On December 22, 2015, the Federal Circuit ruled en banc that the portion of Section 2(a) of the Lanham Act that precludes registration of “disparaging” trademarks is unconstitutional under the First Amendment.  In re Tam, Case No. 2014-1203 (Fed. Cir. Dec. 22, 2015).

In November 2011, Simon Tam, the bassist for a Portland-based Asian-American band, filed an application to register the band’s name THE SLANTS for “entertainment in the nature of live performances by a musical band.”  The Examining Attorney refused to register the mark under Section 2(a) of the Lanham Act on the ground that the mark is disparaging to “people of Asian descent.”  The Examining Attorney relied on dictionary definitions, the band’s usage, and the band’s  statement that the adoption of the mark was “a way to reclaim a racial slur and to assert Asian pride”.  Both the TTAB and a Federal Circuit panel upheld the refusal.   Then, in April of this year, the Federal Circuit sua sponte ordered rehearing en banc to consider whether Section 2(a)’s bar on registering disparaging marks violates the First Amendment.  The Court concluded that it does.

Section 2(a) of the Lanham Act prohibits registration of marks that “[c]onsist or comprise immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, believes, or national symbols, or bring them into contempt or disrepute.”  Whether a mark qualifies as disparaging is determined through the application of a two-part test:  (1) the mark’s likely meaning as determined by dictionary definitions and the manner in which it is used in the marketplace; and (2) whether the meaning may be disparaging to a substantial composite of the referenced group.

“It is a bedrock principle underlying the First Amendment that the government may not penalize private speech merely because it disapproves of the message it conveys.”  Content-based regulations are presumptively unconstitutional and may be justified only if the government proves they are narrowly tailored to serve compelling state interests.  Here, the Court found it beyond dispute that Section 2(a) discriminates on the basis of content because it applies to speech based on the topic discussed, as well as the idea or message expressed.  On its face, the Court held, it targets “viewpoints [in] the marketplace” because speech that is offensive or hostile to a particular group conveys a distinct viewpoint from speech that carries a positive message about the group.  The Court ultimately concluded that the government advanced no compelling state interest justifying this regulation.

First, the Court rejected the government’s argument that Section 2(a) regulates only commercial speech, which is subject to a lower standard of scrutiny.  The Court stated: “every time the PTO refuses to register a mark under § 2(a), it does so because it believes the mark conveys an expressive message—a message that is disparaging to certain groups.”  That the speech is used in commerce or has a commercial component does not change the inquiry when the government regulation is entirely directed to the expressive component of the speech.

The Court also rejected the argument that Section 2(a) does not implicate the First Amendment because it does not prohibit speech (i.e., the argument that a refusal to register the mark does not affect the applicant’s right to use it).  The Court stated that First Amendment standards are not limited to such prohibitions: “Lawmakers may no more silence unwanted speech by burdening its utterance than by censoring its content.”  Here, denial of the significant and financially valuable benefits of federal trademark registration created a serious disincentive to adopt a mark which the government may deem offensive or disparaging, thereby creating a chilling effect on speech.

Nor was the Court persuaded by the government’s attempt to analogize trademark registration to government speech.  “When the government registers a trademark, the only message it conveys is that a mark is registered.”  Society understands trademarks to identify goods sold, and if trademarks convey an expressive message, that message is associated with the mark holder—not the government.  Unlike in the license plate situation, where the government owns the underlying property and frequently uses such property to convey approved messsaging, the government does not own third party trademarks or the underlying goods to which the trademark is affixed.

The Court likewise rejected the idea that Section 2(a)’s message-based discrimination could be justified as the government’s shaping of a subsidy program.  The Court acknowledged that viewpoint-based funding decisions can be sustained in instances in which the government uses private speakers to transmit specific information pertaining to its own program.  However, it found Congress does not have the authority to attach “conditions that seek to leverage funding to regulate speech outside the contours of the program itself,” and trademark registration (derived from the Commerce Clause, not the Spending Clause) is not a program through which the government is seeking to get its message out through recipients of funding.  Nor is it a subsidy.  The benefits of trademark registration, while valuable, are not monetary, and the restriction on the registration of disparaging marks bears no relation to the objectives, goals, or purpose of the federal trademark registration program.

Finally, the Court found that even if it applied intermediate rather than strict scrutiny, Section 2(a) would fail to survive because “[a]ll of the government’s proffered interests [justifying the regulation] boil down to permitting the government to burden speech it finds offensive.”

Though the Court limited its holding to the disparagement provision in Section 2(a), it noted that other portions of Section 2 may also constitute government regulation of expression based on content, such as the prohibition against registering  immoral or scandalous marks.