Lucky Brand Dungarees, Inc. (Lucky Brand) and Marcel Fashions Group, Inc. (Marcel) both offer jeans and other apparel items using the word “lucky.” Marcel owns a trademark registration for the tagline GET LUCKY, while Lucky Brand owns its own trademark registrations for LUCKY BRAND and other LUCKY-formative marks.
A Not-So-LUCKY Litigation History
The “lucky” overlap has spawned nearly 20 years of litigation, the first round of which ended with a 2003 settlement agreement whereby Lucky Brand agreed to stop using the mark GET LUCKY and Marcel agreed to a release of any claims concerning Lucky Brand’s use of its own trademarks.
In 2005, Lucky Brand sued Marcel for trademark infringement in relation to a third-party license. Marcel counterclaimed alleging Lucky Brand continued to use the GET LUCKY mark in connection with other LUCKY-formative marks. In defending against these counterclaims, Lucky Brand initially raised the 2003 settlement agreement as a bar, but failed to rely upon that defense as the proceedings wore on. Ultimately, the court in that action permanently enjoined Lucky Brand from copying or imitating the GET LUCKY mark and a jury found for Marcel on its counterclaims.
In 2011, Marcel sued Lucky Brand again for infringement of the GET LUCKY mark based upon Lucky Brand’s other LUCKY marks. When Lucky Brand sought to defend by relying on the 2003 settlement agreement, Marcel pointed to the 2005 lawsuit to argue that Lucky Brand waived its right to invoke the defense by failing to defend on this basis in the 2005 suit. Following the district court’s ruling in favor of Lucky Brand on a motion to dismiss, the Second Circuit reversed, holding that “defense preclusion” barred Lucky Brand from reasserting an unlitigated defense it should have pursued earlier.
SCOTUS Steps In
With Justice Sotomayor writing for a unanimous Court, the Court held that because Marcel’s 2011 lawsuit challenged different conduct and raised different claims than the 2005 lawsuit, Marcel could not bar Lucky Brand from raising the defense. This decision addresses a Circuit split regarding whether, if ever, claim preclusion applies to defenses (in addition to offensive claims) raised in later suits; put another way, whether “defense preclusion” is a valid application of res judicata.
Justice Sotomayor reiterated the distinction between the two doctrines of res judicata – issue preclusion (“sometimes called collateral estoppel”) and claim preclusion (“sometimes itself called res judicata”). The latter – at issue in this case – prevents parties from raising claims that could have been raised and decided in prior actions. However, suits only involve the same claims or causes of action when they “arise from the same transaction” or share a “common nucleus of operative facts.”
As between Lucky Brand and Marcel, the 2011 and 2005 lawsuits “were grounded on different conduct, involving different marks, occurring at different times. They thus did not share a “common nucleus of operative facts’.” Marcel alleged in the 2005 lawsuit that Lucky Brand infringed upon Marcel’s GET LUCKY mark by directly using and imitating the GET LUCKY mark. The 2011 lawsuit, by contrast, focused only on infringement of the GET LUCKY slogan through use of Lucky Brand’s own marks containing the word “lucky,” not by imitating the GET LUCKY slogan itself.
Moreover, the conduct at issue in 2011 action occurred after the conclusion of the 2005 action and “[c]laim preclusion generally ‘does not bar claims that are predicated on events that postdate the filing of the initial complaint’.” Sotomayor emphasizes 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. As Lucky Brand points out, liability for trademark infringement turns on marketplace realities that can change dramatically from year to year.”
Accordingly, although implying that “defense preclusion” could apply in certain cases, this concept did not apply to this case because the “claims” at issue in the 2011 and 2005 lawsuits did not “arise from the same transaction” or “share a common nucleus of operative facts.” Claim preclusion therefore could not apply and Marcel could not preclude Lucky Brand from raising new defenses.
Authored by Julia Anne Matheson, Anna Kurian Shaw, and Brendan C. Quinn
