Last week, the United States Court of Appeals for the Ninth Circuit issued an opinion in V.V.V. & Sons Edible Oils Ltd. v. Meenakshi Overseas, LLC, 18-16071 (December 27, 2019). The Court held that V.V.V.’s federal lawsuit for unfair competition, trademark dilution, and trademark infringement was not barred by claim preclusion in view of prior proceedings before the Trademark Trial and Appeal Board.
V.V.V. alleges it has marketed sesame oil under the trademark IDHAYAM since the 1980s. In 2009, Meenakshi filed an application to register the IDHAYAM mark for use on sesame oil. V.V.V. opposed Meenakshi’s application, but later abandoned its opposition. The TTAB entered judgment against V.V.V., and Meenakshi received a registration for the IDHAYAM mark and two related marks. V.V.V. then filed a petition to cancel Meenakshi’s marks, and the TTAB dismissed the petition as to the first mark due to claim preclusion. V.V.V. concurrently sued Meenakshi in the Eastern District of California, seeking damages and injunctive relief for unfair competition, trademark dilution, and trademark infringement. V.V.V.’s allegations supporting its federal claims were nearly identical to its allegations before the TTAB. The district court dismissed V.V.V.’s claims involving the first mark based on claim preclusion and granted Meenakshi’s unopposed motion to dismiss the remaining claims.
The Ninth Circuit reversed the claim preclusion finding. The Court assumed, without deciding, that the elements of claim preclusion were met. But the Court recognized an exception to claim preclusion if the plaintiff was unable to seek a certain remedy in the first action due to limitations on subject matter jurisdiction, and the plaintiff was seeking that remedy in the second action. The Court held this exception applied to V.V.V.’s federal claims because an interparty proceeding before the TTAB is a limited proceeding involving registration of a trademark, and the TTAB had no power to decide V.V.V.’s infringement, dilution, and unfair competition claims or to grant injunctive relief or damages. As a result, it would be unfair to preclude V.V.V. from litigating these claims in federal court. The Court found, however, that issue preclusion may bar relitigation of the federal claims and remanded for a determination of issue preclusion in the first instance. Finally, the Court affirmed the dismissal of V.V.V.’s claims regarding the second and third marks, holding that V.V.V.’s failure to oppose Meenakshi’s motion to dismiss those claims waived any challenge to the dismissal.