On May 14, 2020, the U.S. Supreme Court ruled on Lucky Brand Dungarees, Inc. v. Marcel Fashion Group, Inc., unanimously holding a party is not precluded from raising defenses submitted in earlier litigation when a subsequent lawsuit between the parties challenges different conduct and raises different claims from that earlier litigation.
The parties to this lawsuit — Lucky Brand and Marcel — both use “LUCKY” in their marks on apparel. Both parties received trademark registrations for the phrases “Lucky Brand” (belonging to Lucky Brand) and “Get Lucky” (belonging to Marcel). Over the span of 20-years, the parties engaged in three rounds of litigation over each other’s use of these phrases.
HISTORY OF TRADEMARK BATTLES BETWEEN PARTIES
In 2003, Lucky Brand and Marcel entered a settlement regarding a trademark dispute in which Lucky Brand agreed not to use “GET LUCKY” and Marcel agreed to release certain trademark claims it may have in the future arising out of its trademarks. The two parties contest the scope of Marcel’s release, with Marcel taking the position that it only released claims as to infringement that occurred prior to 2003, and Lucky Brand arguing that it released all relevant trademark claims that Marcel may have after 2003.
Later, in 2005, Lucky Brand sued Marcel for copying Lucky Brand’s designs and logos. Marcel counterclaimed that Lucky Brand’s alleged use of “Get Lucky” violated their 2003 settlement agreement, and that Lucky Brand’s use of “Get Lucky” and “Lucky Brand” infringed Marcel’s “GET LUCKY” mark. Lucky Brand unsuccessfully moved to dismiss the counterclaims, arguing that they were barred by the 2003 settlement. A jury found against Lucky Brand on Marcel’s counterclaims, and the court permanently enjoined Lucky Brand from copying or imitating Marcel’s “GET LUCKY” mark.
Then, in 2011, Marcel sued Lucky Brand for infringement of Marcel’s general “LUCKY” marks, alleging Lucky Brand continued to use the marks even after the injunction. Lucky Brand attempted to present an affirmative defense that Marcel’s claim was barred by their 2003 settlement. The district court ruled in Lucky Brand’s favor and dismissed the action based on the release in the 2003 settlement, but the Second Circuit reversed, finding that Lucky Brand was barred from raising the defense under “defense preclusion” because it could have been raised in the 2005 lawsuit. The Second Circuit explained that “defense preclusion” bars a party from raising a defense where: “(i) a previous action involved an adjudication on the merits; (ii) the previous action involved the same parties; (iii) the defense was either asserted, or could have been asserted, in the prior action; and (iv) the district court, in its discretion, concludes that preclusion of the defense is appropriate.”
SUPREME COURT REVIEWS CASE
In 2019, the Supreme Court granted certiorari to determine whether the Second Circuit’s novel theory of “defense preclusion” was valid. It ultimately determined that when the trademark action at issue challenges different conduct and raises different claims from an earlier action between the parties, the plaintiff cannot prevent the defendant from raising new defenses, including a defense that it failed to present in the earlier action.
Applying this holding to the immediate case, because “Marcel’s 2011 action challenged different conduct — and raised different claims — from the 2005 action, Marcel cannot preclude Lucky Brand from raising new defenses.” Because the two relevant lawsuits involve different marks and conduct, they did not share a “common nucleus of operative facts.” While the 2005 claim centered on Lucky Brand’s alleged use of the “GET LUCKY” mark, the 2011 action focused on allegations that Lucky Brand was infringing on other “LUCKY” marks.
In issuing its decision, the Supreme Court explained that “defense preclusion” is not a “standalone category of res judicata,” but instead has to fit within the principles of either issue preclusion or claim preclusion to be valid. However, the Court did note that in issuing this particular decision, it was not taking the position that defense preclusion could never apply in future cases.
Originally Published At The JD Supra Platform