Sharp Kabushiki Kaisha (Also Trading as Sharp Corp.) v. Thinksharp, Inc. ( 2006 )


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    United States Court of Appeals for the Federal Circuit
    05-1220
    (Opposition No. 91/118,745)
    SHARP KABUSHIKI KAISHA
    (also trading as Sharp Corporation),
    Appellant,
    v.
    THINKSHARP, INC.,
    Appellee.
    Duane M. Byers, Nixon & Vanderhye P.C., of Arlington, Virginia, argued for
    appellant. With him on the brief were Robert W. Adams and Michael E. Crawford.
    Sherry H. Flax, Saul Ewing LLP, of Baltimore, Maryland, argued for appellee.
    Appealed from: United States Patent and Trademark Office, Trademark Trial and
    Appeal Board
    United States Court of Appeals for the Federal Circuit
    05-1220
    (Opposition No. 91/118,745)
    SHARP KABUSHIKI KAISHA
    (also trading as Sharp Corporation),
    Appellant,
    v.
    THINKSHARP, INC.,
    Appellee.
    __________________________
    DECIDED: May 30, 2006
    __________________________
    Before NEWMAN, LOURIE, and SCHALL Circuit Judges.
    NEWMAN, Circuit Judge.
    Sharp Kabushiki Kaisha, also trading as Sharp Corporation, ("Sharp") appeals the
    decision of the United States Patent and Trademark Office, Trademark Trial and Appeal
    Board, dismissing Sharp's opposition to the registration by ThinkSharp, Inc. ("ThinkSharp")
    of the mark THINKSHARP.1 We affirm the Board's decision.
    BACKGROUND
    1      Sharp Kabushiki Kaisha v. ThinkSharp, Inc., 2004 TTAB LEXIS 216,
    Opposition No. 91118745 (TTAB Mar. 31, 2004) (initial decision); Sharp Kabushiki Kaisha
    v. ThinkSharp, Inc., 2004 TTAB LEXIS 659, Opposition No. 91118745 (TTAB Oct. 26,
    2004) (decision on reconsideration).
    ThinkSharp filed an application to register the word mark THINKSHARP on February
    26, 1999, and filed a second application to register the mark THINKSHARP and Design on
    June 4, 1999. Both marks were designated for use with educational goods and services in
    the fields of problem solving and critical thinking, and both applications were duly published
    for opposition. Sharp filed a Notice of Opposition to the word mark registration on May 9,
    2000, and to the word-and-design registration on June 28, 2001. In both cases Sharp
    asserted that THINKSHARP is confusingly similar to and dilutes the family of SHARP
    trademarks.
    ThinkSharp chose to defend only the word mark registration and did not file an
    answer in the word-and-design opposition. Thus the Board entered a default judgment
    sustaining Sharp's opposition to the word-and-design mark. Sharp Kabushiki Kaisha v.
    ThinkSharp, Inc., Opposition No. 91123480 (TTAB Oct. 11, 2002) (default judgment).
    However, ThinkSharp contested Sharp's opposition to registration of the word mark
    THINKSHARP. After the TTAB proceedings were completed but before the Board's
    decision, Sharp asserted that the default judgment in its favor on the word-and-design mark
    operated as res judicata to preclude ThinkSharp from contesting Sharp's opposition to
    registration of the word mark.
    The Board rejected Sharp's opposition, on two grounds. First, the Board held that
    Sharp had waived its right to assert res judicata, stating that Sharp had not put ThinkSharp
    on notice and had not raised the issue until after the TTAB evidentiary proceedings were
    completed. On the merits, the Board held that confusion was not likely between the word
    marks SHARP and THINKSHARP. Sharp asked the Board to reconsider. On the res
    judicata issue, Sharp pointed out that it had properly raised and given notice of the issue,
    05-1220                                       2
    and produced a copy of a letter to the Board with copy to ThinkSharp, which stated that
    Sharp intended to rely on the default judgment for res judicata effect. The Board then
    granted reconsideration, explaining that Sharp's notice letter had been misplaced at the
    Board.
    On reconsideration, the Board observed that the ThinkSharp applications were
    copending; the Board held that the applicant was entitled to choose to pursue one
    registration and abandon the other, even after oppositions had been filed. The Board
    explained that an applicant is not required to defend against multiple oppositions in order to
    preserve its right to defend against one of them. Thus the Board held that the default
    judgment on the word-and-design mark did not preclude defending the application to
    register the word mark. The Board also confirmed its decision that there was not a
    likelihood of confusion between SHARP and THINKSHARP. Sharp appeals only the
    decision of the issue of res judicata.
    DISCUSSION
    Whether a particular claim is barred by res judicata is a matter of law, and its
    decision by an administrative agency receives plenary review. See 5 U.S.C. '706(2)(A)
    (2006) ("The reviewing court shall hold unlawful and set aside agency [conclusions] not in
    accordance with law . . . ."); Dickinson v. Zurko, 
    527 U.S. 150
    , 165 (1999) (the
    Administrative Procedure Act applies to tribunals of the Patent and Trademark Office); Jet,
    Inc. v. Sewage Aeration Sys., 
    223 F.3d 1360
    , 1362 (Fed. Cir. 2000) (reviewing de novo the
    application of res judicata in a trademark cancellation proceeding).
    The term res judicata includes two related concepts: "claim preclusion" and "issue
    preclusion." The Court has explained the difference between them:
    05-1220                                       3
    Res judicata is often analyzed further to consist of two preclusion concepts:
    "issue preclusion" and "claim preclusion." Issue preclusion refers to the
    effect of a judgment in foreclosing relitigation of a matter that has been
    litigated and decided. This effect is also referred to as direct or collateral
    estoppel. 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.
    Migra v. Warren City Sch. Dist. Bd. of Educ., 
    465 U.S. 75
    , 77 n.1 (1984) (internal citations
    omitted). Since the merits of Sharp's opposition to the word-and-design mark were not
    "litigated and decided," issue preclusion cannot apply. For claim preclusion based on a
    judgment in which the claim was not litigated, there must be (1) an identity of parties or
    their privies, (2) a final judgment on the merits of the prior claim, and (3) the second claim
    must be based on the same transactional facts as the first and should have been litigated in
    the prior case. Parklane Hosiery Co. v. Shore, 
    439 U.S. 322
    , 327 n.5 (1979); Jet, Inc., 
    223 F.3d at 1362
    . For res judicata to apply against ThinkSharp it must be on the premise that
    the issue of likelihood of confusion as to the word mark should have been litigated in the
    defaulted opposition to the word-and-design mark.
    A default judgment can operate as res judicata in appropriate circumstances. See
    Morris v. Jones, 
    329 U.S. 545
    , 550-51 (1947) ("'A judgment of a court having jurisdiction of
    the parties and of the subject matter operates as res judicata, in the absence of fraud or
    collusion, even if obtained upon a default.'") (quoting Riehle v. Margolies, 
    279 U.S. 218
    ,
    225 (1929)). Sharp argues that the legal effect of the default judgment in the word-and-
    design opposition is that the Board ruled in favor of Sharp as to the merits of all of Sharp's
    pleadings in that opposition, and that Sharp's uncontested allegations therein must now be
    taken as undisputed fact. Sharp states that this precludes the Board's decision in favor of
    05-1220                                       4
    ThinkSharp in the opposition to the word mark registration. Sharp states that in Board
    proceedings, as in federal courts, claim preclusion is to be applied where the necessary
    prerequisites are established.
    ThinkSharp argues that the Board was correct in holding that the circumstances
    concerning the word-and-design mark do not operate as res judicata for the proposed
    registration of the word mark. Sharp raises the issue of claim "preclusion," not to preclude
    a claim asserted by ThinkSharp against Sharp, but rather to support its opposition. See 37
    C.F.R. '2.116(c) ("The opposition or the petition for cancellation and the answer correspond
    to the complaint and answer in a court proceeding"). The Supreme Court has cautioned
    that the offensive use of res judicata should be examined carefully to determine whether it
    would be unfair to the defendant. See Parklane, 
    439 U.S. at 330-32
    . ThinkSharp points
    out that the marks are not the same, that the merits were not decided, that allegations in
    pleadings are not proven facts, that precedent is contrary to Sharp's position, and that the
    Board correctly applied the rules and procedures of trademark practice.
    The Board held that ThinkSharp was entitled to choose to pursue the registration of
    only one of its marks, "rather than defending two oppositions," and distinguished the Board
    precedent cited by Sharp, as follows:
    This case, however, differs from Miller Brewing Co. v. Coy International Corp.
    [
    230 USPQ 675
    , 678 (TTAB 1986)] in that this is not a situation where the
    applicant, after a judgment had been entered against it, adopted a second
    mark in an attempt to avoid the preclusive effect of a previous judgment. The
    applicant herein began using both its THINKSHARP (typed drawing form)
    and THINKSHARP and design marks at the same time and indeed both
    applications were pending at the time judgment was entered in Opposition
    No. 91123480. Applicant did not file its application to register the mark
    THINKSHARP in typed drawing form merely as an attempt to evade the
    preclusive effect of the judgment entered against it in the application to
    register THINKSHARP and design. Applicant was entitled to decide if it
    05-1220                                      5
    wanted to pursue the registration of only one of its marks, rather than
    defending two oppositions.
    2004 TTAB LEXIS 659, at *5-6. In Miller Brewing the Board held that it "does not wish to
    encourage losing parties to insignificantly modify their marks after an adverse ruling and
    thereby avoid the res judicata effect of the prior adjudication." 230 USPQ at 678. Here, the
    Board gave weight to the undisputed fact that the separate applications were not filed in
    order to evade a prior adverse judgment.
    It is highly relevant that the default judgment on the word-and-design mark was
    entered without consideration of the merits. "Precedent cautions that res judicata is not
    readily extended to claims that were not before the court, and precedent weighs heavily
    against denying litigants a day in court unless there is a clear and persuasive basis for that
    denial." Kearns v. Gen. Motors Corp., 
    94 F.3d 1553
    , 1557 (Fed. Cir. 1996); see Brown v.
    Felsen, 
    442 U.S. 127
    , 132 (1979) (res judicata is "invoked only after careful inquiry"). In
    Kearns this court cautioned that:
    When applying res judicata to bar causes of action that were not before the
    court in the prior action, due process of law and the interest of justice require
    cautious restraint. Restraint is particularly warranted when the prior action
    was dismissed on procedural grounds.
    
    94 F.3d at 1556
    . In the present case, not only were the marks different and the prior
    dismissal solely on default, but res judicata would deny ThinkSharp its day in court without
    a "clear and persuasive basis for that denial," 
    id. at 1557
    . The Court in Kremer v. Chemical
    Construction Corporation, 
    456 U.S. 461
    , 485 n.26 (1982) stated that "so long as opposing
    parties had an adequate opportunity to litigate disputed issues of fact, res judicata is
    properly applied to decisions of an administrative agency acting in a 'judicial capacity.'" The
    corollary is that when a party did not have an opportunity to litigate disputed issues, a
    05-1220                                       6
    decision to permit such litigation is favored. Sharp has not established that the issue of
    likelihood of confusion as to the word mark should have been litigated in the defaulted
    opposition to the word-and-design mark. "The public policy underlying the principles of
    preclusion, whereby potentially meritorious claims may be barred from judicial scrutiny, has
    led courts to hold that the circumstances for preclusion 'must be certain to every intent.'"
    Mayer/Berkshire Corp. v. Berkshire Fashions, Inc., 
    424 F.3d 1229
    , 1234 (Fed. Cir. 2005)
    (quoting Russell v. Place, 
    94 U.S. 606
    , 610 (1877)).
    The purpose of res judicata is salutary, for it protects a party from being required to
    relitigate the same issue against the same party in a separate action. Parklane, 
    439 U.S. at 326
    . However, the imposition of claim preclusion in the present case would not further
    this purpose, for not only are the marks not identical, but the issues of likelihood of
    confusion and dilution were not litigated in the defaulted opposition. Precedent and sound
    administrative policy support the Board's reasoning that a trademark owner is entitled to
    choose which opposition to defend, when the proceedings are not an attempt to evade the
    effect of a previous adverse judgment on the merits. See Institut National Des Appellations
    d'Origine v. Brown-Forman Corp., 47 USPQ2d 1875 (TTAB 1998); Metromedia
    Steakhouses, Inc. v. Pondco II Inc., 28 USPQ2d 1205 (TTAB 1993). An administrative
    tribunal has authority to establish procedures and interpretations that facilitate its statutory
    assignment. See 18B Charles Alan Wright & Arthur R. Miller, Federal Practice and
    Procedure '4475, at 473-74 (2d ed. 2002) ("a measure of additional flexibility is recognized
    to defeat preclusion to accommodate the distinctive substantive and procedural policies
    that may govern agency adjudication"); see also Mayer/Berkshire Corp., 
    424 F.3d at 1234
    ("Caution is warranted in the application of preclusion by the PTO").
    05-1220                                        7
    We affirm the Board's holding that ThinkSharp's choice to contest only the word
    mark opposition was not barred by the default judgment in the word-and-design opposition.
    ThinkSharp was not required to litigate both oppositions in order to preserve the right to
    litigate one. The Board's decision that res judicata does not apply is
    AFFIRMED.
    05-1220                                     8