Federal Circuit Declines to Apply Res Judicata after Default Judgment Was Entered in Trademark Case

Per Sharp Kabushiki Kaisha v. Thinksharp, Inc., 448 F.3d 1368 (Fed. Cir. May 30, 2006):

ThinkSharp … did not file an answer in the word-and-design opposition. Thus the [United States Patent and Trademark Office, Trademark Trial and Appeal] Board entered a default judgment sustaining Sharp's opposition to the word-and-design mark. However, ThinkSharp contested Sharp's opposition to registration of the word mark THINKSHARP….Sharp asserted that the default judgment in its favor on the word-and-design mark operated as res judicata to preclude ThinkSharp from contesting Sharp's opposition to registration of the word mark.

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A default judgment can operate as res judicata in appropriate circumstances. See Morris v. Jones, 329 U.S. 545, 550-51, 67 S.Ct. 451, 91 L.Ed. 488 (1947) (internal citation omitted). Sharp argues that the legal effect of the default judgment in the word-and-design opposition is that the Board ruled in favor of Sharp as to the merits of all of Sharp's pleadings in that opposition, and that Sharp's uncontested allegations therein must now be taken as undisputed fact. Sharp states that this precludes the Board's decision in favor of ThinkSharp in the opposition to the word mark registration. Sharp states that in Board proceedings, as in federal courts, claim preclusion is to be applied where the necessary prerequisites are established.

… [T]his is not a situation where the applicant, after a judgment had been entered against it, adopted a second mark in an attempt to avoid the preclusive effect of a previous judgment. … In the present case, not only were the marks different and the prior dismissal solely on default, but res judicata would deny ThinkSharp its day in court without a “clear and persuasive basis for that denial.” The Court in Kremer v. Chemical Construction Corporation, 456 U.S. 461, 485 n. 26 (1982) stated that “so long as opposing parties had an adequate opportunity to litigate disputed issues of fact, res judicata is properly applied to decisions of an administrative agency acting in a ‘judicial capacity.’ ” The corollary is that when a party did not have an opportunity to litigate disputed issues, a decision to permit such litigation is favored. Sharp has not established that the issue of likelihood of confusion as to the word mark should have been litigated in the defaulted opposition to the word-and-design mark.