SCOTUS Opinion: Court Refines Defense Preclusion Doctrine In Trademark Suit

Lucky Brand Dungarees, Inc. sells clothing using trademarks involving the word “Lucky.” Marcel Fashions Group, Inc. received a federal trademark for “Get Lucky,” and used that to sell their own clothing line. Inevitably, decades of litigation ensued between the two groups as they each defended their respective “Lucky” turf. In the first round of litigation, the parties signed a settlement agreement in which Lucky Brand agreed not to use “Get Lucky,” while Marcel released their claims on Lucky Brand’s other trademarks. In the second round, Lucky Brand alleged that Marcel was copying their designs and logos, and Marcel counterclaimed that Lucky Brand was using “Get Lucky.” Lucky Brand responded at first that the settlement resolved those counterclaims but did not press the defense and was ultimately enjoined from using “Get Lucky.” In the third round, Marcel sued again, alleging that Lucky Brand’s use of their other “Lucky” trademarks infringed upon Marcel’s “Get Lucky” mark. Lucky Brand again raised the settlement agreement, and this time won a dismissal.

The Second Circuit reversed, holding that Lucky Brand was precluded from raising the settlement agreement defense since it failed to litigate it fully in the second round. Resolving a split among the circuits as to when claim preclusion applies to defenses raised in subsequent suits, the Court, in a unanimous decision by Justice Sotomayor, reversed, holding that Lucky Brand could raise its defense because the claims in the third suit were different than those in the second suit. The court clarified that for defense preclusion to apply, there must be a “common nucleus of operative facts.” Here, there was no such common nucleus, since the third suit involved different marks and conduct. Accordingly, Lucky Brand could raise the settlement agreement as a defense, which already prevailed below. A link to the decision in Lucky Brand Dungarees, Inc. v. Marcel Fashions Group, Inc. is here: