Tuesday, 02 June 2020 17:55

Supreme Court Rules on Viability of “Defense Preclusion” in Trademark Case

Written by 

Nearly twenty years of trademark litigation between Marcel Fashions Group and Lucky Brand Dungarees resulted in a Supreme Court decision, which ruled that the principle of claim preclusion does not bar Lucky Brand’s reliance on a new defense, particularly given the evolving facts and issues that can arise in a trademark dispute. In the case under review, Marcel alleged that Lucky Brand infringed on Marcel’s “Get Lucky” mark through its use of “Lucky” in violation of a 2005 injunction (which followed the settlement of a 2003 action between the parties, with certain claims being released). The Supreme Court ruled that Lucky Brand was not precluded from asserting a defense based on the release in the 2003 agreement even though it had not pursued that defense in a prior action, because the defense can only be barred if the causes of action are the same, or “share a common nucleus of operative facts.” Finding that the prior action did not share a common nucleus of operative fact, the Supreme Court reversed the decision below and ruled that Lucky Brand could rely on the defense in the most recent action.

This case marks the third round of litigation between the parties. Marcel initiated the first round in 2001 with an allegation that Lucky Brand infringed on its “Get Lucky” trademark. A settlement was reached in 2003, which stipulated that Lucky Brand would refrain from using “Get Lucky”. In 2005, Lucky Brand initiated the second round, alleging that Marcel copied its designs and logos. Marcel filed multiple counterclaims, almost all relying on Lucky Brand’s continued use of the “Get Lucky” mark in violation of the 2003 agreement. Lucky Brand moved to dismiss Marcel’s counterclaims on the theory that they were barred by a release provision in the 2003 agreement; this was the only time Lucky Brand invoked the release defense prior to the current case. The 2005 action concluded with the district court permanently enjoining Lucky Brand’s use of “Get Lucky.” However, as pointed out by Justice Sotomayor in the Supreme Court’s decision, the injunction did not mention Lucky Brand’s use of other marks or phrases containing the word “Lucky.”

Marcel filed the most recent case in 2011, alleging that Lucky Brand violated the 2005 injunction due to its use of the “Lucky” trademark. The central issue became whether Lucky Brand’s failure to litigate the release defense in the 2005 suit barred it from invoking the release defense in the most recent action. The Second Circuit held that Lucky Brand was unable to assert the defense due to the principle of claim preclusion, which prevents parties from raising issues that could have been raised and decided in a prior action–even if they were not actually litigated. However, the Supreme Court reversed on May 14, 2020, finding that a defense can be barred only if the causes of action are the same, or “share a common nucleus of operative facts.”

The Supreme Court ruled that the 2005 and 2011 cases do not share a common nucleus of operative fact because, while the 2005 action depended on Lucky Brand’s use of “Get Lucky,” the case under review did not. Rather, the 2011 action alleged only that Lucky Brand infringed by using their own marks containing the word “Lucky.” The Court explained that claim preclusion generally does not bar claims predicated on events that postdate the filing of the initial complaint, and highlighted that this principle “takes on particular force in the trademark context, where the enforceability of a mark and likelihood of confusion between marks often turns on extrinsic facts that change over time.” Because the two suits involved different marks, legal theories, conduct, and time frames, the Court found that they do not share a common nucleus of operative fact. As such, the Court held that, under the facts of this case, claim preclusion would not bar Lucky Brand from relying on the release defense in the most recent action.

Read 929 times Last modified on Tuesday, 02 June 2020 19:16
Kelly Malloy

Ms. Malloy earned her bachelor’s degree in Industrial and Systems Engineering at the University of Florida, and is currently a J.D. Candidate at the University of Miami School of Law concentrating on intellectual property. At Miami Law, Ms. Malloy serves as President of the Student Bar Association and is on the University of Miami Law Review. Ms. Malloy also served as President of the Intellectual Property Law Society, President of the Inter-Club Council, Executive Board Secretary of the Student Bar Association, and 1L Senator during her time at Miami Law. As a result of her dedication to her coursework, Ms. Malloy is in the top 10% of her class, received the Dean’s Merit Scholarship, and was awarded the Dean’s Certificate of Achievement in her Patent Law course. Ms. Malloy is a law clerk at the firm and assists attorneys by drafting patent applications, performing legal research, and preparing for litigation.