The Potential Effect of Dickinson v. Zurko on Appeals from the Trademark Trial and Appeal Board
The Potential Effect of Dickinson v. Zurko on Appeals from the Trademark Trial and Appeal Board
by David J. Kera
On June 10, 1999, the Supreme Court held, in a 6-3 decision, that the proper standard for review by the Court of Appeals for the Federal Circuit of decisions of the Board of Patent Appeals and Interferences was the standard set forth in the Administrative Procedure Act, 5 U.S.C. §706. That section states that a reviewing court shall hold unlawful and set aside agency findings found to be arbitrary, capricious, or an abuse of discretion, or unsupported by substantial evidence. In so holding, the Supreme Court reversed a decision of the Court of Appeals for the Federal Circuit which held that the proper standard for review was that set forth in Rule 52(a), Fed. R. Civ. P, which states that findings of facts shall not be set aside unless clearly erroneous. The Supreme Court found that the reasons given by the CAFC for deciding that the "clearly erroneous" standard was correct instead of the APA standard were unpersuasive.
The Supreme Court noted that its decision, in terms of judicial review, may result in some practical difference in outcome depending upon which standard is used. The APA standard, according to the Court, is somewhat less strict than the FRCP standard. By "less strict" the Court must mean that it is easier to sustain an agency decision under the APA standard than it is to sustain the judgment of a court under the FRCP standard.
Under the FRCP standard, a court, in applying the "clearly erroneous" standard of review, may overturn a lower court's findings of fact if, upon a review of the entire record, the appellate court is left with a definite and firm conviction that an error has been made. Under the APA standard, a court reviewing an agency's findings of fact cannot upset them unless the court determines that the agency was arbitrary, capricious, or abused its discretion in finding facts or that the facts are unsupported by substantial evidence in a case. A determination by an appellate court that a finding of fact is unsupported by substantial evidence is somewhat different from a determination that a finding of fact by a district court was not supported by a preponderance of the evidence or by clear and convincing evidence, whichever is the appropriate burden of persuasion in a particular case. Under the APA standard, it is at least hypothetically possible that a finding of fact may be irreversible because there is some substantial evidence in the record in support even though there was contravening evidence which was considered by the agency to be of insufficient weight to change the finding of fact but which, under the FRCP standard, might result in an appellate finding that the district court was clearly erroneous in its ultimate finding of fact.
In its discussion of the difference of the standard of review between that of the APA and that of the FRCP, the Court noted that the difference is a subtle one, so fine that, apart from the Zurkocase, it had failed to uncover a single instance in which a reviewing court conceded that use of one standard rather than the other would in fact have produced a different outcome. The Court cited one case where the Court of Appeals judge had first believed, but then corrected himself, that he had found the case dreamed of by law school professors where an agency's findings, although clearly erroneous, were nevertheless supported by substantial evidence.
After the Supreme Court's decision in Zurko, it is virtually unthinkable that the CAFC will fail to apply the APA's standard of review to appeals from the Trademark Trial and Appeal Board in ex parte appeals and inter partes proceedings. There are two conclusions which one may draw immediately from the result of the Zurko case. First, the record before the TTAB in ex parteappeals and in inter partes proceedings should be as factual and as supported by admissible evidence as it is possible to make them. The Board is persuaded far more often by facts than by legal argument, and the greater the weight of the factual record, the more likely it is that a party will prevail. Furthermore, if there is substantial evidence in a record to support particular facts, the omission or misinterpretation of those facts in the TTAB's written opinion will make it somewhat easier to challenge the decision on the ground that it was arbitrary, capricious, and an abuse of discretion, or was unsupported by substantial evidence. A full record makes it more difficult for a trial tribunal to overlook or brush aside important facts and makes it more difficult for an appellee to sustain a judgment against arguments that a failure to consider or to appreciate the importance of facts supported by evidence was reasoned and rational rather than arbitrary, capricious, an abuse of discretion, or unsupported by substantial evidence.
The second implication of the Zurko case is that greater consideration may have to be given to the alternative route of appeal from a decision by the TTAB, that is, an action for review in a District Court. An action for review of a TTAB decision is not, strictly speaking, an appeal. It is litigation instituted to review and, from the dissatisfied party's viewpoint, reverse a decision by the TTAB.
District Court actions for review of TTAB decisions are not to be undertaken lightly because, particularly in inter partes cases, they can open up the opportunity for the introduction of entirely new issues, such as infringement, violations of §43(a), unfair competition, etc. District Court proceedings entail the full range of discovery provided by the Federal Rules of Civil Procedure and also a full range of remedies for violations of other's trademark rights.
The advantage of a District Court proceeding over an appeal to the CAFC is two-fold. First, there will be a trial and, if necessary, an opportunity for appeal to one of the geographical Courts of Appeal. Secondly, on appeal from a District Court to a Court of Appeal, the standard of review will be the "clearly erroneous" standard of Rule 52(a) Fed. R. Civ. P. Thus, one in the position of desiring to seek review of an adverse decision by the TTAB should consider, among other factors, whether one is the complaining party or the defendant before the Board, what further relief one may seek in a District Court action, what relief an adverse party might seek in a District Court action, whether additional evidence should be introduced in the District Court (subject to the rule in many courts that evidence that was available but not presented to the TTAB cannot be presented to the court), what economic stakes are involved on both sides, whether the burden of additional substantial discovery is worthwhile, and whether an action in a District Court would enhance or diminish the chances for a negotiated settlement.
The effect of Zurko on appeals from the TTAB to the CAFC will have to be worked out over a substantial period of time in a number of different cases, and only time will tell whether there will be a practical difference between the old standard of review and the new standard of review.
One effect that may be felt immediately is in appeals from summary judgments granted by the TTAB. Until now, the CAFC has taken the position that an appeal from a summary judgment is considered de novo. That is, the Court considers the entire record on the basis that the TTAB found that there was no material issue of fact so that the only issue remaining for the Court is an issue of law. The Court felt free to review the record to determine whether the Board was correct in finding that there was no issue of material fact, and in several cases of recent vintage, the Court reversed the Board for the reason that there were issues of material fact that precluded the grant of summary judgment. See, for example, Rivard v. Linville, 31 USPQ2d 1218 (CAFC 1993)(Unpublished).
In many administrative agency proceedings, direct testimony is adduced by way of affidavits or declarations subject to cross-examination. This is a procedure very similar to the use of affidavits and declarations in support of motions for summary judgment. Now that the CAFC has been instructed by the Supreme Court to use the same standard of review for cases arising from the Patent and Trademark Office that Courts of Appeal use in reviewing cases arising from administrative agencies, and in view of the practice of adducing evidence in affidavits or declarations in proceedings before administrative agencies, the CAFC may no longer feel free to search the entire record underlying a grant of summary judgment. The Court may believe itself compelled to accept the TTAB's factual determination that there is no factual issue unless an appellant can show that the determination below was arbitrary, capricious, an abuse of discretion, or unsupported by substantial evidence. This may be more difficult than the appellant's burden under the pre-Zurko practice.
There is a temptation when moving for summary judgment or opposing such a motion to be as economical as possible. Often, a party responding to a motion may be tempted to put in just enough to raise a material issue of fact but much less than would be presented during the trial phase of a proceeding. That tactic may be more dangerous now because, if the TTAB finds that there is no issue of material fact, the paucity of evidence contradicting that of the moving party may be insufficient to raise on appeal a question of arbitrariness, capriciousness, abuse of discretion, or lack of substantial evidence.
The Supreme Court's decision in Zurko is going to have a profound effect on CAFC practice and the prudent approach is to make the best possible factual record in the prosecution of an application or in an opposition, cancellation, or concurrent use proceeding.