Res Judicata Precluded Party From Bringing Trademark Cancellation Proceeding At TTAB After Default Judgment Of Infringement Entered By District Court

In Nasalok Coating Corp. v. Nylok Corp., No.

07-1432 (Fed. Cir. Apr. 14, 2008), the Federal Circuit affirmed

a decision of the TTAB granting SJ in favor of appellee Nylok

Corporation ("Nylok") in a cancellation proceeding

brought by Nasalok Coating Corporation

("Nasalok").

Both parties are engaged in business related to self-locking

fasteners using nylon locking elements. A nylon element, such

as a patch or strip of nylon, is applied to the threads of such

a fastener, and prevents the fastener from loosening when

exposed to vibration, stress, or temperature extremes. Nylok is

the owner of federal trademark Registration No. 2,398,840

("the '840 Registration"). The registered mark

consists of "a patch of the color blue on a selected

number of threads of an externally threaded fastener, with the

blue patch extending more than 90 degrees and less than 360

degrees around the circumference of the fastener" and is

designated for use on "metal externally threaded

fasteners." Slip op. at 2.

Nylok filed a complaint against Nasalok in the U.S. District

Court for the Northern District of Illinois, alleging

infringement of several trademarks, including the '840

Registration. Although properly served with the complaint,

Nasalok failed to enter an appearance, and the district court

entered a default judgment of trademark infringement in favor

of Nylok and subsequently entered an injunction prohibiting

Nasalok from "selling within or importing to the United

States of America any self-locking fastener having a nylon

locking element . . . having the color blue, or any color

confusingly similar to the color blue," and from

"promoting or advertising the color blue in the United

States of America on or in association with any self-locking

fastener, except when Nasalok has received express and written

permission by Nylok." Id. at 2-3. The district

court's order also stated that Nylok was the proper owner

of the '840 Registration and that the trademark was valid

and enforceable. Nasalok did not appeal the district

court's order.

Five months after the default judgment, Nasalok filed a

petition to cancel the '840 Registration with the Board,

alleging that the mark was invalid for various reasons. Nylok

moved for SJ, arguing that Nasalok was barred under the

doctrine of res judicata (claim preclusion) from claiming that

the '840 Registration was invalid because it could have

asserted, but did not assert, a claim of invalidity in the

earlier infringement action brought by Nylok. Relying on the

three-part test for claim preclusion set out in Jet, Inc.

v. Sewage Aeration Systems, 223 F.3d 1360 (Fed. Cir.

2000), the Board granted SJ in favor of Nylok, finding that the

doctrine of claim preclusion barred Nasalok's cancellation

petition.

On appeal, the Federal Circuit rejected the Board's

application of Jet because that three-part test for

claim preclusion is the test to determine whether a plaintiff,

who brings a second action related to a first action, is

precluded. When determining whether a defendant is

precluded, however, "the somewhat different rules of

'defendant preclusion' apply." Slip op. at 6

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