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These Are Not Last Year’s Blue Jeans: The U.S. Supreme Court Limits Claim Preclusion in Subsequent Suit Between Same Parties

May 28, 2020 Published Article

In longstanding commercial disputes over trademarks, early rulings can have a significant preclusive effect in subsequent litigation. In Lucky Brand Dungarees, Inc. v. Marcel Fashions Group, Inc., the U.S. Supreme Court limited this preclusive effect, holding that Lucky Brand Dungarees could present defenses that could have been, but were not, litigated in a prior action between Lucky Brand and its adversary, Marcel Fashions Group. While this holding is not specific to trademark disputes, it is applicable to any company seeking to protect their brand through litigation, as the Court specifically noted that liability for trademark infringement turns on marketplace realities that can change dramatically from year to year.

Background

Lucky Brand Dungarees and Marcel Fashions Group both use the word “Lucky” as part of their marks on apparel. The two parties have engaged in multiple trademark infringement-related suits over the years. In 2005, Lucky Brand filed suit against Marcel for violating Lucky Brand’s trademark by copying its designs and logos, while Marcel filed counterclaims based on Lucky Brand’s continued use of the “Get Lucky” phrase that Marcel had previously registered as a trademark. The 2005 action was settled after Lucky Brand agreed to cease use of the marks and Marcel agreed to release various claims. In 2011, Marcel sued Lucky Brand over use of its own marks containing the word “Lucky,” which Marcel claimed was an infringement of its “Get Lucky” trademark. Lucky Brand claimed that the parties’ settlement agreement from the previous action functioned as an affirmative defense, while Marcel argued that this defense was precluded because Lucky Brand could have asserted it in the previous action.

The Ruling

In determining whether defense preclusion barred Lucky Brand from asserting its defense of the settlement agreement, the Supreme Court analyzed whether both suits arose from the same transaction or involved a common nucleus of operative facts. The Court reversed and remanded the Court of Appeals’ decision by determining that the two suits were grounded on different conduct, involved different trademarks, and occurred at different times, and thus did not arise from the same transaction or share a common nucleus of operative facts. As a result, Marcel could not prevent Lucky Brand from claiming the previous settlement agreement as a defense.

Key Takeaways

The Supreme Court did not explicitly recognize defense preclusion as a category of res judicata. Instead, the Court determined that the potential preclusion of a defense must either satisfy the requirements of issue preclusion or claim preclusion.

Trademark owners engaged in ongoing disputes with other parties must continue to monitor marketplace realities while making sure they have raised all viable defenses in trademark infringement litigation.

To read the Lucky Brand Dungarees, Inc. v. Marcel Fashions Group, Inc. case, click here.