On June 18, 2013, in Levi Strauss & Co. v. Abercrombie & Fitch Trading Co. the US Court of Appeals for the Federal Circuit held that issue preclusion does not bar Levi Strauss's USPTO opposition and cancellation proceedings against Abercrombie despite an earlier district court trademark infringement and dilution litigation concerning the same mark. The Federal Circuit found that the scope of the Abercrombie registrations at issue in the USPTO proceeding cover a much broader range of uses of the challenged mark than was litigated in district court and therefore reversed the Trademark Trial and Appeal Board's (TTAB) dismissal of the USPTO proceedings. The court also rejected Abercrombie's alternative argument that claim preclusion barred the USPTO proceedings, concluding that the USPTO and district court proceedings do not involve the same transactional facts.

Levi Strauss holds multiple federal trademark registrations on its signature stitching design for jean pockets (the Arcuate mark), which it has used since 1873. In 2005, Abercrombie sought to register as a trademark a stitching design for use on clothing. Levi Strauss initiated opposition and cancellation proceedings in the USPTO, alleging that Abercrombie's mark was likely to cause confusion with and dilution of Levi Strauss's Arcuate mark. Abercrombie also began using the mark on its Ruehl line of clothing. In 2007, Levi Strauss sued Abercrombie in the US District Court for the Northern District of California for trademark infringement, unfair competition and trademark dilution. The USPTO stayed the opposition and cancellation proceedings pending the district court litigation. In 2009, the district court entered judgment finding Abercrombie did not infringe or dilute the Arcuate mark. Levi Strauss appealed only the dilution judgment to the US Court of Appeals for the Ninth Circuit, which reversed on the basis that the district court applied the wrong dilution standard (see Article, GC Agenda: April 2011: Trademark Dilution). However, in 2011, after Levi Strauss moved to voluntarily dismiss its dilution claim, the district court entered judgment against Levis Strauss dismissing the claim with prejudice.

After the district court litigation ended, the TTAB dismissed Levi Strauss's challenges to Abercrombie's registrations on the basis that issue preclusion in the district court barred the USPTO challenges. Levi Strauss appealed to the Federal Circuit.

The Federal Circuit reversed, holding that neither issue preclusion nor claim preclusion barred Levi Strauss's USPTO challenges to Abercrombie's registrations. First, it noted that the 2009 district court judgment of non-infringement was the only possible basis for issue preclusion. Because the 2011 judgment on dilution was only a voluntary dismissal with prejudice, it is relevant for claim-preclusion purposes but has no issue-preclusive effect. The court also noted that the 2009 judgment on dilution could not support either issue or claim preclusion because it was reversed on appeal.

Relying on its 2005 decision in Mayer/Berkshire Corp. v. Berkshire Fashions Inc., the Federal Circuit held that issue preclusion did not apply because the USPTO proceeding was broader in scope than the infringement action. In the district court litigation, the issue was product-specific and concerned whether Abercrombie's marketing of specific Ruehl-line products with the mirror-image design was likely to cause confusion with the Arcuate mark. In contrast, USPTO proceedings are based on the content of the registration application, not on any specific use of the challenged mark. Abercrombie's registrations sought to cover a broad class of clothing, including jeans, skirts, shorts, pants and jackets without further limitations.

The Federal Circuit also rejected Abercrombie's alternative argument that Levi Strauss's challenges to Abercrombie's registrations are barred by claim preclusion, finding that the district court litigation involved a distinctly narrower set of product-specific transactional facts than those at issue in the registration proceedings.