LaLonde: Defendant Preclusion, Not Claim Preclusion, Bars Party from Seeking Relief from Default Judgment: Nasalok Coating Corp. v. Nylok Corp., 2008 U.S. App. LEXIS 8376 (Fed. Cir. 2008)
Nylok sued Nasalok for trademark infringement, and when Nasalok defaulted, the district court enjoined it from infringing the mark. Thereafter, Nasalok petitioned the TTAB (Trademark Trial and Appeal Board) to cancel the mark, but the Federal Circuit deemed this an impermissible collateral attack on the district court's order. Anne Gilson LaLonde, the author of Gilson on Trademarks, analyzes the defendant’s attempt to avoid final judgment on invalidity by filing a cancellation petition before the Board. She writes:
The Federal Circuit in this case disagreed with the Board’s uncomplicated application of claim preclusion to the facts of this case. It held that the typical claim preclusion case involves a plaintiff who brings a second related action and is barred from making a claim in the later action that it should have made in the prior action. Instead, because this case involves a defendant bringing the second related action, the court ruled that the Board should have used the “defendant preclusion” standard. Under the doctrine of defendant preclusion, a defendant will be precluded from bringing a claim in a later action only where “(1) the claim or defense asserted in the second action was a compulsory counterclaim that the defendant failed to assert in the first action, or (2) the claim or defense represents what is essentially a collateral attack on the first judgment.” . . .
Defendant preclusion will preclude a defendant from bringing a claim in a later action where that claim was a compulsory counterclaim that it failed to assert in the first action. A defendant may assert a counterclaim challenging the validity of the plaintiff’s trademark in an infringement action, and in fact this is often done. As an issue of first impression, the Federal Circuit held in Nasalok that a claim of trademark invalidity is not a compulsory counterclaim when a claim of trademark infringement is made.
. . . .
The Federal Circuit . . . rejected the compulsory counterclaim argument, but embraced another argument for defendant preclusion. Defendant preclusion will preclude a defendant from bringing a claim in a later action where the claim is essentially a collateral attack on the prior judgment. Courts do not allow former defendants to undermine prior judgments by a collateral action that they could have asserted earlier. In this case, the Federal Circuit found that permitting Nasalok to prevail in the cancellation proceeding would undermine the district court’s permanent injunction in the earlier case and would therefore be an impermissible collateral attack on that judgment: “There is no question that success in the cancellation proceeding would negate relief secured by Nylok in the infringement proceeding.”
(citations omitted)
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