                  United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 17-1570
                         ___________________________

                  B&B Hardware, Inc., a California Corporation

                        lllllllllllllllllllllPlaintiff - Appellant

                                            v.

    Hargis Industries, Inc., a Texas Corporation, doing business as East Texas
             Fasteners, doing business as Sealtite Building Fasteners

                        lllllllllllllllllllllDefendant - Appellee

East Texas Fasteners, a business entity of form unknown; Does, 1 through 10, inclusive

                            lllllllllllllllllllllDefendants
                         ___________________________

                                 No. 17-1755
                         ___________________________

                  B&B Hardware, Inc., a California Corporation

                         lllllllllllllllllllllPlaintiff - Appellee

                                            v.

    Hargis Industries, Inc., a Texas Corporation, doing business as East Texas
             Fasteners, doing business as Sealtite Building Fasteners

                       lllllllllllllllllllllDefendant - Appellant

East Texas Fasteners, a business entity of form unknown; Does, 1 through 10, inclusive

                             lllllllllllllllllllllDefendants
                                   ____________

                    Appeals from United States District Court
                 for the Eastern District of Arkansas - Little Rock
                                  ____________

                          Submitted: September 26, 2018
                            Filed: December 21, 2018
                                  ____________

Before LOKEN, BENTON, and SHEPHERD, Circuit Judges.
                           ____________

SHEPHERD, Circuit Judge.

      B&B Hardware, Inc. appeals the district court’s1 judgment in favor of Hargis
Industries, Inc. on B&B’s claim of trademark infringement and request for an
accounting of profits. Hargis cross-appeals from the district court’s denial of its
motion for fees and costs. We have jurisdiction pursuant to 28 U.S.C. § 1291. For the
reasons set forth in this opinion, we affirm on all claims.

                                          I.

       Although we relate the circumstances underlying this case in great detail in our
prior opinions concerning these parties, B&B Hardware, Inc. v. Hargis Indus., Inc.
(Hargis V), 716 F.3d 1020 (8th Cir. 2013); B&B Hardware, Inc. v. Hargis Indus., Inc.
(Hargis III), 569 F.3d 383 (8th Cir. 2009); B&B Hardware, Inc. v. Hargis Indus., Inc.
(Hargis I), 252 F.3d 1010 (8th Cir. 2001), Justice Alito has succinctly summarized the
factual origins of this case and provides apt commentary:




      1
       The Honorable Brian S. Miller, Chief Judge, United States District Court for
the Eastern District of Arkansas.

                                         -2-
      Petitioner B & B and respondent Hargis both manufacture metal
      fasteners. B & B manufactures fasteners for the aerospace industry,
      while Hargis manufactures fasteners for use in the construction trade.
      Although there are obvious differences between space shuttles and A-
      frame buildings, both aerospace and construction engineers prefer
      fasteners that seal things tightly. Accordingly, both B & B and Hargis
      want their wares associated with tight seals. A feud of nearly two
      decades has sprung from this seemingly commonplace set of facts.
      In 1993 B & B registered SEALTIGHT for “threaded or unthreaded
      metal fasteners and other related hardwar[e]; namely, self-sealing nuts,
      bolts, screws, rivets and washers, all having a captive o-ring, for use in
      the aerospace industry.” In 1996, Hargis sought to register SEALTITE
      for “self-piercing and self-drilling metal screws for use in the
      manufacture of metal and post-frame buildings.” B & B opposed
      Hargis’ registration because, although the two companies sell different
      products, it believes that SEALTITE is confusingly similar to
      SEALTIGHT.
      The twists and turns in the SEALTIGHT versus SEALTITE controversy
      are labyrinthine. The question whether either of these marks should be
      registered, and if so, which one, has bounced around within the [Patent
      and Trademark Office] for about two decades; related infringement
      litigation has been before the Eighth Circuit three times; and two
      separate juries have been empaneled and returned verdicts. The full
      story could fill a long, unhappy book.

B&B Hardware, Inc. v. Hargis Indus., Inc. (Hargis VI), 135 S. Ct. 1293, 1301 (2015)
(first alteration in original) (citations omitted).

       In B&B’s trademark infringement action against Hargis in May 2000, a jury
found that B&B’s “Sealtight” mark was not entitled to protection because it lacked
secondary meaning. We affirmed. Hargis I, 252 F.3d at 1011. In June 2006, B&B
filed for incontestability status for its trademark with the Patent and Trademark Office
(PTO). The PTO issued a Notice of Acknowledgment in September 2006, concluding
that B&B’s affidavit of incontestability met the statutory requirements.
Incontestability provided B&B with a presumption that its “Sealtight” mark carried

                                          -3-
secondary meaning. This constituted a significant intervening factual change from
the 2000 jury trial, which resulted in the finding that “Sealtight” was merely
descriptive, and B&B could thus escape the collateral estoppel bar that the 2000 jury
verdict imposed on the issue of secondary meaning. See Hargis III, 569 F.3d at 388.

       Immediately after its 2006 filing for incontestability, B&B brought suit against
Hargis again for trademark infringement, unfair competition, trademark dilution, and
false designation of origin. The case currently before us arises out of this second suit.
However, only the period between June 2006, when B&B overcame collateral
estoppel by filing for incontestability, see Dist. Ct. Dkt. 422; see also Hargis III, 569
F.3d at 388-89, and October 2013, when B&B allowed its trademark registration to
expire and therefore no longer had statutory rights in that trademark, is at issue here.

       The district court initially dismissed B&B’s new suit on collateral estoppel
grounds. B&B Hardware, Inc. v. Hargis Indus., Inc. (Hargis II), No. 4:06CV01654
SWW, 2007 WL 2711647, at *12-13 (E.D. Ark. Sept. 13, 2007). B&B appealed and
this Court reversed and remanded, finding that incontestability was a significant
factual change precluding application of collateral estoppel. Hargis III, 569 F.3d at
389-90. The district court then conducted a jury trial and the jury found against B&B
on all claims. B&B Hardware, Inc. v. Hargis Indus., Inc. (Hargis IV), 736 F. Supp.
2d 1212, 1214 (E.D. Ark. 2010). B&B again appealed to this Court, which upheld
the jury’s verdict. Hargis V, 716 F.3d at 1022. B&B then appealed to the Supreme
Court of the United States, which found that the district court should have given
preclusive effect to a decision of the Trademark Trial and Appeal Board (TTAB)
finding that there was a likelihood of confusion between “Sealtight” and “Sealtite.”
Hargis VI, 135 S. Ct. at 1299. The Supreme Court remanded the case for further
proceedings.

      We subsequently vacated the district court’s judgment and remanded. B&B
Hardware, Inc. v. Hargis Indus., Inc. (Hargis VII), 800 F.3d 427, 427 (8th Cir. 2015)
(per curiam). Following our remand, the case proceeded in the district court on

                                          -4-
B&B’s claim that Hargis committed trademark infringement under the Lanham Act,
false designation of origin, and unfair competition. B&B sought disgorgement of
Hargis’s profits beginning in June 2006. Hargis counterclaimed for false advertising
and false designation of origin. A five-day jury trial ensued.

       At trial, Hargis argued that B&B obtained its incontestability status through
fraud, presenting evidence that B&B failed to inform the PTO about the 2000 jury
verdict that B&B’s “Sealtight” mark was merely descriptive. Hargis also presented
evidence that all of its profits stemmed from its personal relationships with its
customers, exemplary customer service, and the quality of its products, rather than the
“Sealtite” name.

      At the close of evidence, B&B moved for judgment as a matter of law on
Hargis’s counterclaims but failed to do so on its own claims. The jury found that
Hargis infringed on B&B’s trademark but did not do so willfully, awarded B&B none
of Hargis’s profits, and found for Hargis on its counterclaims and its affirmative
defense of fraud. Based on the jury’s fraud finding, the district court found that
“Sealtight” was not entitled to incontestability status, and that B&B therefore had not
pled an intervening change in circumstances allowing it to relitigate claims raised in
the 2000 jury trial. The district court therefore entered judgment for Hargis on all
claims.

       In determining that B&B was not entitled to any of Hargis’s profits, the district
court recognized that, under 15 U.S.C. § 1117(a), it retained discretion to reduce or
increase the jury’s profit award or to award profits itself. See Masters v. UHS of Del.,
Inc., 631 F.3d 464, 474-75 (8th Cir. 2011). Rather than basing its ruling solely on the
jury’s refusal to award profits, it treated that refusal as advisory, considering it
together with the six factors used by the Third, Fourth, and Fifth Circuits in balancing
the equities. See, e.g., Synergistic Int’l, LLC v. Korman, 470 F.3d 162, 175 (4th Cir.
2006). The district court concluded that, because B&B did not lose sales, Hargis did
not represent that its products were B&B’s products, and Hargis’s infringement was

                                          -5-
not willful, it would be inequitable to award B&B any of Hargis’s profits. It therefore
refused to disgorge Hargis of its profits.

        Hargis then filed a motion seeking attorneys’ fees, nontaxable litigation costs,
and an injunction as sanctions against B&B. The district court awarded Hargis
taxable litigation costs but otherwise denied Hargis’s motion, finding that protracted
litigation, on its own, does not make a case an exceptional case justifying fee-shifting
under the Lanham Act.

       B&B appeals to this Court, arguing (1) the jury verdict finding fraud and a lack
of willfulness was clearly erroneous; and (2) the district court abused its discretion
in refusing to disgorge Hargis of its profits. On cross-appeal, Hargis argues that the
district court abused its discretion in denying Hargis’s motion for fees and costs.

                                          II.

       B&B challenges the jury’s fraud finding, arguing that the verdict was not
supported by sufficient evidence. Because B&B failed to file a Rule 50(b) motion as
to the sufficiency of the evidence at the close of evidence, “our review is strictly
limited. We cannot test the sufficiency of the evidence to support the jury’s verdict
beyond application of the ‘plain error’ doctrine in order to prevent a manifest
miscarriage of justice.” Karjala v. Johns-Manville Prods. Corp., 523 F.2d 155, 157
(8th Cir. 1975) (citations omitted); see also Pulla v. Amoco Oil Co., 72 F.3d 648, 655
(8th Cir. 1995). “Under this standard we can only grant [B&B] relief if [we find error
that] would result in a miscarriage of justice if left uncorrected.” Fin. Holding Corp.
v. Garnac Grain Co., 965 F.2d 591, 595 (8th Cir. 1992) (internal quotation marks
omitted) (quoting United States v. Schmidt, 922 F.2d 1365, 1369 (8th Cir. 1991)).
We find no such plain error in the jury’s verdict.

     Under Section 15 of the Lanham Act, Pub. L. No. 79-489, § 15, 60 Stat. 427,
433-34 (1946) (codified as amended at 15 U.S.C. § 1065), a registrant of a valid

                                          -6-
trademark who has continually utilized that trademark for five years after registration
may have his mark declared incontestable. Incontestability provides “conclusive
evidence of the validity of [a] registered mark . . . and of the registrant’s exclusive
right to use the registered mark in commerce.” 15 U.S.C. § 1115(b). In order to
obtain incontestability, an applicant must file an affidavit with the PTO declaring that
“there has been no final decision adverse to [his] claim of ownership of such mark . . .
or to [his] right to register the same or to keep the same on the register . . . .” 15
U.S.C. § 1065(1), (3). At least one circuit treats a district court’s finding of mere
descriptiveness at summary judgment as such an adverse decision. See OBX-Stock,
Inc. v. Bicast, Inc., 558 F.3d 334, 342-43 (4th Cir. 2009). Failure to disclose an
adverse decision is critical because “the PTO does not examine the merits of a § 15
affidavit, which is entered into PTO records ‘without regard to its substantive
sufficiency’ as long as it is received at the proper time and lacks facial inconsistencies
or omissions.” Gutier v. Hugo Boss Trade Mark Mgmt. GmbH & Co. KG, 555 F.
App’x 947, 949 (Fed. Cir. 2014) (quoting 3 J. Thomas McCarthy, McCarthy on
Trademarks and Unfair Competition § 19:140 (4th ed. 2013)).

       Complying with the Lanham Act’s affidavit requirement is especially important
because a defendant accused of infringing an incontestable trademark may raise an
affirmative defense that “the registration or the incontestable right to use the mark
was obtained fraudulently.” 15 U.S.C. § 1115(b)(1). “[T]he words ‘obtained
fraudulently’ comprehend not only the initial securance of a registration, but also the
maintenance thereof, i.e., the securance of continuing rights of registration, by fraud.”
Crown Wallcovering Corp. v. Wall Paper Mfrs. Ltd., 188 U.S.P.Q. (BNA) 141, at *3-
4 (T.T.A.B. 1975) (“[T]he filing of a fraudulent Section 15 affidavit would enable a
registrant to obtain a new right, namely, incontestability, to which he would not
otherwise be entitled . . . .”). Fraud on the PTO consists of willfully withholding
material information that, if disclosed, would result in an unfavorable outcome. Id.
at *2. We define “material information” in this context as “information that a
reasonable examiner would have considered important” when making her decision.
Gilbert/Robinson, Inc. v. Carrie Beverage-Mo., Inc., 989 F.2d 985, 992 (8th Cir.

                                           -7-
1993) (applying the Federal Circuit’s patent materiality definition to the trademark
context), abrogated on other grounds by Lexmark Int’l, Inc. v. Static Control
Components, Inc., 572 U.S. 118, 124-25 (2014).

      It is undisputed that B&B failed to inform the PTO of the 2000 jury verdict
finding the “Sealtight” trademark merely descriptive. B&B raises two arguments
defending its failure to disclose. It argues first that the 2000 verdict was not a final
adverse decision. However, in its August 28, 2007 decision refusing to register
Hargis’s “Sealtite” mark, the TTAB, a separate division of the PTO from that which
handles incontestability affidavits, explicitly stated that the 2000 jury verdict was an
adverse decision that extinguished B&B’s common-law rights in the “Sealtight”
name. B&B Hardware, Inc. v. Sealtite Bldg. Fasteners, Opp. No. 91155687 to App.
No. 75129229, 2007 WL 2698310, at *6 (T.T.A.B. Aug. 28, 2007). We therefore
conclude that the district court did not plainly err in finding that the 2000 jury verdict
was a prior adverse decision.

        B&B next argues that its failure to disclose was not willful because it did not
realize the jury verdict was a final adverse decision and it did not disclose that verdict
based on the advice of counsel. B&B’s owner so testified at trial. However, the jury
was entitled to disbelieve him if it chose. See Willis v. State Farm Fire & Cas. Co.,
219 F.3d 715, 720 (8th Cir. 2000) (“[A] jury is free to disbelieve any witness, even
if the testimony is uncontradicted or unimpeached.”). Thus, we cannot say that the
district court plainly erred in finding that B&B acted willfully.

       Because we find no plain error in the district court’s determination that B&B
willfully failed to disclose a prior adverse decision, it follows that the district court
did not err in its determination that B&B committed fraud on the PTO and that Hargis
was therefore entitled to the affirmative defense of fraud under 15 U.S.C.
§ 1115(b)(1).




                                           -8-
                                          III.

       We turn now to the district court’s conclusion that B&B’s claims were barred
by collateral estoppel. Finding that B&B failed to present evidence of any significant
intervening factual change from the date of the 2000 jury verdict, we affirm.

       We review the District Court’s legal conclusions regarding preclusion de novo,
Knutson v. City of Fargo, 600 F.3d 992, 995 (8th Cir. 2010), and may affirm on any
basis in the record. Wycoff v. Menke, 773 F.2d 983, 986 (8th Cir. 1985). There are
two types of preclusion—claim preclusion, or res judicata, and issue preclusion, or
collateral estoppel. See Knutson, 600 F.3d at 995. Claim preclusion “provides that
‘a final judgment on the merits bars further claims by parties or their privies based on
the same cause of action.’” Klipsch, Inc. v. WWR Tech., Inc., 127 F.3d 729, 733 (8th
Cir. 1997) (quoting Montana v. United States, 440 U.S. 147, 153 (1979)). Collateral
estoppel generally provides that “[w]hen an issue of fact or law is actually litigated
and determined by a valid and final judgment, and the determination is essential to
the judgment, the determination is conclusive in a subsequent action between the
parties, whether on the same or a different claim.” Hargis VI, 135 S. Ct. at 1303
(alteration in original) (quoting Restatement (Second) of Judgments § 27, at 250
(1980)); see also Knutson, 600 F.3d at 996. Collateral estoppel, in the Eighth Circuit,
has five elements:

      (1) the party sought to be precluded in the second suit was a party . . . in
      the prior suit; (2) the issue sought to be precluded is the same as the
      issue involved in the prior action; (3) the issue was actually litigated in
      the prior action; (4) the issue was determined by a valid and final
      judgment; and (5) the determination in the prior action was essential to
      the judgment.

Morse v. Comm’r of Internal Revenue Serv., 419 F.3d 829, 834 (8th Cir. 2005)
(internal quotation marks omitted).



                                          -9-
       In Hargis III, we identified incontestability as “a significant intervening factual
change” precluding application of collateral estoppel. 569 F.3d at 388. In other
words, obtaining incontestability allowed B&B to escape the preclusive effects of the
2000 jury’s finding that “Sealtight” lacked secondary meaning. Secondary meaning
is part of validity; a descriptive trademark that lacks secondary meaning is not
protectible. Schwan’s IP, LLC v. Kraft Pizza Co., 460 F.3d 971, 974 (8th Cir. 2006)
(stating that a descriptive mark is only protectible if it is “so associated with the
product that it becomes a designation of the source rather than of a characteristic of
the product”—thus, if it has acquired secondary meaning). However, incontestability
entitles a trademark owner to a presumption that “it has a valid, protectible mark and
there is a likelihood of confusion between its mark and the defendant’s mark.” Id. at
389. Thus, when B&B obtained incontestability for “Sealtight,” its factual
circumstances changed because, unlike at the 2000 trial, it could rely on a
presumption that “Sealtight” carried a secondary meaning.

        Once Hargis proved its affirmative defense of fraud in this case, B&B lost the
benefits of incontestability, including the presumption of validity. See 15 U.S.C.
§ 1115(b); Hargis III, 569 F.3d at 389. The district court found that, without
incontestability, B&B was in the same situation as it was at the 2000 jury trial
because it failed to plead any other intervening change in transactional facts. See
Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 572-75 (5th Cir. 2005) (“In
[a prior case], the critical issue before the court was whether [plaintiff’s] trademark
had acquired secondary meaning. In the present case, [plaintiff] is requesting
protection against unfair competition, infringement, and false and deceptive
advertising, based on his central argument that his . . . mark has now acquired
secondary meaning. The issues of law in both cases are incontrovertibly identical .
. . .” (footnote omitted)); see also id. at 575 (“The thrust of our holding is that
[plaintiff] has not alleged in his pleadings any significant intervening factual
change.”). Therefore, the district court held that collateral estoppel mandated
judgment for Hargis. See B&B Hardware, Inc. v. Hargis Indus., Inc. (Hargis VIII),
No. 4:06-CV-01654 BSM, 2017 WL 957548, at *4-5 (E.D. Ark. Feb. 16, 2017).

                                          -10-
       B&B’s sole argument against preclusion on appeal is that the 2000 district
court lacked subject matter jurisdiction to determine whether “Sealtight” had
secondary meaning. It claims that the Lanham Act prevents any review of
descriptiveness after the mark has become incontestable. However, it fails to
acknowledge that its mark was not incontestable in 2000. It also points out that no
governmental body attempted to cancel the “Sealtight” mark’s registration after the
2000 trial, but it cites no authority implying that this failure indicates the 2000 district
court lacked subject matter jurisdiction.

        In any event, we find that the 2000 district court had jurisdiction to consider
the issue of secondary meaning. B&B does not dispute that, under 28 U.S.C. § 1331,
the 2000 court had jurisdiction over its trademark infringement claim, which arose
under 15 U.S.C. § 1114. Given this unrefuted fact, B&B offers nothing to support
its claim that the district court lacked subject matter jurisdiction in that proceeding,
and we therefore reject its contention.

       We further agree with the district court that, without incontestability, B&B is
collaterally estopped from pursuing its claims. There is no dispute that B&B was a
party to the 2000 litigation. In Hargis III, we explicitly noted that the 2000 jury
verdict considered secondary meaning—the same issue in question here. 569 F.3d
at 389. We also noted that the 2000 district court’s decision—a valid and final
judgment—hinged solely on the jury’s finding that the “Sealtight” mark had no
secondary meaning. Id. We thus found there that the elements of collateral estoppel
were satisfied as to the issue of secondary meaning, and we again so conclude.

      There, however, we refused to apply collateral estoppel because B&B had
shown an intervening factual change—incontestability—that allowed it to overcome
issue preclusion on secondary meaning. Id. at 388. There, we referenced with
approval the Fifth Circuit’s decision in Test Masters Educational Services v. Singh,
which concluded that issue preclusion depends not on the passage of time but on
whether the plaintiff alleges “an intervening factual change” in its pleadings. 428

                                           -11-
F.3d at 575; Hargis III, 569 F.3d at 388. Here, other than incontestability and the
passage of time, B&B has failed to allege any intervening factual change that would
allow it to escape the application of collateral estoppel. Absent any evidence that
B&B’s mark has developed secondary meaning since the 2000 trial, we decline to
allow B&B to relitigate that issue. We thus uphold the district court’s application of
collateral estoppel.

                                            IV.

       Because disgorgement under the Lanham Act requires that a plaintiff establish
that the defendant has violated its trademark rights, see 15 U.S.C. § 1117(a), and
because we have concluded that the district court did not err in finding that B&B’s
trademark infringement claims are barred by collateral estoppel, the district court
made no error in declining to order disgorgement of Hargis’s profits.

                                            V.

      In its cross-appeal, Hargis argues the district court improperly denied its
motion for fees and costs. “We review the district court’s decision on whether to
award attorney’s fees under an abuse-of-discretion standard.” Cmty. of Christ
Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ’s Church, 634
F.3d 1005, 1013 (8th Cir. 2011).

       Prevailing trademark defendants only receive fees and costs in exceptional
cases. 15 U.S.C. § 1117(a). “An exceptional case is one in which a plaintiff brought
an action that ‘was groundless, unreasonable, vexatious, or was pursued in bad
faith.’” Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 123 (8th Cir. 1987) (quoting
Hodge Chile Co. v. KNA Food Distribs., Inc., 575 F. Supp. 210, 214 (E.D. Mo.
1983)); see also Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc., 908 F.3d
313, 346 (8th Cir. 2018) (“[W]e hold that the district court did not abuse its discretion in
finding that SMRI’s case was not ‘exceptional’ with respect to either the ‘substantive


                                           -12-
strength of [its] litigating position’ or ‘the unreasonable manner in which the case was
litigated.’” (second alteration in original) (quoting Octane Fitness, LLC v. ICON Health &
Fitness, Inc., 572 U.S. 545, 554 (2014))). This case does not present an example of
groundless, unreasonable, or vexatious litigation, as it has arguable merit on both
sides—evidenced by the fact that both parties have prevailed at various times
throughout its 12-year history. We cannot say that B&B pursued litigation in bad
faith, as it received a favorable Supreme Court ruling and reasonably believed it could
prevail. Therefore, the district court did not abuse its discretion in finding this an
unexceptional case, and we affirm its denial of Hargis’s motion for attorney fees and
nontaxable litigation costs.

      The judgment of the district court is affirmed.
                     ______________________________




                                          -13-
