law . . . .");Dickinson v. Zurko, 527 U.S. 150, 165, 50 USPQ2d 1930, 1937(1999)(holding that Federal Circuit reviews decisions of the PTO under § 706).Similarly, whether preclusion applies to a particular action is an issue of law.SeeFoster v. Hallco Mfg. Co., 947 F.2d 469, 475, 20 USPQ2d 1241, 1246(Fed. Cir.1991).

The Board based its decision on the doctrine of res judicata, or claim preclusion.Under that doctrine, "a judgment on the merits in a prior suit bars a second suit involving the same parties or their privies based on the same cause of action."Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5(1979);see alsoLawlor v. National Screen Serv. Corp., 349 U.S. 322, 326(1955);Foster, 947 F.2d at 476, 20 USPQ2d at 1248;Young Eng'rs, Inc. v. United States Int'l Trade Comm'n, 721 F.2d 1305, 1314, 219 USPQ 1142, 1150(Fed. Cir.1983)(stating that Federal Circuit would receive guidance from Restatement (Second) of Judgments (1982)).Over the years, the doctrine has come to incorporate common law concepts of merger and bar, and will thus also bar a second suit raising claims based on the same set of transactional facts.SeeMigra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 77 n.1(1984)("Claim preclusion refers to the effect of a judgment in foreclosing litigation of a matter that never has been litigated, because of a determination that it should have been advanced in an earlier suit.Claim preclusion therefore encompasses the law of merger and bar.");Foster, 947 F.2d at 478-79, 20 USPQ2d at 1248-49.Accordingly, a second suit will be barred by claim preclusion if: (1) there is identity of parties(or their privies); (2) there has been an earlier final judgment on the merits of a claim; and (3) the second claim is based on the same set of transactional facts as the first.SeeParklane, 439 U.S. at 326 n.5;Foster, 947 F.2d at 478-79, 20 USPQ2d at 1248.

In this case, there is no dispute between the parties regarding factors (1) and (2): the parties(Jet and SAS) are identical in both actions, and the infringement litigation resulted in a valid final judgment on the merits.Thus, the case reduces to an analysis of the transactional facts involved in the two causes of action.SeeRestatement (Second) of Judgments§ 24(1982)(defining "claim" as encompassing rights and remedies arising out of the same set of transactional facts);see alsoYoung Eng'rs, 721 F.2d at 1314, 219 USPQ at 1150(noting that Federal Circuit is broadly guided by the Restatement).

The Restatement notes that a common set of transactional facts is to be identified "pragmatically."Restatement (Second) of Judgments§ 24(2).Seeking to bring additional clarity to this standard, courts have defined "transaction" in terms of a "core of operative facts," the "same operative facts," or the "same nucleus of operative facts," and "based on the same, or nearly the same, factual allegations."Herrmann v. Cencom Cable Assoc., Inc., 999 F.2d 223, 226(7th Cir.1993)(citingParsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518, 521(1986));see alsoUnited States v. Haytian Rep., 154 U.S. 118, 125(1894)("One of the tests laid down for the purpose of determining whether or not the causes of action should have been joined in one suit is whether the evidence necessary to prove one cause of action would establish the other.");Kratville v. Runyon, 90 F.3d 195, 197-98(7th Cir.1996)(citingRestatement (Second) of Judgments§ 24);Brzostowski v. Laidlaw Waste Sys., Inc., 49 F.3d 337, 338(7th Cir.1995);Diversified Foods, Inc. v. First Nat'l Bank, 985 F.2d 27, 30(1st Cir.1993);Sanders Confectionary Prods. v. Heller Fin., Inc., 973 F.2d 474, 484(6th Cir.1992)("Identity of causes of action means an identity of facts creating the right of action");Prochotsky v. Baker & McKenzie, 966 F.2d 333, 335(7th Cir.1992);McCarney v. Ford Motor Co., 657 F.2d 230, 232(8th Cir.1981).Thus, we must determine whether, for purposes of claim preclusion, a claim for trademark infringement is based on the same set of factual allegations as a petition to cancel the defendant's federally registered mark.

We hold that they are not.The set of facts which underlie a claim for trademark infringement under federal law include:

the plaintiff's possession of a valid registered trademark;

the defendant's use "in commerce" of "any reproduction, counterfeit, copy, or colorable imitation" of the registered mark;

the defendant's use "in connection with the sale, offering for sale, distribution, or advertising of any good or services";

whether defendant's activity is "likely to cause confusion, or to cause mistake, or to deceive."

15 U.S.C. §§ 1114,1115 (Supp. 2000)(establishing trademark infringement and defenses).By contrast, the set of facts which underlie a petition for cancellation include in relevant part:

the existence of a registered mark held by the respondent;

the petitioner's belief of damage by the mark;

a filing within five years (in most cases) of the...