Leigh Ann Benson, (left) and Stephen A. Miller, (right) of Cozen O'Connor.

Two competing apparel companies find themselves before the U.S. Supreme Court after an 18-year trademark dispute. They are asking the court to consider the scope of the doctrine of res judicata, which precludes re-litigation of issues and claims that were, or could have been, litigated in a prior case.

In this case, the court will focus on the application of res judicata principles to defense arguments. Specifically, the court will decide whether Lucky Brand Dungarees is barred from raising a defense in a trademark infringement action brought by Marcel Fashion Group where the defense was not previously raised in prior trademark litigation between the parties.

The parties' dispute began in 2001. Marcel sued Lucky Brand for trademark infringement. Prior to Lucky Brand's founding, Marcel had trademarked the phrase "Get Lucky." Years later, nationally known Lucky Brand marketed its denim and sportswear with that same slogan. The parties settled that initial action in 2003. Lucky Brand agreed to stop using the phrase, and Marcel released certain trademark-specific claims that it might have in the future against Lucky Brand.

The peace didn't last long. After settling, Marcel licensed its trademark to two other retailers.  Lucky Brand sued Marcel for unfair business practices. Marcel alleged in a counterclaim that Lucky Brand continued to use its trademarks in violation of the 2003 settlement agreement. The parties found themselves before a jury, and the jury found in favor of Marcel. In 2010, Lucky Brand was permanently enjoined from using "Get Lucky."

Marcel struck again the following year. This time, Marcel sought to enjoin Lucky Brand from using other "Lucky" marks in light of the 2010 judgment. Lucky Brand successfully moved to dismiss, but then the U.S. Court of Appeals for the Second Circuit remanded that decision. Only on remand did Lucky Brand raise as a defense that Marcel's claims were barred by the 2003 settlement agreement, which included a release of trademark claims. The district court again agreed with Lucky Brand and dismissed. The Second Circuit, though, agreed with Marcel and its argument that "defense preclusion" barred Lucky Brand from raising this defense because it was not raised in the second action.

Lucky Brand argues to the Supreme Court that the Second Circuit misinterpreted well-settled law. Three other courts of appeal have ruled that claim preclusion does not bar a party from raising defenses where the claims in later litigation arise from different transactions and occurrences. Lucky Brand argues that the Second Circuit "invented an entirely new variant of preclusion" that is inconsistent with settled legal principles.

Lucky Brand argues that permitting "defense preclusion" would be impractical and discourage speedy resolutions and private settlements. Defense attorneys would be forced to practice "scorched earth" litigation techniques if their client would lose a defense forever by not raising it at the outset and fighting it through a final judgment. This would overrun the judicial system. Attorneys would never be able to advise a client to drop a weaker defense out of fear of losing the ability to ever raise the defense in the future. Lucky Brand argues that the result would be particularly problematic in the context of trademark litigation, where the strength of defenses "wax and wane" over time, and defendants often have good reason for raising a defense in one dispute but not another.

Marcel counters that defense preclusion should be recognized as a matter of "common sense"—a party should not be permitted to raise a "previously neglected defense." Marcel distinguishes between its claims, which are not precluded, and Lucky Brand's defenses, which are at issue. Marcel could not have raised its present claims in the prior suit, because they are based on events that occurred after the final judgment. Lucky Brand, however, could have raised a defense based on the 2003 settlement agreement. It did not, despite the fact that it was a defense fully available to it during the second action.

Marcel also argues that public policy favors bringing an end to litigation. To allow a party to raise a defense that could have been previously raised would undermine the finality of judgments. It would also encourage successive litigation by losing parties that would strain the resources of both private parties and the judicial system. Marcel asserts that "a losing litigant deserves no rematch after a defeat fairly suffered."

The Supreme Court's decision could have a broad impact on civil litigation. The court will hear oral argument in mid-January 2020, and a decision will be issued before July 2020.

Stephen A. Miller practices in the commercial litigation group at Cozen O'Connor's Philadelphia office. Prior to joining the firm, he clerked for Justice Antonin Scalia on the U.S. Supreme Court and served as a federal prosecutor for nine years in the Southern District of New York and the Eastern District of Pennsylvania.

Leigh Ann Benson also practices in the firm's commercial litigation group. She received her J.D. from Villanova University School of Law and her B.A., magna cum laude, from Virginia Tech.